Topic: Last week, The Platform Group (TPG) announced the takeover of Chronext which highlights the interest in secondhand watch dealers such as MWB, in our view. On the other hand, current data still show a muted secondhand watch market. In detail:

TPG announced the acquisition of Chronext via an asset-deal out of insolvency under self-administration. While no transcation data were disclosed, we expect TPG to have paid 5-10x EBITDA based on past TPG acquisitions. However, we do not regard this as a fair valuation cross-read for MWB, because (1) Chronext was bought out of insolvency, pushing down the price, (2) MWB operates as a broker (vs. Chronext as a mix of  retailer  and broker) and (3) MWB is smaller and therefore not comparable. However, the deal shows that companies such as TPG have a keen interest to expand into the secondhand watch market, which will remain a large and vibrant part of the overall watch market, due to artificial scarcity on the firsthand market.

On the other hand, market prices on the secondhand market have continued to decline throughout 2024 and now seem to stabilize at trough levels. (see p. 2) As this leads to reluctance at investor type watch buyers, fearing a further decline in the future, the still low inventory turnover (pre-owned Rolex watches took an average of 67 days to sell in H1'2024 vs. 18 days in 2021, Source: Forbes) also indicates a much lower no. of watches sold. Both effects lead to tough market conditions. Light at the end of the tunnel could come from continously strong capital and crypto markets, as investor-type watch buyers might take profits there and shift asset allocation more towards watches.

MWB however is only a small piece of the overall market and with its elaborate network of repeat customers a bit more immune against overall market dynamics. Especially the sale of just a few higher priced watches can significantly affect sales positively. Moreover, MWB is in a comfortable position to capture growth in the next years, as its unique USPs of (1) a high level of trust among customers (vs. some concerning Chronext reviews on Trustpilot) and (2) of finding a desired watch within 7 days remain fully intact, even at current market conditions, which shows their potential to capture market share.

Against this backdrop, we view MWB as too early to buy and thus reiterate our HOLD recommendation, with unchanged PT of € 50.00, based on DCF.