The Watches of Switzerland Group PLC

The Watches of Switzerland Group PLC (LON: WOSG) is an FTSE 250-listed luxury watch retailer, operating in the UK and US regions.

Investment Rationale for Valuation – Buy at GBX 921.00

• Q4FY22 Update: The Group exited FY22 with decent performance in Q4FY22 and delivered an increase in Group revenue to £304 million during the quarter, compared to £218 million posted in Q4FY21.
• Uptick in Luxury Sales: The company reported an uptick in luxury watch sales by 36% in FY22, compared to FY21 driven by decent demand in both the US and UK markets.
• Improvement in Debt Position: The Group reported an improvement in net debt position to £14 million as of 01 May 2022, compared to £44 million as of 02 May 2021.
• Technical Indicator: The stock is hovering between the lower and middle Bollinger band with 14-day low RSI level of ~43.12.  

Key Risks

• Interest Rate Headwinds: The Group's cash flows may also get impacted due to a hike in interest rates by the Fed.     
• Inflation Risk: Surging inflation might dent consumer sentiments towards luxury spending, thereby impacting the sales of the company.    

Financial Highlights (for FY22 ended 01 May 2022, as of 18 May 2022)

(Source: Company Website)

• Group Revenue: Group revenues grew by an impressive 37% in FY22 to £1,238 million, from £905 million reported in FY21.  
• Rise in Jewellery Sales: Luxury jewellery sales grew by 86% in FY22 owing to strong market conditions, coupled with incremental growth from the Betteridge acquisition and the opening of its first BVLGARI mono-brand boutique.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

Conclusion

The company has started FY23 with decent momentum and expects the recovery in footfall and air traffic to aid in sales going forward. It anticipates revenue to be in the range of £1.45 - £1.50 billion in FY23.

(Source: Company Website)

The stock made a 52-week high and low of GBX 1,600.00 and GBX 779.00, respectively.

Based on the impressive financial performance, increase in luxury sales, optimistic outlook and support from the valuation as done using the above method, we have given a “Buy” recommendation on The Watches of Switzerland Group PLC at the current market price of GBX 921.00 (as on 26 May 2022, 11:41 AM GMT+1) with lower double-digit upside potential based on 20.39x Price/NTM Earnings (approx.) on FY23E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

---

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.