Today I was in town! The first AGM I attended this year that was held in a hotel.
Some light moments first.
It’s been such a long time since I last came to this part of Orchard and I forgot Mandarin Orchard was already bought over by Hilton! So I missed the hotel and needed to walk back. Now that I look at the picture, the hotel name is right up there! How mindless I was!
Went into the same lift with CEO Michael’s mum Jannie. And together with a few other shareholders, chit chatted a bit as the lift brought us to the Imperial ballroom at level 35.
Strategic Leader with Insights
I have always enjoyed reading Michael’s letters to shareholders as they provided good insights. He exudes the same confidence in person. He strategically organised the questions from pre-AGM and gathered further questions on the spot, before answering them eloquently and with clarity.
I felt assured that they know what they are doing and believe that they will be able manage the business well in good or bad times.
Impact from Pandemic
The company has benefited from the pandemic as there was new interest in luxury mechanical watches. With no where to go, people are looking for other ways to spend their money.
Interestingly, CEO shared that he doesn’t see the watches as luxury good but view them as collectibles because they are long lasting and can increase in value.
With more time on hand during pandemic, people are able to gain more knowledge and so they are more willing to put their capital into purchasing of watches.
The company also sees a shift in terms of the age groups who are interested mechanical watches. Pre-Covid, interest came mostly from those in the 40-60, but post-Covid the average age drops by 30%.
Learnt more about Business
Michael shared that his long term goal is the survivability of the company. The focus is always on improving qualitative attributes rather than quantitative. So they do not have any revenue target but focus on how to improve services and trust with customers and partners.
The following are other aspects of the business that are new to me.
- 25 years ago, gross margin was 12.5% but now it is above 30%. Generally attributed to brand recognition and have reached a level of desirability. Boosted by social media and younger demographic, and supply can’t keep up with long term demand.
- Deliberate strategy to have core customers from local residents. Hence, they were very much less affected when the borders closed during Covid. Michael shared that he did an interview with CNA in 2019 on focusing on domestic market. Click here to read the article.
- Compared to past two years, outlook is dimmer. With current high interest rate and option to travel, consumers are more selective in discretionary spending. The positives that come from this is that this basically wipes out speculators and flippers in the secondary market, which leads to happier genuine buyers and retailers.
- Retail price is set by brand partners. Differing price in different countries due to foreign exchange.
- The company has been studying pre-owned market and is still studying it. They have not found a model that can scale up with a good margin. Hence, they are not rushing into it.
- They are still see growth in Australia and New Zealand. Vietnam has good potential and they have formed a joint venture with Thailand partner to try out the market.
- The company does not have a dividend policy but thus far payout has been between 25% to 35%.
Yup, there were small bites for the shareholders after the AGM. I really think this is a nice gesture for shareholders who took time to attend the meeting.
This is another AGM that I enjoyed. No, it’s not about the food nor venue, but because of what I learnt over the one and a half hour. I am determined to read their past years of their annual reports to gain more knowledge, so that I will be more willing to part my capital to buy even more shares in the future.
I last added more Hour Glass shares in June. You can watch the video below or read the post here.
I will hold on to my current stake while I wait patiently for their 20231H report.