As the festive season gets into full swing, all of us is actively searching for the ideal gifts. Amid compiling gift lists and organizing gatherings, I came across an interesting statistic by Knight Frank on the most lucrative luxury investment items.
In a year marked by cooling values and economic uncertainty, collectors remained steadfast in their readiness to ‘invest’ their top dollars in the most luxurious items in the world.
Based on the average 10-year price change of luxury investment types as of 2022, rare whiskey came on top with 373% price increase, followed by cars(+185%), wine(+162%), and watches (+147%).
Last year, the record for the highest selling price of rare whisky was set by a bottle of The Macallan 'The Reach'- an 81-year-old single malt—fetching £300,000 at Sotheby's in October.
This year, the record has been eclipsed by The Macallan 1926, the world's most coveted whiskey, which was sold for over £2.1 mn last month at Sotheby’s London. With only 40 bottles in existence, it represents the oldest Macallan vintage ever produced.
Source:The Guardian
However, let’s take a look into the broader picture, in November, the leading 500 traded whiskies saw an unprecedented 8% market value drop, the steepest monthly decline in Whisky Index history. The Whiskystats Whisky Index has fallen back to their January 2021 levels, erasing all value gains achieved over the past three years.
Source: Whiskeystats
A similar pattern is evident in the luxury watch market, reaching its peak in the first half of 2022 and subsequently following a downward trajectory to the present day.
Source: Watchstats.com
This prompts us to explore what luxury items offer significant returns over the years and understand the rationale behind considering them as 'investments'.'Similar to stocks, let's assume you can select the 'right' items that appreciate in value over the next few years.
Taking the Patek Philippe Nautilus watch as a sample, as it is widely acknowledged as an "investment" timepiece. Considering a price decline and a general market downturn, the Patek Philippe Nautilus 5711/1A maintained an average annual return of ~20% over a 7-year period— a commendable performance.
Source: Luxury Bazaar, Chrono24
Naturally, we aim to compare the rate of return to our top stock picks. We are confident that many Indonesian stocks are still positioned as luxury "bargain" stocks with significant potential for high returns. Our Chief Strategist consistently emphasizes that the Indonesian stock market is too cheap to ignore, enticing enough to draw him from Canada to this market.
I want to emphasize on PANI specifically, given its association with two prominent ‘brand’ names, Agung Sedayu and Salim Group. Just based on its ownership alone, it can be classified as a 'luxury' stock. There are not many stocks we can assertively claim to be supported by both seasoned management and robust cash flow.
Additionally they recently gained an extra 619 ha of sellable effective ownership through their second rights issue, priced at a modest IDR 1.2 mn/sqm compared to the ASP of ~IDR 36 mn/ sqm selling price in PIK 2.
On top of that, another joint venture between Agung Sedayu and Salim Group is also constructing its own toll for direct access to PIK 2, with a capital expenditure of ~IDR 44 tn, set to complete in 2025.
Few developers can allocate such a substantial budget to guarantee high-quality infrastructure. As per our analyst, Niko Pandowo, PANI projects an impressive CAGR of 36% for earnings and revenue from 2023-40F. In terms of share price performance, PANI stock has demonstrated an extraordinary ~455% annual return in less than a year!
Source: Sucor Sekuritas
We believe this is just the initial phase for PANI, as our DCF based TP of IDR 7,225 indicates a 63% discount to the RNAV. This assumes full utilization of PANI's landbank within the next 15 years. It's important to note that the current market capitalization of IDR 78.14 tn significantly lags behind the landbank value of IDR 190 tn.
So what’s your verdict? Is it worthwhile to indulge in a new 'investment' whiskey or watch this holiday season, considering the unpredictable price fluctuations and difficulty in assigning a precise value?
Alternatively, investing in PANI might be a more compelling option, given their predictable conservative ~8% increase in ASP of landbank over the years, and potential ~44.5% upside in stock price.
Read our full report here: