Assessment on Wharf REIC and Techtronics

Hi Jeon, I can help you with the Wharf and my colleague Chee Hoi will get back to you on Techtronics since he is more familiar with the company. For Wharf, you are right that you can actually use REIT framework to analyse them since it is similar to a REIT (without the REIT status). They primarily hold investment properties like Harbour City, Time Square, etc which they rented out for income. So REIT framework will be better here. Wharf has a relatively short listing history but we still can try to get the low and high yield. You can look at their share price and pinpoint the low (2020) and high (2019) then try to calculate the yield at that time. I think the main question you should be asking is whether HK can get back to its heyday (pre-Riot level)? If they can, we will probably see Wharf benefited from it since tourists contribute quite significant footfall in their malls.

Hi Jeon,
To me, Techtronic Industries has 'high switch cost' as its economic moat because of its battery ecosystem. For example, its Milwaukee lawnmowers, electric drills, and leaf-blower share the same battery. Because of its compatible battery ecosystems, the user tends to buy more of the same range of Milwaukee products and the batteries. As users don't want their tools or extra battery to remain idle at home, they tend to stick back to the same Milwaukee tools and batteries. This sort of creates a recurring income for the company. The same concept also applies to its another brand called Ryobi. The Milwaukee is quite popular based on what I found. As the ecosystem is quite sticky, I think Techtronic Industries can increase prices (growth) to pass down costs to consumers/customers.

If you refer to their Annual Report 2022, p. 63/95 or p. 123 on hard copy (https://www.ttigroup.com/documents/annual-report-2022/assets/files/Fullreport_e_spread%20page.pdf), you can see the revenue breakdown by geography. Techtronic Industries pretty much does businesses in the U.S. and Europe as well as a bit of Australia etc.

Actually just like the information that you have gathered, this company definitely passed the 8-step, just that recently it was targeted by a short-seller actually. (https://jehoshaphatresearch.com/wp-content/uploads/669HK-Short-Report-Feb-2023-Jehoshaphat-Research.pdf, https://www.scmp.com/business/china-business/article/3211341/techtronic-rebounds-us41-billion-sell-hong-kong-power-tool-maker-denies-allegations-accounting-fraud). I compared its margin with its competitors like Bosch and Stanley, Black and Decker, the margins are actually comparable, so I don't think it is a fraudulent company. That will depend on whether you still trust and want to invest in this company, you can also demand a higher yield if you want to be conservative.