RE: >>>> Do you have an opinion on Hengdeli 3389.HK ? This is a jewelry retailer, that seems to have fallen on hard times recently. The stock is somewhat cheap. I noticed that some Luxury companies (i think it is Swatch group) have a significant stake in them, so I think they are legit. This could be an interesting recovery play and lower gold prices could be good for them as well. I would love you hear your first hand impression. They should be well known in HK.
Jardine made a nice jump yesterday. I have no clue what this is about, but I gladly take it.
Hey Spek, congrats on JMH! As usual, compliance at my firm takes too long to clear and Im like a tortoise without legs.
On Hengdeli, I havent looked at it in a while and yes they are one of the largest if not largest luxury watch retailer in HK/PRC with 70% sales exposure to China. What I do understand is that they fell on corporate governance issues + speculated loss of distributorships for some of the European luxury brands. I looked at several of these firms while back as an analyst 2/3 years ago. The industry seems to be prone to accounting manipulation and of course is rather working capital heavy but they have benefited from the influx of china folks shopping in HK (besides the milk powder lol).
Attached is some articles, not sure if you have seen them.
bloomberg.com
online.wsj.com
And this Moodys report for some background check (I dont agree with some of their analysis).
pg.jrj.com.cn
Swatch owns 9% and LVMH 5.9% while the owner family owns over 35%.
The odd thing is that LVMH owns Fendi which is one of the brands that reportedly pulled out of the distributorship among others. When asked on the distributorship, they did not give a resounding reply which may mean some or all of the speculation may be real.
Secondly the family has been pledging shares so effective ownership isnt clear. He reportedly pledged 500m shares out of 4800m outstanding, over 10% (which at 2011 prices of mkt cap HK12B average) means he got a personal loan of US$100m over security of HK1.2B or US$154m thereabout at then exchange rate of 7.78 average. Thats almost a third of their holdings.
Financially not impressive either, cash sucking machine (high level products so long turnover period) and I spotted some minor black holes for which I cant explain for.
Hmm, I would rather sit back and wait further (my hunch tells me its going futher down) or fly down to China to check out their stores and re-evaluate if you are around the area. :) |
