Hour Glass

Hour Glass: Over the past 34 years, Hour Glass has cemented itself as a luxury watch retailer in Singapore and has been growing its presence in Asia. It also secured the main franchise of Ladurée in SE Asia, a French luxury bakery renowned for its macaroons. Headwinds include the rising business costs, weak consumer sentiment, as well as increasing competition as newcomers enter the Singapore market. In China, the recent efforts to weed out official corruption has resulted in a drop in Swiss watch export levels to Asia (Singapore’s -2.6%, Hong Kong’s -11.1% and China’s -18.7% in 1H13.) To mitigate the slowdown in Singapore, Hour Glass teamed up with Blue River Corporation, a local luxury jewellery manufacturer in Thailand in 2008 and opened three stores in Bangkok. Hour Glass has a resilient balance sheet (net cash position of $38.3m, five-year ROE average of 15%), but recently cut its dividend payout, bringing its yield of 3.1% in line with peers. Valuation is unattractive at 7.8x hist. P/E vs. its average of 6.3x.