Luxury Watch Market And Companies In Singapore

Leading Companies in Singapore’s Luxury Watch Market

Singapore is not only renowned as the trading hub but also becoming the shopping paradise for luxury goods. At present it ranked as number 7 all over the world as their luxury watch imports increased by 33.9% since the year 2010 the value of Singapore watch market is 98.7 million CHF. It is the leading market for Southeast Asia that is closely followed by Thailand with the value of 36.7 million CHF and Malaysia with the value of 6.9 million CHF. Tourists from China and India are ready to spend thousands of dollars for the watches from Singapore (Atwal & Bryson, 2014).The reason behind this is the authenticity of luxury watches and less chances of getting the fake item. The other factors are availability of receiving the tax refunds and payment of much lower amount as compared to their own country’s tax burden.

The Hour Glass was formed during the year 1979 in Singapore and currently supporting more than 50 brands for watches all over Asia Pacific region. It is one of the luxury retail group for watches in Asia pioneer with appreciation and awareness of the culture, it attempts to lead the cultural retail enterprise in world. The multi-brand boutiques of the company are located strategically in main retail walkway in Hong-Kong, Japan, Thailand, Australia, Malaysia and Singapore. The expert team of the company are experienced in sales consulting and assist the customers through the experience of watch purchase (The Hour Glass – Leading Luxury Watch Retail Group, 2018).  

Cortina Holdings Limited was established in the year 1972 and the company is based in Singapore. It is the investment holding company that is engaged in retail and distribution of the timepieces and related accessories in Russia, Taiwan, Hong Kong, Indonesia, Thailand, Malaysia and Singapore. It operates through retail and wholesale segments. The retail segment is engaged in retailing of the branded pens, time pieces and the accessories. On the other hand, the wholesale segment is engaged in wholesaling of luxury brand accessories and time pieces (Cortina Holdings Limited, 2018).

The term sustainability means the corporate and social responsibility and the sustainable development. It includes three aspects like social, economic and environmental. The social aspect includes the impact of the organization on the communities and its employees. The environmental impact is the effect on the environment and the economic impact is the financial stability and wider indirect as well as direct impact (The Hour Glass, 2018). The board of the company is engaged with overall management of business affairs of the company and sets overall policies and strategies of the company for long-term sustainability of the company. It reviews the divestment and investment proposals, financial performances, funding decisions, key operational initiatives and implementation of proper systems for managing the business risks of the company. Other functions involve the approving and considerations of re-nominations and nominations for the board, reviewing the performance management and endorsing the framework.  Engaging with Sustainability offers the opportunity for the HR professionals for making strategic contribution towards the organization. Through embedding the sustainability in the strategy of the people will assist the company to prepare the strategies for employee engagement, retention and motivation. It has been realised that the company is required to enhance the awareness of the leaders for opportunities and sustainability issues (The Hour Glass, 2018). It is required for enabling them to take the ownership for required changes in the company to become successful under low carbon economy and achieve the expectation of the customers.

The Hour Glass – Leading Luxury Watch Retail Group

The issue found is that the under the operating activities in sustainable way most of the people struggle for moving beyond basics, for instance, recycling. However, if the management gather their knowledge regarding measurable and successful green initiatives they will gain the potential regarding fulfilling the requirements of the employees (D’arpizio et al., 2015). While various companies have made the public stands with regard to the environmental and social commitments, the reviews related to environment consciousness will benefit the companies to form their policies. 

The solvency ratios are the key metrics for measuring the company’s ability for meeting its debt and various other obligations. Solvency ratio of the company indicates whether the cash flow of the company is enough for meeting the long term as well as the short term liabilities. When the solvency ratio of the company is lower the probability that the company will default the debt obligation is higher (Brooks, 2015). The gearing ratio of the company measures the percentage of the capital raised through borrowing as against the equity. It indicates the company’s financial risk as the excess debt can lead the company to financial issues. In the same way the higher debt-equity ratio represents that higher proportion of the debt will enhance the risk of un-stability.   

Looking int the above tables and graphs it is recognized that the gearing ratio of Hour Glass and Cortina Holdings has no specific trend if the years 2015, 2016 and 2017 are taken into consideration. However, in both the cases, the gearing ratio for the year 2016 is lower among all the 3 years. It is further observed that the gearing ratio of Hour Glass for all the three years is significantly better as compared to its competitor Cortina Holdings. It has been found that the shareholder’s equity for Cortina Holdings is significantly low against its fixed cost bearing fund. Therefore, it can be stated that the company will not be able to meet its interest obligation with the available equity. Further, if the debt equity ratio is considered it is found that the debt equity ratio of Cortina Holdings for all the three years is comparatively higher than Hour Glass (Sandström, 2016). Higher debt equity ratio indicated that Cortina Holdings is highly leveraged as compared to Hour Glass.

Short term liquidity ratios represent the ability of the company to meet their short term obligations when they become due (Drehmann & Nikolaou, 2013). Current ratio states the current assets of the company against its current liabilities and the quick ratio does not take into consideration the inventories. 

Cortina Holdings Limited

Looking into the above graphs and tables it is observed that both the company’s current ratio and quick ratio are strong and is sufficient to meet the short term obligations of the companies.  However, it is found that both the ratios of Hour Glass are better as compared to that of Cortina Holdings (Jones & Kulish, 2013). Though both the company’s liquidity position is strong, as the current ratios for all the 3 years for are Hour Glass as well as Cortina Holdings are quite high it is indicating that both are not using their working capital efficiently and missing on the opportunities. 

Profitability ratios measure the performance of the company. It is the capacity of the company to generate profit. The profit is the amount left after meeting all the expenses and costs of the company (Delbridge et al., 2013). 

It is observed from the above that the gross profit margins of both the companies are almost same and moving around 22%-23%. However, if the net operating margin is considered it can be observed that is significantly better for Hour Glass as compared to that of Cortina Holdings (?ermák, 2015). Therefore, it can be stated that the operating expenses of Cortina Glass is quite high as compared to Hour Glass. Moreover, the net profit margin of Hour Glass is moving between 7% and 9% whereas the same for Cortina Holdings is moving between 2% and 4%. Therefore, the profitability position of Hour Glass is considerable better as compared to its competitor Cortina Holdings (Maga, Canale & Bohe, 2013).   

Return on equity is the return percentage to the shareholders from net income. It measures the profitability of the company through stating the amount of profit that the company is able to generate with the invested money of the shareholders (Grant, 2016). Looking into the above it can concluded that for the year 2015 the return on equity for Hour Glass is better than Cortina Holdings. However, for other 2 years this ratio for Cortina Holdings is significantly better than Hour glass. Therefore, Cortina is more efficient in generating income on shareholder’s investment (Hevert, 2013).

It indicates the profitability of the company with regard to the total assets. It reveals the management’s efficiency in using its assets for generating the earnings. It is calculated through dividing the net income of the company by total asset of the company (Heikal, Khaddafi & Ummah, 2014). The return on asset for Cortina holdings is significantly better as compared to Hour Glass.

Sustainability and Corporate Responsibility

Price earnings ratio or P/E ratio is the amount investor is paying for company’s profit of $ 1. Therefore, if the basic or diluted EPS of the company is $ 10 and the stock price is $ 25 then the P/E ratio will be $ 25 / $ 10 = 2.5. Looking into the above graph and tables it can be stated that except for the year 2015 the P/E Ratio of Hour Glass is far better as compared to Cortina Holdings (Prasetyorini, 2013). 

Conclusion and recommendation

It is found from the above that though the company is efficient in meeting its liabilities, the higher liquid ratio is indicating that both are not using their working capital efficiently and missing on the opportunities. Therefore to improve the efficiency in using the working capital the company can replace its short-term obligation into long-term and may sell the long-term assets on cash basis. On the other hand as the ROE of Hour Glass is lower than its competitor Cortina Holding, therefore, to improve the RE the company shall try to improve its margin for profit, improve the asset turnover ratio and distribute the idle cash.

As it can be observed from the annual reports of Hour Glass that the net profit margin of the company is stable and moving around 7% to 8%, to improve the earnings the company must have controls on its operating expenses. Further, it is found that Switzerland is practically sole supplier for the luxury watches in Singapore; it shall find any other country for the same or better quality of watches from which it can import to eliminate the monopoly of Switzerland. Moreover to improve the growth rate the company shall try to increase its share’s market price so that the P/E ratio can be improved which in turn will attract the investors to invest in the company. 

Reference 

Atwal, G., & Bryson, D. (Eds.). (2014). Luxury brands in emerging markets. Springer.

Brooks, R. (2015). Financial management: core concepts. Pearson.

?ermák, P. (2015). Customer profitability analysis and customer life time value models: Portfolio analysis. Procedia Economics and Finance, 25, 14-25.

Cortina Holdings Limited. (2018). Cortina.com.sg. Retrieved 10 February 2018, from https://www.cortina.com.sg/

D’arpizio, C., Levato, F., Zito, D., & de Montgolfier, J. (2015). Luxury goods worldwide market study. Milan Google Scholar.

Delbridge, T. A., Fernholz, C., King, R. P., & Lazarus, W. (2013). A whole-farm profitability analysis of organic and conventional cropping systems. Agricultural systems, 122, 1-10.

Drehmann, M., & Nikolaou, K. (2013). Funding liquidity risk: definition and measurement. Journal of Banking & Finance, 37(7), 2173-2182.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101.

Hevert, S. R. B. (2013). Return on Equity.

Jones, C., & Kulish, M. (2013). Long-term interest rates, risk premia and unconventional monetary policy. Journal of Economic Dynamics and Control, 37(12), 2547-2561.

Maga, M., Canale, P., & Bohe, A. (2013). U.S. Patent No. 8,428,997. Washington, DC: U.S. Patent and Trademark Office.

Prasetyorini, B. F. (2013). Pengaruh ukuran perusahaan, leverage, price earning ratio dan profitabilitas terhadap nilai perusahaan. Jurnal Ilmu Manajemen, 1(1), 183-196.

Sandström, A. (2016). Handbook of solvency for actuaries and risk managers: theory and practice. CRC Press.

The Hour Glass – Leading Luxury Watch Retail Group. (2018). The Hour Glass Official. Retrieved 10 February 2018, from https://www.thehourglass.com/

The Hour Glass. (2018). Singapore. Retrieved from https://www.thehourglass.com/web/app/uploads/2016/07/ARFY2016_SGX.pdf

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