Thursday, July 26, 2018

Updates To Big Idea 3

After my update to Big Idea 2, I decided to also do an update on Big Idea 3 after re-reading its annual report.

Big Idea 3's Chairman always give a very insightful context in his Chairman's Statement. Last year, he initiated a cautious approach, but the results turn out to be very different - which is great. Because this shows that the management is not aggressive and have a plan for the future. In fact their numbers tie in with their execution - showing successful integration of the strategy in the business.

This year, here are some extract from the Chairman's Statement that got me excited for the future:

"...As we begin a new phase of network enhancements and measured retail expansion, coupled with our overall inventory having been rightsized to our desired level of stock turnover, it is highly probable that this pace of cash generation will begin to moderate in the coming year..."

"...The luxury watch market has enjoyed a pronounced turnaround in the last 12 months - driven by a strong global economy and revived demand from Chinese shoppers..."

"...This positive uptrend continued in 2018, with like-for-like exports rising 10.1% in the first quarter..."

"...We expect the upturn to continue for the next 12 to 18 months..."

"...Despite the good news, the watch industry is still in the process of undergoing substantial change..."

"...Several notable developments in online retailing for luxury watches have taken place in 2017, and this is only the beginning..."

"...And for third party retailers like <Big Idea 3>, the only way to ensure long term success is for us to forge indelible partnerships with the right brands..."

"...Whilst the industry’s focus is on creating a digital response to the disruption that technology and e-commerce are having on the future of the watch world, our response has been to spend the past nine months rebooting our attitudes and approach towards client facing interactions. How, and how often we engage our clients, and the service experience we provide them to gain more understanding of their needs and form even greater intimacy with those customers. We do this because we acknowledge what Four Seasons founder Isadore Sharp has often repeated, “The simple idea that if you treat people well, the way you would like to be treated, they will do the same.” It is therefore our organisational desire to build a high and consistent standard in every one of our boutiques within our entire retail network, with aspirations to be the Four Seasons of the specialist luxury watch retail industry..."

That's all the highlight of the Chairman's Statement.

It basically explains the next quarter will still be positive and this environment could continue at least another 9 Months. But change will still continue to occur in this industry and companies within this industry has to be prepared.

It also state Big Idea 3 will continue with its strategy as per last year and continue the good work done.

In Short

Despite some investors doubting my choice of this company as a Big Idea 3, I still believe, with an sustainable strategy in place and an excellent management that is able to execute the plan, my choice of listing this company as a Big Idea is a correct one.

Nevertheless, in investing, numbers still speak louder than words. In addition, the last quarter of 2017, the company had performed slightly worse off than its biggest competitor despite leading it for the first 3 quarters of 2017. As of now, I will just have to continue to keep a look out on its next quarterly report.

Please do your own due diligence before you invest this counter (if you knew what it is).

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