This article first appeared in The Edge Financial Daily on January 18, 2018
KUALA LUMPUR: Poh Kong Holdings Bhd, which registered a double-digit growth in net profit for the financial year ended July 31, 2017 (FY17), is optimistic about matching, or even outdoing, the stellar performance in FY18.
Its executive chairman Datuk Choon Yee Siong (pic) said this can be achieved if the upward trend in gold prices seen in 2017 continues, further aided by improving demand for its jewellery products, still a major contributor to the group.
“We are expecting FY18 to be better than FY17. Overall, the global economy is picking up, including that in Malaysia,” Choon told reporters after the jeweller’s annual general meeting yesterday.
He said the better economy, alongside Malaysians’ gradual acceptance of the goods and services tax, has resulted in higher consumer spending — this was seen in the pickup in Poh Kong’s sales in recent quarters.
“Gold analysts are expecting [the gold price] to be around US$1,350 (RM5,332.50) to US$1,400 [per ounce] in the short term. If gold prices continue to trend upwards, it would also enhance the sales of gold bullion and gold bars among investors,” added Choon.
Poh Kong currently maintains an inventory of some RM540 million worth of merchandise, enough to last the group an average of three to four months, said Choon, also Poh Kong’s group managing director.
This has indirectly allowed Poh Kong to benefit if stocks acquired earlier are sold at higher prevailing prices, but Choon said there is no plan to further leverage on that. “The inventory is allocated on [a] per-store basis — a comfortable level for us at the moment.”
The higher demand for jewellery and gold products seen by Poh Kong in FY17 had extended to the first quarter of FY18 (ended Oct 31, 2017), with net profit tripling to RM5.36 million. Revenue grew 19.1% to RM220.93 million, driven by its retail division.
Poh Kong operates 94 branches in Peninsular Malaysia, with another one in the pipeline. The new outlet’s location has not been identified, but Choon said it is not in East Malaysia for now.
The jeweller will also continue to market its products via e-commerce, which saw double-digit revenue growth year-on-year in FY17, thanks to an inflow of new buyers, and improved trust by repeat customers who purchased its more expensive products.
Poh Kong first entered the digital sphere in 2012, but Choon said it has only seen a significant contribution last year. “It is not just cheaper products; we are seeing people purchasing gold bars online, and slightly higher-priced jewellery as well. We see this as the trend to go.”
Choon conceded that there is intensified competition in the e-commerce market, but said “trust is always an issue for online shopping”. Poh Kong’s offline presence has helped position it as a trusted jeweller among online shoppers, he added.
On a related matter, Choon takes a swipe on investing in cryptocurrencies, calling it a bubble. “In intrinsic value and hedge against economic uncertainties, gold is a better [investment] tool.
“Of course we see this [trend in] cryptocurrencies as a bubble. The risks [in cryptocurrencies] are actually very high,” he said, when asked if people are dropping gold for cryptocurrencies such as bitcoin.
Alongside several other precious metals, spot gold has risen over 2.5% since the beginning of the year to above US$1,330 per ounce, thanks to a weaker US dollar. Meanwhile, bitcoin, having experienced a meteoric rise in value last year, has declined 22% year-to-date to just above the US$11,100 range.
Poh Kong’s share price closed unchanged at 64.5 sen yesterday, with a market capitalisation of RM264.68 million.