In April 2019, Tiger Woods won his first primary in eleven years due to the fact that 2008 and his 5th Master’s name after his last win at Augusta 14 years ago. It is broadly predicted that the resurgence of Tiger Woods may want to cause renewed hobby in golf and gain his brand sponsors and golf businesses as well. The Financial Times mentioned that the number of U.S. Broadcast community viewers expanded through an average of 2 million for the 4 golf
tournaments final 12 months that Tiger Woods ranked among the top 25 gamers, quoting records from Nielsen (NLSN). Also, Nike’s (NKE) golfing business recorded its maximum profits historically in 2013 in the course of the previous “Tiger Woods revival”, whilst he finished in the top 10 at two majors in that year, according to The New York Times. If golfing rises in popularity again, golfing organizations along with Honma Golf Limited (OTC: HNMGF) (HK:6858) could be beneficiaries.
Home Gold became began in 1959 by way of the Honma family in Japan, received by means of present-day main shareholder and Chairman Mr. Liu Jianguo, and listed at the Hong Kong Stock Exchange in October 2016. The organization is a clothier, manufacturer, and supplier of golf clubs and related products like golf balls, baggage, apparels & different add-ons. Honma Golf turned into the No. 1 logo with a marketplace percentage of twenty-two.6% of top-rate golf clubs (referring to woods offered above $seven hundred per club and irons sold above $2 hundred in keeping with membership) globally in terms of retail sales in 2015, in keeping with its listing prospectus.
Honma Golf generated 80.Nine%, eight.Zero%, 6.Five% and 4.6% of its economic 2019 (ended March) sales from golfing golf equipment, golf baggage & add-ons, golf balls, and apparels respectively. Japan become the biggest contributor for Honma Golf in financial 2019 at 51.7% of sales, followed with the aid of Korea, Greater China (along with Hong Kong, Macau), Rest of the World, North America, and Europe which contributed 17.7%, 14.3%, 7.Five%, 4.Nine% and three.Nine% of the employer’s top-line respectively. Honma distributes its products via self-operated shops and 0.33-celebration outlets, as well as wholesale vendors. As of FY2019, it had sixty-eight self-operated stores and over three, seven hundred point-of-sales. Besides the long history of the logo at over 60 years, the Honma golf logo commands a top class due to the fact an enormous a part of Honma’s production system is still finished manually with the help of its 296 skilled craftsmen and R&D personnel. According to the employer’s IPO prospectus,
By manually wrapping the carbon club shafts, our craftsmen are capable of produce club shafts that have a good deal decrease stages of air bubbles and weight variations than the ones of our competition who automate their membership shaft manufacturing method.
Notwithstanding its market management within the top class golfing clubs segment, Honma Golf trades at a reduction to friends at 9 times consensus forward monetary 2020 P/E based totally on its share charge of HK$7.00 as of June thirteen, 2019. Peers Callaway Golf (ELY) and Acushnet Holdings (GOLF) are valued by the marketplace at 15 times forward 2019F P/E and 16 times forward 2019F P/E respectively. Furthermore, internet cash accounted for about 17% of Honma Golf’s marketplace capitalization, so Honma Golf’s ex-net coins consensus ahead FY2020 P/E is closer to 7.Five times. Also, there are doubtlessly wonderful re-score catalysts at the horizon for Honma Golf.
Firstly, the resurgence of Tiger Woods could power renewed interest in a golf round the sector, specifically inside the U.S. As highlighted above, Honma Golf derives about eighty-five % of its sales from Japan, Korea, and Greater China, however, an insignificant four.Nine% of income from the world’s biggest golf market accounting for over half of global golf retail income, the U.S. In different phrases, Honma Golf’s products are manner below-penetrated inside the U.S.
Honma Golf signaled its intentions to grow in the U.S., with the appointment of Mr. Mark King, former CEO of TaylorMade Golf, as a strategic marketing consultant at Honma Golf USA in August 2018. Mark King comes with a stellar recognition, having led TaylorMade to be the No. 1 played driving force on the PGA Tour and a marketplace share above 50% in metalwoods while he turned into the business enterprise’s CEO among 2003 and 2014. Following his stint at TaylorMade, he joined Adidas (OTCQX: ADDYY) (OTCQX: ADDDF) as president of Adidas North America, and Adidas doubled its marketplace share in North America in the course of his tenure between 2014 and 2018.
Mark King made an effect quickly after his appointment: In October 2018 Honma Gold announced that Justin Rose, ranked fourth inside the global currently (and he became ranked first inside the international for thirteen weeks in 2018) will leave TaylorMade and grow to be Honma Golf’s international emblem ambassador starting January 1, 2019. Honma Golf is already reaping the blessings of getting Justin Rose as logo ambassador. The sales of Honma Golf’s Tour World circle of relatives clubs, which Justin Rose used at some point of tours, turned into up with the aid of 124.7% yr over 12 months in the 2d half of fiscal 2019 (October 2018 – March 2019 period). Mark King additionally was given his former colleagues at TaylorMade to join Honma Golf; former TaylorMade govt vice chairman John Kawaja is now a consultant with Honma Golf USA, while Honma Golf USA’s contemporary leader working officer Jeff Letourneau turned into previously director of U.S. Income at TaylorMade.
Honma Golf’s U.S. Commercial enterprise did reasonably properly in monetary 2019, but there’s nevertheless lots of room for the further boom. Honma Golf’s U.S. Segment noticed sales develop 16.7% YoY from JPY 1,168 million in economic 2018 to JPY 1,363 million in financial 2019. In an interview with Links Magazine, Mark King shed extra mild on Honma Golf’s strategy inside the U.S., announcing:
We are going to focus on what Justin Rose will play and constitute that is extra consistent with the products that sell right here… We are going to awareness on the beautiful product bought through selective providers with an actually upscale buying enjoy… What we’re after is to establish premium-shopping for studies.
I actually have elaborated at the effect of Justin Rose above. Meanwhile, Honma Golf’s other key initiative is to create top-rate customer reviews through shaping in which and how its products are being bought. Honma Golf is opening its first brand revel in the center, the HONMA residence in Carlsbad, Calif., this month, and plans to follow in this via beginning 30 highest quality save-in-stores and 50 on-route retail hubs in North America in the next 24 months.
Secondly, Honma’s modern product mix implies there are untapped opportunities to enhance income margins by way of definitely selling greater better-margin merchandise like golf bags & add-ons, golfing balls and apparels. It nevertheless derives the extensive majority (eighty-one %) of its sales from golfing clubs.