Monday, June 25, 2012

Carpenter Tan (tkr: 837 HK) - Would you buy these combs?

Carpenter Tan is a 'high end' wood comb manufacturer and retailer in China/Hong Kong with combs  marketed under the brand 'Carpenter Tan' (譚木匠).  

I've walked by their retail outlets at least a few dozen times (they have outlets located in the Hong Kong MTR which I frequently walk by) and I have been counting the number of customers each time.  So far I've seen no paying customers and a grand total of 4 'window shopping' customers in their stores.  Usually the store attendant is just sitting around.

Are combs brandable?  Because these are some of the most expensive combs I've seen:

(from their homepage www.woodencomb.co.uk)

To be clear, this is denominated in USD.  Out of the nine samples from their homepage three combs are priced above USD90 and one at USD78!  (I am not selectively choosing samples.  But you should take a look at their retail outlets as well)

In 2011 they had sales of RMB244mm with 50%+ EBITDA margins.  Seriously, how many companies can you name globally with that sort of EBITDA margins?  Real world business is very competitive and to make 50%+ EBITDA margins require selling something quite differentiated/high value-add/competitively protected.  These are generally not features of the comb industry.

Is this a fraud?  Your call.

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