The Hour Glass

sales.png
SAsia.png
NAsia.png

Quality Time

The company was established in 1979 as a subsidiary of Metro Holdings Ltd. Metro transferred 51% of its share to subsidiary Transmarco Ltd in 1987. Founder Dr Henry and Dr Jannie Tay in joint venture with PAMA acquired The Hour Glass for $11M. 

The Hour Glass is a wholesaler & retailer of watches, jewellery and investment properties in Singapore, Malaysia, Thailand, Vietnam, Japan, Australia, New Zealand, Hong Kong and China. 

Flagship watch brands are Rolex and Patek Philippe. Complemented by more than 50 brands of watches. 

Investment properties are in Singapore, Malaysia, Australia and New Zealand. 

Financial

Revenue had been growing steadily through the decades, peaking in FYMar15. There is strong likelihood that sales will jump more than 20% in FYMar22 as consumer shift disposal expenses to luxury goods due to travel restriction because of Covid-19 global pandemic. 

Prior to FY19, gross margin averages 23%. Margin jumped notably to 27% and has been increasing gradually to 29.2% in FY21. 

One of the reason for this increase was due to China reducing import duties from 20% in 2012 to 8%~15% in 2019. VAT was also reduced from 16% to 13%. Daigou operators shopping on behalf of clients overseas were curtailed to improve tax collection. More duty free outlets were also introduced in airports. 

While China provides a one-off jump in margin, it is South Asia that show significant margin improvements. From public information, the company started a 'digital transformation' program three years ago. This include ERP planning system upgrade and expanding e-Commerce activities which according to Bain will grow from 10% of luxury sales in 2019 to a third in 2025. There may be other reasons for the sharp rise in margin. 

Associates also contributed meaningfully to earning; increasing from average $4M to $9M in FY21. 

Outlook

The Hour Glass is likely to close FYMar22 with record sales driven by South Asia. North Asia is likely to be muted due to zero-Covid policy accompanied by regular lockdown of cities. Push towards common prosperity may continue to damped appetite for conspicuous luxury goods. 

High inflation in 2022 will remain elevated for some time exacerbated by the war between Russia & Ukraine. This will not only impact energy and food prices but also supply chain. As a result, growing headwind is likely to impact consumer demand in the foreseeable future.