August 4

Post AGM 2023: The Hour Glass stock review


At the end of the questions from the audience, Michael Tay, the Group Managing Director joked,

I’m surprised my mother hasn’t asked any questions.

People broke into laughter.

For the first time since attending these Annual General Meetings (AGMs), it felt as if I was amongst family.

If you’ve ever gone for these AGMs, they can feel like staid, dull affairs where the Chairman reads out boring resolutions and nothing much happens.

The Hour Glass was a little different.

What followed was a masterclass in learning how to run a business.

In this article, I will place in quotes what I remember hearing, considering that no recording of any kind was allowed in the room.

If there are errors, they are mine solely and not the responsibility of the group.

The business as it stands

Michael’s stand on the luxury watch business was clear. It wasn’t just a subset of the luxury industry but stood in a separate class on its own.

Watches are not a luxury item, but a collectible.

It can last, as it defies the passage of time.

The attention paid to watches is just incredible
The attention paid to making watches is just incredible

If you look at most luxury items, such as your diamond ring, they may eventually depreciate in value.

On the other hand, watches appreciate in value.

A shareholder asked about why profits had been so high over these three years.

Michael shared the example of the LVMH Group, which had added $8.9 billion in profit over the past 3 years in COVID, to show how the era of ‘cheaper money’ and a lack of avenues to spend it due to COVID had resulted in people moving their money into luxury items.

How LVMH has grown its profit
Just look at how LVMH, has doubled its profit after tax 107% in one (yes, just one) year.

With more time spent at home, consumers had more time to research these brands.

Secondly, Michael pointed out that the growth had been pushed by social media, with more people having the platform to ‘flex’.

Lastly, the portfolio of brands had matured under The Hour Glass’ consistent long term play of advancing watch culture.

One reason was because of how The Hour Glass has chosen to be the retailer of some smaller, but remarkable independent watchmakers, such as F.P. Journe. These also have remarkable innovations in watchmaking that make the watches even more valuable over time.

Seeing the incredible documentaries that The Hour Glass commissioned on the lives of these watchmakers, it’s not difficult to see why demand grew for these smaller, niche players.

With watchmakers limiting supplies, this means that there is a strong demand for these watches when they do come onto the market.

But the industry had also matured as a whole. Discounts rarely exist today. Buyers no longer speak so much of price, as they do of the availability of the watch.

The documentaries The Hour Glass commissioned were just beautiful
The documentaries The Hour Glass commissioned were just beautiful

What next?

As Michael shared,

The outlook has dimmed compared to the last 3 years.

But as Chairman wrote in the Annual Report,

The short-term outlook has dimmed, but I am confident that the future will remain dynamic and prosperous.

It will be hard to find the same unique confluence of factors – fear in the markets driving a flight to physical luxury, lockdown and cheap financing; over the coming years.

But The Hour Glass has certainly positioned itself for growth.

Part of the strategy has been the expansion into different geographies.

They have expanded strongly into the Australasia markets, with its acquisitions of properties and a New Zealand business in 2021 priming it for growth. Michael was certainly upbeat about growth there.

It makes sense if you think more about it. If you look at the isolated, island profile of the Australasia territories, it does seem like an untapped market for luxury.

But The Hour Glass has also recently gone into Vietnam with Michael remarking that it was exhibiting simiarl characteristics as China.

Buy local

Michael recounted the multiple financial crises and scares he had been through, which has certainly shaped his thinking about the typical customer profile of The Hour Glass.

Remember what PM Lee did before assuming the PM role? He went to Taiwan.

It sparked a diplomatic row.

Michael also came of age in 1999, whilst turning around The Hour Glass under the shadow of the $8 million in losses that they incurred in 1998.

At that time, they ended up divesting their watchmaking businesses.

The financial crises and the abilities of foreign governments to use strong-arm tactics has resulted in The Hour Glass focusing on domestic retail.

Thus, if you look at most of The Hour Glass’ outlets, they are located in prime local shopping districts, and not tourist shopping districts.

A shareholder asked why they had so many outlets in Mid Valley in Malaysia and Michael quickly observed how that was the main place for domestic tourists.

They target locals. Period.

That’s why their business hasn’t been terribly affected by COVID. In fact, Michael talked about the funny moment when the GST Tax Refund Agent came into their office to report about how The Hour Glass was ‘in the red’, compared to its peers.

It meant that not as many foreigners were buying from them, and getting GST Refunds.

But for Michael, it was a good thing.

Ensuring the survivability of The Hour Glass

A management you can trust
A management you can trust

Perhaps the enduring message that I took away was Michael’s final words.

My aim is to ensure the long-term survivability of The Hour Glass.

If you’ve followed The Hour Glass for some time, you would have noticed that they aren’t just surviving. They are thriving.

But it’s testament to the management that they don’t just have their heads in the air. They do the things that benefit the long-term shareholder, and not just themselves.



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