Higher gold prices to boost Poh Kong's profit in FY19

-A +A

KUALA LUMPUR (Jan 11): Poh Kong Holdings Bhd, the country’s largest jewellery retail chain store, expects to stem the decline in net profit to record a growth in the current financial year ending July 31, 2019 (FY19), on anticipation of higher gold prices this year. 

Its executive chairman cum managing director Datuk Eddie Choon Yee Seiong is predicting gold price for 2019 to trade at US$1,300 to US$1,400 per ounce levels in the next 12 months, up from below US$1,300 per ounce now.

"If gold prices trend upwards, our margin will be better and this will help lift our profitability,” he told reporters after the group’s annual general meeting today. 

For FY18, Poh Kong saw a 20.7% decline in net profit to RM23.4 million from RM29.53 million in the previous year, while revenue rose 14.4% to RM1 billion from RM877 million.

Choon is of the view that gold will benefit from the ongoing US-China trade war concerns, as investors may find the precious metal a safe haven.

Bloomberg data showed spot gold price rose 0.62% or US$7.93 to trade at US$1,294.58 per ounce at 3.33pm. Over the past one year, the price of gold has been trading in the range of US$1,362.40 to US$1,176.20 per ounce. 

Given the optimistic prospects for gold prices, Choon said Poh Kong will continue to put effort on areas such as inventory management and cost control to further improve the group’s efficiency to lift profit.  

“Expansion is also one way to enhance our profit margin and we will introduce products to meet the current market demand to enhance our bottomline,” he added. 

Poh Kong has allocated up to RM15 million in capital expenditure for FY19, which will mainly be used in opening three new outlets, refurbishment of existing stores and information technology enhancement. 

“Of the three new outlets, one has opened at the IOI Mall Puchong, with the other two to open at Aeon in Nilai next week and Midvalley Southkey Megamall in Johor in the middle of this year,” Choon said, adding  cost per outlet is estimated at between RM3 million and RM5 million. 

The three new outlets will bring Poh Kong's total number of outlets in the country to 95, he added.  

Choon said the group is looking to expand to Sabah and Sarawak, but it may take about three to five years to materialise. 

Poh Kong saw its net profit fall 41.04% to RM3.16 million in the first financial quarter ended Oct 31, 2018 (1QFY19) from RM5.36 million a year ago, on fluctuation of gold prices affecting its profitability. Meanwhile, its quarterly revenue which rose 16.94% to RM258.36 million, from RM220.93 million in 1QFY18, was due to the increase in demand for gold jewellery and gold investment products, and additional revenue contributed from new outlets. 

At 4.59pm, Poh Kong shares were up 3.5 sen or 7.22% at 52 sen, with 349,400 shares done,bringing a market capitalisation of RM213.38 million.