The Hour Glass is one deep value stock that has been paying investors consistent dividends over the past decades. Currently, The Hour Glass makes up 3% of my stock portfolio. Despite the company holding lots of cash, The Hour Glass has been paying investors a consistent pay out of 2 cents over the past few years. With the recent runup in stock price from S$0.65 to S$0.82, I thought I share some updates that I read about on The Hour Glass.
The Hour Glass which deals with luxury watches has been suffering from the economy downturn over the past few years (2015 to 2018). Recently, The Hour Glass has announced a decent set of latest financial results and for the first time, proposed to increase its first and final dividend pay out from the usual 2 cents to 3 cents.
The group’s revenue climbed 4% to $720.9 million in FY2019 and profit after taxation rose 41% to $71.4 million. As you can see below, the financial results for FY2019 is excellent with debt being its lowest level at $15.0 million and a free cash flow of $47.0 million.
After experiencing sluggish demand for some years, the trend for luxury watches in Asia picked up and stabilised during the course of FY2019.
| Financial Results | FY2019 ($’000) | FY2018 ($’000) | FY2017 ($’000) | FY2016 ($’000) | FY2015 ($’000) |
| Revenue | 720,925 | 691,645 | 696,056 | 707,525 | 734,938 |
| Net Asset Value | 560,244 | 507,140 | 478,477 | 439,872 | 408,730 |
| Cash and cash equivalents | 180,971 | 180,496 | 124,849 | 93,898 | 98,332 |
| Loans and Borrowings | 14,972 | 49,655 | 51,160 | 63,422 | 61,187 |
| Free Cash Flow | 46,931 | 74,181 | 57,113 | 10,453 | (13,026) |
The Hour Glass is currently trading at S$0.82 which is 3.8% above premium to the Net Asset Value of S$0.79 per share.
| Financial Ratios | FY2019 | FY2018 | FY2017 | FY2016 | FY2015 |
| Gross margin (%) | 27.0 | 24.2 | 22.7 | 23.7 | 22.6 |
| Inventory turnover ratio | 1.8 | 1.9 | 1.8 | 1.7 | 1.9 |
| Debt/Equity Ratio (%) | 2.7 | 9.8 | 10.7 | 14.4 | 15.0 |
| Earnings per share (cents) | 9.99 | 7.07 | 6.91 | 7.42 | 8.22 |
| Net asset value per ordinary share ($) | 0.79 | 0.72 | 0.68 | 0.62 | 0.58 |
I like the following quote from Henry Tay in the FY19 Annual Report.
“Trying to understand is like straining through muddy water. Have the patient to wait. Be still and allow the mud to settle. – Lao Tzu”
What Henry Tay meant was the with the rise of e-Commerce, The Hour Glass thought they will be threatened by it. However, as time goes by, they realise e-Commerce only cater to the general crowd. What The Hour Glass stands out is that they cater to premium customers.