Swatch Group

This is a family owned business.

Two types of shares. Bearer shares are 5 x Registered shares. Total of ~ 30M bearer and ~ 124M registered shares.

As of 31 December 2014, the Hayek Pool, related parties, institutions and persons control 63 169 930 registered shares and 1650 bearer shares, totalling 40.8% (previous year 40.8%) of the votes.

The company runs on meager debt and the management has a very long term view of the business (83.7% equity ratio in 2014).

The family-ownership allows the company to “suffer in the near term” to build the brand value. Even after significant appreciation of the swiss franc they continue to invest here.

Because it is also here, in Switzerland, that we want to be established and to manufacture in the future. For you, for us, for industry, for the region and through this, for Switzerland. Because to us, the idea of “outsourcing abroad” is utter nonsense. — Nayla Hayak, Chairwoman, Swatch

What remains is the valuation.

The company is selling for 30xFCF at the moment (morningstar). But, their investments have been quite high and the “normal” value of the FCF is closer to 1B CHF currently. Which puts the multiple at 20 and the growth in FCF for the last decade to be 5% (FCF was 568CHF in 2005). The 20 multiple implies that the discount rate for the DCF calculation is 5%. Assuming these assumptions to be correct, at current prices I am looking at a return of 10% (5% from FCF growth and 5% from the discount rate). This is too high for me. I will probably be more interested around CHF16B i.e., a 20% drop from the current price.

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