What a fightback! It has been a long while since I last covered luxury watch retailer, The Hour Glass. And boy, this counter recently rose from the tomb to stage a magnificent recovery after posting a stunning full-year financial result. Is this really the light at end of tunnel for The Hour Glass?
Back in 2017, co-founder cum Chairman Henry Tay had warned of a severe winter ahead for The Hour Glass because of oversupply issue and a slow-down in the Hong Kong market. On the basis of the latest financial results, it appears to me that the management may have successfully turned. Revenue increased 5% to $727 million but net profits exploded by 41% to reach a whopping $71 million. To achieve this feat, the management had exercised cost discipline and pushed up top-line. No wonder The Hour Glass share price surged from $0.65 in March to the recent $0.80 mark.
Indeed, investors of The Hour Glass must have that bitter-sweet feeling. Chairman Henry Tay’s warning proved to be proverbial as revenue had previously slowed from $707 million in FY2016 to reach $691 million in FY2018. Profit after tax dropped from $53 million to $50 million in the corresponding period. So the latest full-year financial result must have brought plenty of smile for long-time investors.
In this article, I will share my views on the key financial metrics of The Hour Glass, such as its increasing free cash flow, the gross margin and net asset value. Through these factors, I will explain why The Hour Glass share price is considered slightly undervalued.
The Hour Glass the forgotten stock
The Hour Glass started out as husband-and-wife luxury watch boutique shop in 1979 and had grown to become a leading luxury watch retailer with a network of 40 boutiques in the Asia Pacific region. As a veteran entrepreneur, Henry Tay’s views are highly respected among the industry. In fact, looking at the statements made by him in the annual reports, one can tell the amount of wisdom and foresight that Henry Tay possesses.
Whether the recent stellar results are sustainable [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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