The Hour Glass

[weijian]

The last bolt-on acquisition THG did was back in 2019 when it bought out a family own boutique in NZ for 35mil.

There is not much information wrt to this Aus acquisition and THG is paying ~8x earnings, which is just slightly cheaper than buying back its own shares. Nonetheless, the reduction in NTA post acquisition suggest that there is substantial intangibles been recognized on the BS, meaning most of the retail pieces are not transferred over.

PROPOSED ACQUISITION OF SPV IN AUSTRALIA

The Acquisition is in line with the Group’s strategy to continue expanding its presence in Australia and strengthen the Group’s retail footprint. The Acquisition is expected to provide both an enlarged client base and operating synergies to THGA’s business.

The consideration for the Acquisition is A$90.0 million (approximately S$75.6 million) (the “Purchase Consideration”). Under the SPA, the vendors will undertake a restructuring pursuant to which certain dealership rights, leases in prime locations and inventories will be transferred to SPV (the “Business”). The Purchase Consideration was arrived at on a willing-buyer and willing-seller basis, taking into account the earnings potential and assets of the Business.

https://links.sgx.com/FileOpen/Acquisiti...eID=839196

We finally have understanding of this 75mil sgd acquisition of an Aus SPV from AR25. THG has bought all the Rolex retail ops from Kennedy Watches and Jewellery. Post acquisition, THG is probably the biggest individual Rolex retailer in Aus and I suppose the Tays are wise enough to have gotten Rolex's blessings before they went ahead with the purchase.

Besides 4 new Rolex standalone boutiques, THG OPMIs should also be excited about the first (of the many) standalone Patek Philippe boutique that opened in Ginza in Oct last year (as per VB dydx). Dr Henry Tay has pointed out that the luxury watch market is currently in a dual track system - most desirable brands are growing and the rest are shrinking at the same time. THG is premium-izing and on the correct track. More CAPEX, higher inventory turnover days and less dividends, I am definitely ok.

CHAIRMAN’S STATEMENT

Over the past two and a half years, we have executed a series of initiatives to realign our retail network and deepen our market presence. A pivotal move was the transformation of The Hour Glass Japan’s multi-brand boutique in Ginza into a standalone Patek Philippe boutique, a testament to our commitment to elevating the overall retail experience for our clients. This project marks the first of several planned upgrades to the Group’s Patek Philippe network over the next 12 months, each designed to enhance brand visibility and client engagement.

Concurrently, the AUD90 million acquisition of four Rolex boutiques from an Australian counterpart—two in Sydney, one in Melbourne and one in Perth— completed our geographic expansion into all the biggest cities in Australia and New Zealand. This acquisition expands our footprint in Oceania from 3 boutiques in 2019 to 15 boutiques across 6 cities by the end of FY2026. We remain believers in the future potential of this region and have positioned have positioned The Hour Glass to maintain its leadership in this market.

THG AR25: https://links.sgx.com/1.0.0/corporate-an...d585c6cfd4

Kennedy family sells off Rolex dealership to Singapore: https://www.afr.com/companies/retail/ken...625-p5ma97

[weijian]

While David Webb is rooting for his HK watch retail holdings, most VBs will be hoping US citizens come Singapore to make their timeless timepiece instead.

Trump's tariff own-goal

There are some other interesting effects for larger ticket purchases. It will become more attractive for US citizens to visit other countries (particularly those with zero or low sales taxes) and buy anything that they can carry/wear home, claiming that they left the USA with it and it isn't an import. So HK tourism should benefit from US tourists looking for their next iPhone or sneakers, as should British Columbia in Canada. Similarly, if you are in the market for a Swiss watch, a trip to Switzerland or (again) HK beckons!

https://webb-site.com/articles/trumptariff.asp

4 months down the road, David Webb's view has actually materialized. From THG/Cortina's GPM of ~30%, a 39% tariff will add anything between 25-30% to the MSRP if the tariffs are fully passed onto customers. For the marquee brands, they will have to revisit the MSRPs that they set for their retail partners - both in US and rest of the world I suppose.

Unlike chocolate and pharma, makers will not relocate an inch of production overseas. The US is the biggest export market for Swiss watches at ~16% and MSRPs have always been strictly enforced on the ADs, at least by the Big3. Big geographical mis-pricings due to sudden FX changes are generally "quickly fixed" by brand owners.

It will be interesting to see what happens next if the 39% tariffs stay around. In the meanwhile, AP retailers will surely benefit.

How Switzerland’s tariff drama swung from hope to despair


Two different narratives of the call have emerged. One portrays Keller-Sutter lecturing Trump and botching the encounter. The other suggests it was all show and Trump had made up his mind to hit Switzerland before picking up the phone.

The truth might lie in the middle. Unlike some other leaders, Keller-Sutter is not one to opt for pomp and flattery, like NATO Secretary-General Mark Rutte has done to woo the US leader.

“We will not make promises we cannot keep,” Keller-Sutter told reporters when asked if she should have followed such a negotiating style.

But Trump also may have wanted to make an example of Switzerland after facing criticism for caving in on tariffs, especially against big countries like China.

Swiss companies initiated emergency plans to relocate production elsewhere to avoid the levies or pause deliveries to the US.

While the Swiss government is keeping a delegation in Washington to pursue concessions, the steadfast faith on the country’s exceptionalism is now broken.

“In negotiations, such breaks can happen,” Keller-Sutter told reporters. “One has to live with that and carry on.”

https://finance.yahoo.com/news/switzerla...00020.html