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

Equity Bottom-Up

<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> has been a long term favorite of mine as the company was a perennial cheap HK travel play. Chinese residents would come to HK and Macau to buy luxury watches which were cheaper vs the mainland.Since 2020 and the onset of Covid the story has changed with mainland citizens unable to travel to HK, Macau, Europe or the US. Chinese travelers were notorious for spending lavishly in cities across Europe and the US in luxury boutiques. Today's Bloomberg article <a href="https://www.straitstimes.com/asia/east-asia/cautious-china-keeps-borders-shut-despite-mass-covid-19-vaccination-drive" target="_blank" rel="noopener">"Cautious China Keeps Borders Shut Despite Mass Vaccination Drive"</a> again highlights that the opening up of China is going to take much longer than investors expect. This is bullish for domestic luxury players.With no foreign holidays mainland Chinese buyers have gone on a spending spree buying luxury watches in mainland China. While no official data is available we estimate Oriental Watch is the largest importer and reseller of Rolex watches in China. During 1H21, 27% of its sales were generated in HK, 70% came from China, 2.8% from Macau, and 0.2% from Taiwan. Contrast this with pre-Covid times when HK/Macau generated a combined +/-75% of annual revenues.Oriental Watch will report FY21 results later this month. We expect record results and a good dividend (minimum 0.25 HKD/share). The question is how much is already discounted with the stock up 60% YTD. As highlighted by fellow insight provider <a href="https://www.smartkarma.com/profiles/sameer-taneja-a0539e0c-84dd-4e66-9c40-6e598edfb4c5" target="_blank" data-smartkarma-citation="accounts:352" rel="noopener">Sameer Taneja</a> in March the stock is still not expensive on a SOTP basis.

Oriental Watch (398 HK) has been a long term favorite of mine as the company was a perennial cheap HK travel play. Chinese residents would come to HK and Macau to buy luxury watches which were cheaper vs the mainland.Since 2020 and the onset of Covid the story has changed with mainland citizens unable to travel to HK, Macau, Europe or the US. Chinese travelers were notorious for spending lavishly in cities across Europe and the US in luxury boutiques. Today's Bloomberg article "Cautious China Keeps Borders Shut Despite Mass Vaccination Drive" again highlights that the opening up of China is going to take much longer than investors expect. This is bullish for domestic luxury players.With no foreign holidays mainland Chinese buyers have gone on a spending spree buying luxury watches in mainland China. While no official data is available we estimate Oriental Watch is the largest importer and reseller of Rolex watches in China. During 1H21, 27% of its sales were generated in HK, 70% came from China, 2.8% from Macau, and 0.2% from Taiwan. Contrast this with pre-Covid times when HK/Macau generated a combined +/-75% of annual revenues.Oriental Watch will report FY21 results later this month. We expect record results and a good dividend (minimum 0.25 HKD/share). The question is how much is already discounted with the stock up 60% YTD. As highlighted by fellow insight provider Sameer Taneja in March the stock is still not expensive on a SOTP basis. 

Oriental Watch: Buying a Rolex in Milan or New York? No, Thanks We Will Get It in Shanghai & Beijing

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

<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> cycled into favorable comps for April-June 2023 owing to COVID-related closures in China in 2022 for the same period. </li>
<li>Another favorable data point was the <a href="https://www.smartkarma.com/entities/emperor-watch-jewellery" target="_blank" data-smartkarma-citation="entities:19670:1" rel="noopener">Emperor Watch &amp; Jewellery (887 HK)</a> positive profit alert for H1 FY23 ( Jan-Jun 2023), where the company guided &gt;100% net profit growth. </li>
<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> trades at 6.9x FY24e, with more than 50% of the market cap in cash and a ~100% payout ratio resulting in a 14% dividend yield. </li>
</ul>



Oriental Watch (398 HK) cycled into favorable comps for April-June 2023 owing to COVID-related closures in China in 2022 for the same period. 
Another favorable data point was the Emperor Watch &amp; Jewellery (887 HK) positive profit alert for H1 FY23 ( Jan-Jun 2023), where the company guided &gt;100% net profit growth. 

Oriental Watch (398 HK) trades at 6.9x FY24e, with more than 50% of the market cap in cash and a ~100% payout ratio resulting in a 14% dividend yield. 


Oriental Watch (398 HK): Strong Data Points for H1 FY24, 14% Yield + >50% Mkt Cap in Cash

Value Investing in Asia, Oriental Value

Oriental Value

Value Investing in Asia

<ul>
<li>A Review on Final Results Oriental Watch recently announced its earnings for the fiscal year, and the results were quite impressive.</li>
<li>On June 20, 2023, the company reported a revenue of HKD3.7 billion and a net profit of HKD295 million.</li>
<li>These figures surpassed our initial estimates of HKD3.</li>
</ul>


A Review on Final Results Oriental Watch recently announced its earnings for the fiscal year, and the results were quite impressive.
On June 20, 2023, the company reported a revenue of HKD3.7 billion and a net profit of HKD295 million.
These figures surpassed our initial estimates of HKD3.


<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> reported a steady result, with 2023 earnings &lt;18% YoY ( adjusted for one-time gains in 2022 &lt;5% YoY), which was broadly in line with our expectations. </li>
<li>The DPS for FY23 was 61 cents (FY22: 74 cents) lower than our expectation of 65 cents, a 100% payout ratio equating to a 14% dividend yield.</li>
<li>Cash at 1.07 bn represents &gt; 50% of market capitalization. We believe the management will dip into reserves when it requires to manage a decent payout for shareholders.</li>
</ul>



Oriental Watch (398 HK) reported a steady result, with 2023 earnings &lt;18% YoY ( adjusted for one-time gains in 2022 &lt;5% YoY), which was broadly in line with our expectations. 
The DPS for FY23 was 61 cents (FY22: 74 cents) lower than our expectation of 65 cents, a 100% payout ratio equating to a 14% dividend yield.
Cash at 1.07 bn represents &gt; 50% of market capitalization. We believe the management will dip into reserves when it requires to manage a decent payout for shareholders.


Oriental Watch: Steady FY23, Dividend Yield 14%, Cash >50% of Market Cap

Perfect Medical Health / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">Perfect Medical Health (1830 HK)</a>, post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&amp;investments representing 24% of the market cap.</li>
<li>HK is experiencing a dip in consumer sentiment, and <a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">t</a>he company isn't immune to it, but flat sales/profitability, a 24% net margin, and &gt;40% ROE provide great margin of safety.</li>
<li>The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.</li>
</ul>



Perfect Medical Health (1830 HK), post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&amp;investments representing 24% of the market cap.
HK is experiencing a dip in consumer sentiment, and the company isn't immune to it, but flat sales/profitability, a 24% net margin, and &gt;40% ROE provide great margin of safety.
The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.


Perfect Medical: Post Card From HK, Yield of 11.5%

Hong Kong

Oriental Watch Holdings Limited, through its subsidiaries, trades watches and invests in properties.

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Oriental Watch (398 HK)

Oriental Watch: Buying a Rolex in Milan or New York? No, Thanks We Will Get It in Shanghai & Beijing

Oriental Watch has morphed from a cheap HK travel play to a domestic China luxury spending story. The stock has run up 60% YTD in anticipation of...

Nicolas Van Broekhoven