Time Watch signals mainland intent with IPO
Manufacturer and retailer plans to tap into China's rising middle-class market by opening 38 branded stores in first-tier cities by 2015
The initial public offering of Time Watch Investments, a mid-priced watchmaker listed in Singapore before being privatised in 2011 and now tapping into the Hong Kong market, is a play on domestic Chinese consumption but the company's rising inventory could be cause for concern.
The dual themes of urbanisation and domestic consumption have returned to the spotlight in China of late, with top policymakers in Beijing repeatedly sending a clear message that the government wants these to be the new growth engines.
A key question is whether the watchmaker, controlled by chairman and founder Michael Tung Koon-ming, will be able to tackle in timely fashion a rise in inventory, which represented about a third of its sales level last June.
According to its listing prospectus, the company's inventory turnover days - the number of days it takes it to sell the inventory on hand - rose to 231 for the year to June last year, from 197 days the year before. Operating cash flow dropped sharply to HK$4.7 million from HK$75.2 million for the same period.
Bad debts rose 35 per cent to HK$314.2 million in 2012 from HK$233.2 million, raising the possibility of provisions for impairment losses.
The prospectus attributes an increase in cash and cash equivalent on its balance sheet to a slew of financing activities for the first six months of last year, which resulted in cash-on-hand of HK$104 million.