Swatch Group: how long till break-up?

9 December 2022

Profitable, cash-rich companies can ignore market trends – but only ever for so long.

Swatch Group is a collection of incredible brands and assets, but the market is sceptical about their outlook. Since 2013, the stock has lost 58% of its value. Its main competitors have all made up ground since. LVMH is up 450%, Kering gained 200%, and even industry-laggard Richemont rose 30%.

Swatch Group stock is now cheap not just in relative but also absolute terms. It trades at an EV/EBITDA multiple of 7. The Omega brand alone, which contributes 35% to group revenue, could be worth almost the entire enterprise value if restructured and sold separately.

The family heirs are an issue. They control 43% of the shares, dominate the board, and are protected by voting right restrictions for outsiders.

Right now, the market assumes there is ZERO chance of things changing at Swatch Group. However, broader industry trends and the advancing age of family members may catalyse change during the next 24 months.

A change in leadership, the sale of individual divisions or brands, and even a break-up of the company all seem possible. Just the expectation of possible change should see the share price jump – the stock's low valuation makes it akin to a coiled spring. Swatch Group's profitability and strong balance sheet make it a defensive investment with a lot of upside potential.

This 34-page report takes you on a journey through the fascinating world of the Swiss luxury watch industry.

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