Dickson Concepts Ltd (113:HKG)

Dickson Concepts (International) Ltd. is a Bermuda incorporated, Hong Kong-based listed company.  The company is chaired and controlled by Dickson Poon.

Brief History

Dicksons Watches Jewellery_2

In 1987, acquired ST Dupont.

In 1991, acquired Harvey Nichols from the Burton Group.

In 2005, acquired Bertolucci SA, manufacturer and distributor of luxury Swiss watches

In 2006, acquired Tommy Hilfiger Asia-Pacific Limited (“THAP”) for HK$396 million.  At the time, THAP operated 89 Tommy Hilfiger retail stores in Hong Kong, Taiwan, the PRC, Singapore, and Malaysia.

In 2009, the company announced the end of its 20-plus year distributorship for Polo Ralph Lauren products in Asia would end [estimated to contribute 10% of its revenues].

From at least 2013, the company has been issuing scrip dividends in lieu of cash payment, based on the election of the stockholder.  In times of good, this is a small issue; however, when the stock trades at a severe discount to assets, the company is overpaying its stockholders with an undervalued security.  Although this is a frustration, it’s a minor one.  If I owned the stock, I’d be taking the scrip — at least.  And it appears Dickson Poon is doing the same.

The most recent scrip dividend [valued at HK$2.94 per share], of this year, increased shares outstanding nearly 13 million shares or over 3%.

On the bright side, the company has bought back over 9 million shares in the recent past, at an average cost of HK$3.22 before expenses.  As of November 2017,  the current shares outstanding stood at 393,251,331.

During the year ended 31st March, 2016, the Company repurchased a total of 9,433,328 ordinary shares on the Stock Exchange at an aggregate purchase price (excluding expenses) of HK$30,370,744. [2017 Annual Report]

It’s a bit difficult to get a handle on, but the company has been closing stores for quite some time. In some periods, they have reported an increase in stores, but the general direction has been downward. In 2008, they reported operating 452 stores [64 in Hong Kong, 237 in China, 3 in Macau, 109 in Taiwan and 39 in Singapore, Malaysia and the Philippines]. In their recent interim report, they are down to 112 stores [25 stores in Hong Kong, 15 in China, 58 in Taiwan, 5 in Singapore, 5 in Malaysia and 3 in Macau].

On the flip side, sales per store have gone up considerably, as total revenue has gone from HK$3.8B in 2008 down to HK$3.1B in 2017.  Without doing the legwork, the most likely explanation is that the company has been closing small stores, kiosks, and pop-ups and opening larger stores.

Other

  • No options have been granted
  • Pension is a defined contribution plan
  • As of March 2017, future minimum lease payments under non-cancellable operating leases payable amount to HK$821,440,000.

    3/31/15 3/31/16 3/31/17 9/30/17
    Cash and Short-term Investments 1,387,000,000 $ 1,456,837,000 $ 1,498,971,000 $ 1,552,526,000 $
    (0.75 * Accounts Receivable) 94,737,750   $ 69,092,250   $ 57,627,000   $ 234,689,250 $
    (0.5 * Inventory) 422,314,500   $ 326,031,500   $ 322,593,000   $ 309,814,000 $
    Total Liabilities 830,313,000   $ 835,097,000   $ 704,778,000   $ 755,733,000 $
    NNWC 1,073,739,250 $ 1,016,863,750 $ 1,174,413,000 $ 1,341,296,250 $
    NCAV 1,760,687,000 $ 1,586,903,000 $ 1,729,222,000 $ 1,729,267,000 $
    NCAV + LT Investments 2,081,716,000 $ 1,855,524,000 $ 1,929,400,000 $ 1,930,507,000 $
    TBV 2,312,536,000 $ 2,018,000,000 $ 2,072,000,000 $ 2,060,000,000 $
    Enterprise Value 338,629,334   $ 441,296,833   $
    Retained Earnings 1,328,890,000 $ 1,368,019,000 $ 1,311,392,000 $
    Dividend Payout (34,638,000) $ (23,193,000) $ (41,850,000) $ (27,046,000) $
    Shares Outstanding 390,930,073 380,451,745 380,451,745 393,251,331
    P / NNWC 121% 86% 90% 84%
    P / NCAV 74% 55% 61% 65%
    P / NCAV + LT Investments 62% 47% 55% 59%
    P / TBV 56% 43% 51% 55%
    NCAV Burn Rate -5.8% -9.9% 9.0% 0.0%
    Debt / Equity 2.9% 3.7% 2.1%
    F-Score 4 5 8
    FS-Score 4 6 7
    Z-Score 2.6
    Beneish M-Score (4.1)
    EV / Operating Income (5yr) 203%
    EV / Operating Income (10yr) 23%
    Operating Income (10yr) 1,483,731,000 $

The company traded above NCAV as recently as 2013.

113

Dickson Poon has been aggressively accumulating shares.  Brandes, (a value shop), looks to have been in this for some time.

SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interest
Dickson Poon 16,246 53.2% 209,331,145
Brandes Investment Partners, LP 30,473,125 7.8%
61.0%

Write-ups:

  • barginhunter blog here

Disclosure:  Placed a limit order @ HK$2.90

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