Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> profit alert for &gt;350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). </li>
<li>Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. </li>
<li>With cash &gt; 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. </li>
</ul>



Oriental Watch (398 HK) profit alert for &gt;350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). 
Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. 
With cash &gt; 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. 


Oriental Watch: Good Results in the Bag, Cautious H1 2023

<ul>
<li>We have increasing confidence in <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). </li>
<li>Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. </li>
<li>Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.</li>
</ul>


We have increasing confidence in Oriental Watch (398 HK) paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). 
Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. 
Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.


Oriental Watch: Increasing Visibility on H2 2022

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<ul>
<li>Oriental Watch's 1H22 results again demonstrate the company remains a prime beneficiary of China's isolationist zero-Covid policy. Revenues +36.8% and Profits +188% YoY. Net Margin of 9% highest ever achieved.</li>
<li>With no outbound Chinese tourism allowed, the internal consumption of luxury watches remains strong. Worldwide shortages of Rolex and Patek Philippe watches drive higher ASP  enhancing margins.</li>
<li>Rock-Solid balance sheet and high dividend payout as reliable as a Swiss Watch. Stock up +110% YTD but the company is still on a 13% annual dividend yield.</li>
</ul>


Oriental Watch's 1H22 results again demonstrate the company remains a prime beneficiary of China's isolationist zero-Covid policy. Revenues +36.8% and Profits +188% YoY. Net Margin of 9% highest ever achieved.
With no outbound Chinese tourism allowed, the internal consumption of luxury watches remains strong. Worldwide shortages of Rolex and Patek Philippe watches drive higher ASP  enhancing margins.
Rock-Solid balance sheet and high dividend payout as reliable as a Swiss Watch. Stock up +110% YTD but the company is still on a 13% annual dividend yield.


Oriental Watch: Living in Isolation with My Patek and Rolex Is Just Fine

China Shineway Pharmaceutical / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-shineway-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:6241:1" rel="noopener">China Shineway Pharmaceutical (2877 HK)</a> has been listed since December 2004. The IPO was 231x oversubscribed and the company was listed at 4.36 HKD. Since then the company has consistently paid interim, final, and special dividends totaling 5.89 HKD/share. Currently, Shineway has 6 HKD/share in net cash on the balance sheet vs a 7.2 HKD stock price. Cash is therefore approximately 85% of the market cap. Shineway is not a hot stock, on the contrary, it is a TCM player out of Hebei which is rather boring. There's positive and negatives about the TCM sector which we will delve into below. What attracted us to Shineway, and why it deserves your attention, is the new dividend policy it announced in late July. We believe this has gone largely unnoticed by investors but provides a floor for the stock which was not there before.Shineway <a href="http://api.aconnect.com.hk/Attachment/67377" target="_blank" rel="noopener">announced</a> that from its 2021 dividend base of 0.6 RMB, the dividend would grow EVERY year with at least 15%, or by the % growth in earnings (whatever is higher). It also announced it would pay the dividend in quarterly installments. Shineway has effectively become a "Pharma REIT-or-BOND-like investment instrument". So while your downside is supported by 1) the 6 HKD/share cash pile and 2) the new dividend policy. The upside case is a change from rock-bottom sentiment towards TCM and any of their five key growth drivers delivering earnings upside (see corporate presentation attached).Shineway reminds us a lot of a similar situation at <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> over the past few years. Assuming the dividend policy is followed and the dividend grows by the minimum %/year investors in Shineway get back their entire investment in 6.5 years.In our base case, we forecast Shineway to have a dividend yield of 11.5% in 2022, 13.3% in 2023, 15.3% in 2024, and 17.7% in 2025.In our bull case, we forecast Shineway to have a dividend yield of 12.5% in 2022, 15.7% in 2023, 19.7% in 2024, and 24.7% in 2025.

China Shineway Pharmaceutical (2877 HK) has been listed since December 2004. The IPO was 231x oversubscribed and the company was listed at 4.36 HKD. Since then the company has consistently paid interim, final, and special dividends totaling 5.89 HKD/share. Currently, Shineway has 6 HKD/share in net cash on the balance sheet vs a 7.2 HKD stock price. Cash is therefore approximately 85% of the market cap. Shineway is not a hot stock, on the contrary, it is a TCM player out of Hebei which is rather boring. There's positive and negatives about the TCM sector which we will delve into below. What attracted us to Shineway, and why it deserves your attention, is the new dividend policy it announced in late July. We believe this has gone largely unnoticed by investors but provides a floor for the stock which was not there before.Shineway announced that from its 2021 dividend base of 0.6 RMB, the dividend would grow EVERY year with at least 15%, or by the % growth in earnings (whatever is higher). It also announced it would pay the dividend in quarterly installments. Shineway has effectively become a "Pharma REIT-or-BOND-like investment instrument". So while your downside is supported by 1) the 6 HKD/share cash pile and 2) the new dividend policy. The upside case is a change from rock-bottom sentiment towards TCM and any of their five key growth drivers delivering earnings upside (see corporate presentation attached).Shineway reminds us a lot of a similar situation at Oriental Watch (398 HK) over the past few years. Assuming the dividend policy is followed and the dividend grows by the minimum %/year investors in Shineway get back their entire investment in 6.5 years.In our base case, we forecast Shineway to have a dividend yield of 11.5% in 2022, 13.3% in 2023, 15.3% in 2024, and 17.7% in 2025.In our bull case, we forecast Shineway to have a dividend yield of 12.5% in 2022, 15.7% in 2023, 19.7% in 2024, and 24.7% in 2025.

China Shineway: Cash Is 85% of Market Cap, and New Dividend Policy Gives More Downside Support

Despite a slight slowdown in August and September,  due to supply constraints from Rolex and Patek as well lockdowns in China due to Covid, we expect that <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> will announce a profit alert ahead of its result in November.
We continue to like <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a>:
<ul>
<li>We believe that despite the last two months of difficulties, dividends for H1 2022 will still be more than 25 cents representing an annualized yield of 12% on the current share price.</li>
<li>We expect inventories to trend lower due to these supply constraints resulting in further cash conversion on the balance sheet and net cash levels remaining over one bn HKD (representing 50% of the current market capitalization).</li>
</ul>
Risks
<ul class="">
<li>Imposition of a luxury tax by the Chinese government.</li>
<li>Further severe supply curtailments by Rolex and Patek Philippe. </li>
</ul>

Despite a slight slowdown in August and September,  due to supply constraints from Rolex and Patek as well lockdowns in China due to Covid, we expect that Oriental Watch (398 HK) will announce a profit alert ahead of its result in November.
We continue to like Oriental Watch (398 HK):

We believe that despite the last two months of difficulties, dividends for H1 2022 will still be more than 25 cents representing an annualized yield of 12% on the current share price.
We expect inventories to trend lower due to these supply constraints resulting in further cash conversion on the balance sheet and net cash levels remaining over one bn HKD (representing 50% of the current market capitalization).

Risks

Imposition of a luxury tax by the Chinese government.
Further severe supply curtailments by Rolex and Patek Philippe. 


Oriental Watch - Expect a Positive Profit Alert for H1

Hong Kong

Oriental Watch is an investment holding company primarily engaged in the trading of watches and clocks through an extensive retail network in Greater China. It sells watches from numerous prestigious brands, including Rolex, Tudor, Bulgari, Breitling, and Longines. The company also engages in property holding and securities investment activities. Headquartered in Central, Hong Kong, the company was founded in 1961.

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Oriental Watch (398 HK)

Oriental Watch: Good Results in the Bag, Cautious H1 2023

Oriental Watch is a value play with net cash > 50% of the market cap, a 6.3x PE, and a 16% dividend yield. The weakness in China due to lockdowns...

Sameer Taneja

Oriental Watch: Increasing Visibility on H2 2022

Trading at a 17% dividend yield with >50% of the market capitalization in cash, Oriental Watch is a compelling investment in the medium term.

Sameer Taneja

Oriental Watch: Living in Isolation with My Patek and Rolex Is Just Fine

Oriental Watch continues its incredible performance track record over the last 5 years. The stock is up +694% since we first wrote about it in...

Nicolas Van Broekhoven

China Shineway: Cash Is 85% of Market Cap, and New Dividend Policy Gives More Downside Support

China Shineway is a TCM player which has decided to share more of its cash pile with minority investors. Cash makes up 85% of market cap which...

Nicolas Van Broekhoven

Oriental Watch - Expect a Positive Profit Alert for H1

Oriental Watch is a deep value stock with 50% of its market capitalization in cash and a dividend yield of over 12.5%. We believe the company is...

Sameer Taneja

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