KUCHING: The current high degree of volatility in gold prices in the world market has impacted the nine months financial year 2012 (9M12) earnings performance for integrated jewellery designer, manufacturer, wholesaler and retailer, Tomei Consolidated Bhd (Tomei).
In a research note by the research division of Kenanga Investment Bank Bhd (Kenanga Research), Tomei made only 42 per cent of he research house’s full-year projection
with a net profit of just RM14.2 million for the 9M12.
According to the findings by the research house, Tomei’s disappointing result was mainly due to an unfavourable product mix whereby its jewellery have higher composition of gold sales that generally had lower margins as compared with precious diamond jewelleries which led to the gross margin dipping by 6.3 percentage points year-on-year (y-o-y).
Secondly, it was also due to the unfavourable gold price coupled with a higher degree of price volatility as well as higher operating costs as a result of new store openings and the closing of existing stores comand ultimately the higher finance costs.
The research house gathered that in the third quarter 2012 (3Q12) outlets rationalisation plan, the higher gold selling prices did not translate into better profit margins for the group due to a timing mismatch.
To recap, Tomei had opened twelve new outlets located at Setia Mall, Paradigm Mall, Alor Star Mall, Mentakab Star Mall, Johor Premium Outlet and Aeon Ipoh, Ampang Point, Bintang Mall, Aeon Seri Manjung and Plaza Merdeka in the 9M12 period.
Going forward, two new outlets are expected to be opened in Sarawak and Perak in the 4Q12 and beyond that, management will focus on refurbishing the existing outlets.
As for the group’s overseas network, the group also has a direct presence in Vietnam (since 2007) and China (since 2009).
Currently, Tomei has seven retail kiosks and a manufacturing faclity in Vietnam, and nine kiosks in China. Kenanga Research reported that Tomei derived its revenue from four main geographic segment, namely Malaysia, Vietnam, China and Hong Kong as well as from its export markets.
Out of the four geographic segment, Malaysia contributed the most to the group’s coffer with 93.4 per cent, while its export market netted 4.4 per cent, China and Hong Kong with 1.9 per cent and Vietnam recorded just 0.3 per cent for its revenue in 9M12.
In light of the operational headwinds, Kenanga Research trimmed Tomei’s FY12-FY13 net profit projections lower by 49 per cent and 41per cent to RM17.3 million and RM24.2 million respectively.
The research house also pegged Tomei’s stock price at a target price of RM0.675 per share in view of the roller-coaster ride of its stock price which had jumped 10 per cent to a high of RM0.79 per share in early September this year but retreated again due to market selldown.