Will Apple Inc’s latest product launch stop the clock ticking for wristwatch manufacturers? If upheavals in the music and mobile handset industries during the past 15 years are any guide, time keepers should have a close eye on this year’s launch of the Apple Watch. Arguably, the industry’s last major technology step change occurred in 1972 with the introduction of digital time pieces.
Over subsequent decades, Casio Computer Corp has been a major driver of digital time keeping trends. The Japanese company was a pioneer of ‘shock proof’ capabilities via its G Shock range in the 1980’s; and, at the turn of the millennium introduced a number of world firsts; including wrist watches with global positioning systems, MP3 music players, and even a digital camera. Fifteen years later, Apple aims to provide further impetus for digital pieces to expand their share of the international wrist watch market from current levels in the order of 23 per cent.
Apple’s impact on the wrist watch market is of modest significance for the coming listing of Shriro Holdings. The Company is focused on wholesaling household products and consumer electronics in Australia and New Zealand; including those manufactured by Casio. Shriro distributes a combination of licensed and proprietary branded products. Its partnership with Casio spans decades and currently delivers a third of revenue. Household offerings orientated towards kitchen and cooking appliances, including brands such as Blanco, Omega, Robinhood, Evedure, and Altise, make up the balance of income.
With its listing representing a partial sell down by existing shareholders, incentive for new investors is provided by Shriro’s record of profitable growth and long standing management team. Shriro is on course to generate its third consecutive period of earnings growth, supported by widening margins. To sustain the trend, management is focused on developing new products within its proprietary household goods brands. Since 2010, proprietary brand sales have increased from 26 per cent to 45 per cent of total revenues. It is launching the Neil Perry Kitchen under the Omega brand during 2015.
Risks surrounding the offer include Shriro’s exposure to discretionary consumer spending and the potential for broadening of its proprietary portfolio to cannibalise sales of licensed Blanco products. Despite the execution risks, management’s record to date indicates a generally positive outlook favouring a mix of income and capital growth.
Company: Shriro Holdings Ltd
ASX Code: SHM
Shares on Offer: 50.5m
Listing Price: $1.00
Market Capitalisation: $95million
Listing Date: June 23rd
Author: Tim Morris
Jun 23, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.