Leading retail group in the UK and US. The company sells luxury watches from Rolex, Patek Philippe, Cartier and others. An undervalued company that expects to double revenues and profits by 2028.
Hi EVI - amazing piece. Curious if you ever posted part II? If you did, apologies if I missed this, and could you share the link? I ask as WOSGF is part of my porfolio and I see it going up 5x to 10x. Beyond 10x they would have to add new lines of business, dividends, buybacks, etc. Thank you!
1- WOSG buys at wholesale prices from luxury brand manufacturers, and then sells at retail prices to wealthy end users - this margin is their Gross Margin- Am I right? If yes, who sets the retail prices, Rolex or WOSG by themselves?
2- Their revenue came from both - Volume and Prices increase. I understand luxury brands have pricing power, you shared a 7% CAGE Rolex price increase but this is only for 1 model, By any chance, we can get data for an overall AVERAGE price increase across EVERY brand they sell. I am trying to gauge what their revenue would be in 2035. For example, if the industry volume is growing by 6%, and it increases revenue by 5% through m&a & then let's say adds 3-4% average price increasing power, then it would be a 15% overall CAGR Revenue increase, let's say average operating margin is 10% then I would DCF and try to do valuation.
1- Rolex tend to set the price. See this video to understand the process [Rolex sets the price and determines the watches that will distribute] --> https://youtu.be/sn2cTMG7qYs
2- I think having the overall data for all brands and models is impossible. The main reason is that most of the big brands like Rolex, Patek Philippe, etc. are private companies. In the investment thesis you have a chart about Swiss watch exports, that provide a CAGR of 5% during the last two decades.
The 5% growth is a base value, but you can rely on additional data by looking into public companies to see if there are additional data points. Eg: Richemont (Cartier), or Swatch Group (Omega, Swatch..) are public companies and you may find additional information.
I believe its quiet complex to determine the revenue in 2035 due to the fact that the company is acquiring new businesses. However, you can try by estimating an organic growth of the current business (note that the 5% CAGR of exports in Swiss watches already includes price and volume). Then you will need to estimate how much growth can bring the M&A in the future. You should compare the value excluding M&A and including M&A to see if results make sense.
I'm expecting to review the financials soon, so I will share a post on the current valuation.
1- Rolex manufacturing production will increase by 60% in next 5 years. Currently WOSG sells about 1 billion of Rolex as per 'plural investing' report in USA & UK Combine. Naturally it would be 1.6B by 2030 assuming WOSG keeps the share. Then through acquisition of other Rolex retailers in USA, there would be another additional possible 0.5B (2.8B overall USA market size and currently WOSG has only 330M sales). Add on sales from rest of luxury watch brands + new branded jewelry, of about another 0.5B sales.. I guess Base case revenue would be ~2.5B? ...
Does that seem a good approach instead of running with %? it does not include the 5% decade growth you mentioned in report. I just want to go bare minimum i guess.
and then 10% Operating Margin would make 250Mm, & 70% cashflows conversion power would be like ~ 175M before capex.
That is an epic piece on WOSG. Thank you very much!
Thank you sir! I will be posting part II: Valuation and financials in the coming weeks
Hi EVI - amazing piece. Curious if you ever posted part II? If you did, apologies if I missed this, and could you share the link? I ask as WOSGF is part of my porfolio and I see it going up 5x to 10x. Beyond 10x they would have to add new lines of business, dividends, buybacks, etc. Thank you!
Hey! Thanks for your comment. I’m planning to do it soon. Once I finish the current analysis I’m doing, next will be WOSG
Amazing! I am looking forward to it. Thanks!
thx, a lot for putting in the effort.
1- WOSG buys at wholesale prices from luxury brand manufacturers, and then sells at retail prices to wealthy end users - this margin is their Gross Margin- Am I right? If yes, who sets the retail prices, Rolex or WOSG by themselves?
2- Their revenue came from both - Volume and Prices increase. I understand luxury brands have pricing power, you shared a 7% CAGE Rolex price increase but this is only for 1 model, By any chance, we can get data for an overall AVERAGE price increase across EVERY brand they sell. I am trying to gauge what their revenue would be in 2035. For example, if the industry volume is growing by 6%, and it increases revenue by 5% through m&a & then let's say adds 3-4% average price increasing power, then it would be a 15% overall CAGR Revenue increase, let's say average operating margin is 10% then I would DCF and try to do valuation.
your guidance would be appreciated.
Hi! Thank you for your comment.
1- Rolex tend to set the price. See this video to understand the process [Rolex sets the price and determines the watches that will distribute] --> https://youtu.be/sn2cTMG7qYs
2- I think having the overall data for all brands and models is impossible. The main reason is that most of the big brands like Rolex, Patek Philippe, etc. are private companies. In the investment thesis you have a chart about Swiss watch exports, that provide a CAGR of 5% during the last two decades.
The 5% growth is a base value, but you can rely on additional data by looking into public companies to see if there are additional data points. Eg: Richemont (Cartier), or Swatch Group (Omega, Swatch..) are public companies and you may find additional information.
I believe its quiet complex to determine the revenue in 2035 due to the fact that the company is acquiring new businesses. However, you can try by estimating an organic growth of the current business (note that the 5% CAGR of exports in Swiss watches already includes price and volume). Then you will need to estimate how much growth can bring the M&A in the future. You should compare the value excluding M&A and including M&A to see if results make sense.
I'm expecting to review the financials soon, so I will share a post on the current valuation.
Hope this helps
Best, EU Value
Thx a lot for reply.
1- Rolex manufacturing production will increase by 60% in next 5 years. Currently WOSG sells about 1 billion of Rolex as per 'plural investing' report in USA & UK Combine. Naturally it would be 1.6B by 2030 assuming WOSG keeps the share. Then through acquisition of other Rolex retailers in USA, there would be another additional possible 0.5B (2.8B overall USA market size and currently WOSG has only 330M sales). Add on sales from rest of luxury watch brands + new branded jewelry, of about another 0.5B sales.. I guess Base case revenue would be ~2.5B? ...
Does that seem a good approach instead of running with %? it does not include the 5% decade growth you mentioned in report. I just want to go bare minimum i guess.
and then 10% Operating Margin would make 250Mm, & 70% cashflows conversion power would be like ~ 175M before capex.