corporate presentation 17 september 2008. presentation outline business overview fy2008 financial...
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Corporate Presentation17 September 2008
Presentation OutlineBusiness Overview
FY2008 Financial Review
Outlook & Future Plans
Stock Information
Stock Codes TWCH.SI, TWIN SP
Share Price S$0.140 (Closing on 16/09/08)
Number of Issued Shares 374,062,000
Market Capitalization S$52.4 million
FY08 PE 4.5 times
Research coverageCIMB (BUY, TP $0.40)
Westcomb (BUY, TP$0.39)
Substantial ShareholdersFounder 58.3%
UOB Asset Management 10.9%
Free float 30.8%
Time Watch – A leading PRC watch retailer
Extensive retail presence and experience
Started first PRC retail store in 1988
2 house brands “Tian Wang” & “Balco” and PRC exclusive distributor of Italian brand Police
4 key business segments
Manufacturing and Retailing
OEM Manufacturing
Watch movement trading
Leasing of Shopping Mall
Strong Brand Equity – China’s No. 1 Watch Strong Brand Equity – China’s No. 1 Watch BrandBrand
Multi-brand strategy with two house brands; “Tian Wang” and “Balco” as well as
exclusive PRC distributorship of Italian brand “Police”
“Tian Wang” brand top among ALL watch brands in China in terms of sales volume
“Balco” brand of Swiss watches among top-selling foreign watch brands in China*
*Source: China National Commercial Information Centre, an agency governed by the Commercial Department of
the PRC Government.
Renowned actor Francis Ng is Balco’s
spokesperson
Market Presence in PRCMarket Presence in PRC
764 outlets in over 35 cities
Stores present in all colored regions except Qinghai & Tibet
Presentation OutlineBusiness Overview
FY2008 Financial Review
Outlook & Future Plans
Performance Highlights
Satisfactory top and bottom-line growth
Expanded point of sales by 149 stores
Initial contributions from new Police stores and HK flagship store
Shift of focus to higher margin business segments
Gross margin expansion on higher contributions from Retail segment
Income Statement - Highlights
In HK$'000 FY2008 FY2007 Variance
Revenue 944,380 855,859 10.3%
Gross Profit 288,361 181,192 59.1%Gross profit margin 30.5% 21.2%
Net Profit 70,162 83,061 -15.5%
Revaluation Gains 4,275 27,981 -84.7%Effective tax rate 14.8% 14.4%
Adjusted Net Profit 65,887 55,080 19.6%Net profit margin 7.0% 6.4%
FY: Financial year ended 30 June
Balance Sheet -- HighlightsIn HK$'000 FY2008 FY2007
Current Assets 497,880 355,209Cash & bank balances 64,760 51,821Trade & other receivables 164,665 112,704Inventories 231,174 163,887
Non-current Assets 229,219 179,118Property, plant and equipment 36,810 21,208Investment properties 166,666 136,000
Current Liabilities 348,749 219,769Bank loans & overdrafts 179,185 78,660Trade & other payables 108,784 86,944
Non-current Liabilities 52,847 92,350Bank loans 8,941 56,475Convertible loan notes 28,596 25,262Deferred taxation 14,004 10,362
Total Equity 325,503 222,208Shareholders' equity 292,504 202,561
Cash Flow Statement -- HighlightsIn HK$'000 FY2008 FY2007
Net cash from Operating Activities 846 26,417
Net cash used in Investing (28,266) (107,565)Purchase of fixed assets (19,939) (9,759)Purchase of investment properties (5,926) (90,692)
Net cash from Financing 36,874 106,661Repayment of bank loans (367,229) (337,729)New bank loans raised 420,228 372,640
Net increase in cash & equivalents 9,454 25,513
Cash & equivalents at beginning of period
51,814 22,677
Cash & equivalents at end of period 64,760 51,814
Sales by Business Segment
Focus increasingly on high margin retail and OEM segments since 2007
Retail and OEM contribute 62% of sales in FY08 versus 48% previously
Retail store in Tshimshatsui, HK contributes HK$47.9m, 16% of total retail sales despite setting up only in late Jan 2008
Gross margin for the Group surged from 21.2% in FY2007 to 30.5% in FY2008 due to the change in business mix.
HK$m % HK$m % Change
Trading watch movement 352.8 37% 447.8 52% -21%Manufacturing & retail of watches 306.0 33% 180.3 21% 70%Manufacturing & resale of OEM watches 274.7 29% 227.6 27% 21%Leasing of shopping mall 10.9 1% 0.0 0% NAOthers 0.0 0% 0.2 0% -100%Total 944.4 100% 855.9 100% 10%
Segment Results
Retail contributes 64% of Group’s core profits
Watch movement segment has strategic importance to support retail and OEM segments
Initial contributions from leasing of Zijingshan Department Store at Zhengzhou City, Henan Province.
Profits from core operations up a strong 19%
HK$m % HK$m % ChangeTrading watch movement 3.0 3% 8.0 9% -63%Manufacturing & retail of watches 66.4 64% 52.3 61% 27%Manufacturing & resale of OEM watches 28.5 28% 26.1 30% 9%Leasing of shopping mall 5.0 5% 0.0 0% NAOthers -0.2 0% -0.1 0% 100%Total 102.7 100% 86.3 100% 19%
Breakdown of Stores.
FY 04 FY 05 FY 06 FY 07 FY 08
PoliceBalco
Tian Wang
383 399382
429
533
134 161 171 186 216
0 0 0 0 150
100
200
300
400
500
600 Total of 149 additional stores opened for Tian Wang, Balco and Police
Opened 15 stores for Italian brand Police to kickstart exclusive PRC distributorship
Tian Wang & Balco’s FY08 sales performance
Tian Wang
Lowest Price: 150
Highest Price: 23,800
ASP: RMB 832
Balco
Lowest Price: 1,620
Highest Price: 29,800
ASP: RMB 3,050
Top 10 best-selling Tian Wang models in FY08 Top 10 best-selling Balco models in FY08
Outlets in PRC.
517 560 553615
764
0
200
400
600
800F
Y 0
4
FY
05
FY
06
FY
07
FY
08
Stores as at end of the period:
Improving PRC Performance
Average Sales Per StoreHK$’000
FY05FY06
FY07FY08
212.1253.2
293.2337.8
0
50
100
150
200
250
300
350 15.2%
Presentation OutlineBusiness Overview
FY2008 Financial Review
Outlook & Future Plans
Growing Size of PRC Middle Class & Watch Market
Size of China’s middle class (earning between US$6,000-US$25,000 per year) to increase from 5% of urban households in 2005 to 43% in 2015 and 66% in 2025.
Size of the affluent class (earning more than US$25,000 per year) is expected to comprise 2.3% of Chinese urban households by 2025.
Source: McKinsey Global Institute
Rapidly emerging middle class, along with rising discretionary spending power, to be the key fundamental driver of watch retail spending.
PRC watch market size valued at RMB7.1 billion in 2008, reaching RMB8.3 billion by 2010
Source: Euromonitor
Dual Expansion PlansDual Expansion Plans
149 point of sale (POS) added in FY08
Continue to expand retail network in FY09
Increase same store sales
Expansion of Retail Point of Sales
Expansion of Retail Formats
To obtain additional sole distributorships in the PRC
Retailing of internationally-renowned brands such as “POLICE” to target younger, trendier yuppies
On Track For Further Growth
32.645.4 55
78.8103.3
0
20
40
60
80
100
120
FY06 FY07 FY08 FY09(E)
FY10(E)
HK$’m
*Adjusted for HK$83m in non-cash goodwill write off in FY06, revaluation gain on property of HK$28m in FY2007 and HK$4.3m in FY2008.Analysts’ consensus estimates used for FY09 and FY10
CAGR of 33.4%
SummarySummary
Vertically integrated model from manufacturer, trader and retailer to enhance margins
Owns “Tian Wang”, the largest PRC watch brand
Ability to pump new brands into existing network to further fortify growth opportunity
Trading substantially below peers, An undervalued high-growth stock
“Balco” and “Police” brands to supplement growth
THANK YOU
www.timewatch.com.sg