If you’re a shareholder of The Hour Glass, you would be in for a treat.
In 2021, on their 40th anniversary, they delightfully sent a chocolate tart from Cheryl Koh.
And every year, you would receive their annual report, printed on high quality paper, embossed with their seal.
It’s not just fancy paper too.
They’ve made fancy money too.
Over the past 4 years, their share price has rocketed more than 3x.
But why, and should you continue to buy into them?
This article may seem a little ‘atas’ (a Singaporean colloquial term for ‘sophisticated or elegant’, but be rest assured, we don’t understand all the complex French terms too.
The business is (deceptively) simple to understand
The Hour Glass is in a simple to understand business. They sell first-hand luxury watches.
They work with some of the biggest brands such as Rolex, and Patek Philippe, who formally partner them and recognise them as their distributors.
They also take on smaller, independent brands such as Jean-Claude and Blancpain.
Over COVID, we saw that the money which couldn’t be spent traveling ended up being spent on big-ticket items such as property and luxury watches. The era of low-interest rates also flooded markets with cash, allowing people to spend.
Dr Henry Tay, the Executive Chairman of The Hour Glass, commented on how this played out in the industry.
Swiss watch exports for 2022 grew 11.6% to an all-time high of CHF23.7 billion with all our principal brand partners reporting record sales.
This is despite a steady decline in the number of watches Switzerland exports.
Last year’s number was 15.8 million units, nearly half the total number of units exported in the year 2000.
In other words, industry growth has been driven by higher value watches at the expense of more entry level Swiss watches.
With demand far outstripping supply, this has meant that watches are able to command a premium. With The Hour Glass being the retailer, it has seen its revenue soar too.
So far, so good.
Whilst its business seems simple to understand, executing a strategy that takes advantage of this is not that easy.
It might seem that selling watches that are so much in demand would be a simple business.
But it’s not so.
In fact, as The Peak reports, in 1998, The Hour Glass went from having $18 million in profits to $8 million in losses. For Managing Director Michael Tay, who had just gotten the position of an investment banker in Merrill Lynch, returning to salvage the business was a necessity.
It was a baptism of fire, that allowed him to eventually gain great experience turning around an ailing business.
The reason for its failing? Aggressive expansion.
One reason was because of complacent staff who relied on a few ‘champion salesman’ to bolster growth. The Hour Glass had to eventually sack 50 staff.
They also lost focus by owning watch brands such as Daniel Roth and Gerald Genta.
Today, you can see how The Hour Glass has adjusted its strategy.
We will continue to invest with the next decade in mind and operate in a manner that, whilst may not maximise short-term financial gains, will extract future advantages.
We shall continue to focus on being the best possible collaborator for the brands we represent with a deliberate emphasis on offering high-quality watches with a high-quality personalised service to our clients.
Dr Henry Tay, in his Chairman’s Statement of the 2023 Annual Report
If you want a quick win with The Hour Glass, Dr Tay has already provided guidance. It may not be quick.
But they will continue to invest in longer term projects that will have long-lasting effects. What those are weren’t shared in the Annual Report.
But if you look at Managing Director Michael Tay’s recent interview, published on The Hour Glass, it shows some ideas.
Firstly, on the demand side, they have focused on advancing watch culture. Part of that comes from curating exhibitions, such as the Patek Philippe exhibition in 2020. Another aspect has been through its content-heavy website, which writes about watches. For their 40th anniversary, they also put together a list of short documentaries on independent watchmakers such as Urwerk and Nendo.
They have not neglected the supply side as well. The Hour Glass regularly scouts for the best brands to represent.
With Michael Tay sitting on the committees of the Foundation de la Haute Horlogerie and talent competitions such as the FP Journe Young Talent Competition, they get first dips on the best upcoming watchmakers.
They don’t just represent brands for the sake of growing their portfolio. Instead, they choose watchmakers that have introduced innovations that have the potential to change the course of history.
Here’s what Michael said himself in the interview with Jean-Claude.
Only by looking at this (horological) arc can we understand what has come before, and only then do we decide and determine if a watchmaker is introducing innovations that’s truly here to stay.
I think like a collector when I consider new partners and watchmakers in that if I were to teleport myself 100 years in the future, would I be proud of having that vision to determine if a given brand has that century long staying power?
But what are they like compared to their peers?
Of course we have to compare to their competitors to see if they are doing something exceptional.
Just look at Cortina Watches, which also sells luxury watches in Singapore.
Of course if you look at their profits, it looks great.
But if you peer at their management’s profile, you would realise that all of them are famed for their business acumen, rather than their ability to admire art.
Compare this to Michael Tay.
He went to a boarding school in the U.K., and shared with The Peak,
“I was the only person in my co-education school who elected to take contemporary-dance classes, so the school organised private tutorials. Whenever there was a school play that involved a dance segment, I filled in – in my one-piece, sheeny white leotard.
Despite having to continually justify to my rugby teammates that what I was engaged in was purely body movements in abstraction, I loved the momentary liberation it afforded.”
Beyond just his growing up years, which helped him to appreciate visual art, Michael does take the art of watchmaking seriously. Just look at the committees he is a part of.
The Hour Glass remains my favourite company
Watching The Hour Glass in action as a company is like admiring the curves on a Lamborghini.
Sure, you don’t know how they taught about design, and how much effort they put in, but it’s certainly nice to see the after effects of their work.
The sheer attention they take towards every single portion of their business, is just phenomenal to watch.
Just look at the efforts they take with their Annual Report, even going to the extent of mailing it to every shareholder, in a time where many companies have simply published it online, in the name of ‘sustainability’.
I don’t know why they do that.
But I suspect it’s because they know that it’s a gesture to get in touch, and touch the shareholder.
Even the Annual Report feels like a work of art. Graze your hands over the surface of the report, and you would be delighted knowing that this is a company you might own.
And if this is the effort they take with an Annual Report, whom many don’t read, can you imagine the efforts they take with the parts that people do see?
I think it’s why we continue to add to this position, whenever we can.