The Hour Glass is a stock with deep value and it currently makes up 3% of my stock portfolio. This company had been consistently paying investors dividend over the years. In fact, The Hour Glass had increased their dividend to 3 cents from 2 cents last year.
The luxury sector has been suffering from sluggish demand over the past few years and just when things start to pick up in 2019, the economy was hit by the COVID-19 outbreak which impacted the tourism industry and indirectly the luxury retail sector. The Hour Glass who had over 40 boutiques in twelve key cities in the Asia Pacific region will surely be impacted by the COVID-19 outbreak.
Even though The Hour Glass had recognized the uptrend of eCommerce in the year 2017 and thus launched their Omni-Channel Strategy, The Hour Glass is still very focused on physical stores. I am not aware they have any online stores to sell their luxury watches. This is actually a disadvantage to The Hour Glass in situations like now whereby tourists from certain countries are banned from travel and shoppers shun shopping malls. Tenants like The Hour Glass still have to pay rent for their physical stores and of course their staff salaries.
The Hour Glass usually trades at S$0.82 which is 3.8% above premium to the Net Asset Value of S$0.79 per share. However, due to panic, the market starts selling off stocks. As of 6th March 2020, The Hour Glass closed at S$0.71.
Based on the current price of S$0.71 and historical dividend payout of 3 cents, the current dividend yield is 4.23%. There is a high chance The Hour Glass will not retain its highest payout of 3 cents should the COVID-19 situation persists.
It is unknown how long the current COVID-19 situtation will last. For the above reasons, I have divested The Hour Glass.
Hi, do you invest in something else or hold the cash to strength your warchest? If the former, what do you buy?
Hi Warrior, I invested in something else. I added more of SPH REIT given the price has fallen and current yield has increased.
Hi Siak Lim,
Interesting thoughts about THG not having an online presence, and there are some nuances within the new watch industry I can share with you to better understand why first hand dealers don’t usually sell their watches online:
It’s essentially a relationship-driven industry. Especially in a climate where popular models are perpetually out of stock, the wait-list can literally be years-long. You can’t just go into a shop and say ‘I want this’. So the de-facto way of getting your name on the wait list is by being a regular customer of the shop, or start by being one (ie purchasing other cheaper models first). These dynamics cannot be fully captured via an online shop. A not-so-very accurate comparison would be the new car market — not a lot of people will want to drop big bucks to buy a BMW via the online shop . Same for watches – in fact, many watches easily exceed the price of a BMW.
So to me, for a counter like THG, I’d close an eye if they don’t have an online shop.
Hi Timothy, thanks for sharing.
it looks like your decision and rationale for selling back then was wrong. THG has since reached $2 and the value is yet to be fully unlocked.
“The Hour Glass will not retain its highest payout of 3 cents should the COVID-19 situation persists.” they even increased their payout during this COVID period.
Oh yes, I have no crystal ball back then 🙂