AFTER a series of ups and downs, the fate of jeweller Poh Kong Holdings Bhd might finally start to improve again despite fluctuating gold prices.
In January 2015, Poh Kong was expected to benefit from the less-volatile gold prices when it was expected to consolidate between US$1,200 (RM4,261 at the time) and US$1,300 per ounce that year.
During that time, analysts were bearish on the precious metal following positive economic data from the US, the strengthening greenback and the likelihood of the US Federal Reserve.
Back then, Poh Kong executive director Ermin Siow Der Ming told FocusM that the weakening ringgit impacted the local gold retail prices which would be good for Poh Kong in the long run.
On March 2019, The Edge reported Poh Kong’s net profit fell 20.8% to RM4.81 mil in its second quarter ended Jan 31, 2018 from RM6.07 mil previously due to higher operating expenses.
Meanwhile, its quarterly revenue went up 19.3% to RM269.98 mil from RM226.32 mil, thanks to the increase in demand for gold jewellery and gold investment products.
The group’s net profit continued to fall in its third quarter ended Apr 30, 2018 by 41.79% to RM4.31 mil from RM7.4 mil a year earlier due to fluctuation in gold prices, but its quarterly revenue climbed 17.16% to RM240.44 mil from RM205.23 previously for the same reasons in 2Q FY2018.
However, The Edge reported on Jan 14, 2019 that the group was expecting to improve its margin to boost profitability in line with the gold price that was anticipated to be higher in that year.
In that article, Poh Kong’s managing director Eddie Choon Yee Seiong said gold prices were expected to hover between US$1,300 and US$1,400 (RM5,735 at the time) per ounce despite the challenging macro environment during that period.
“We are aware of the US-China trade war, as well as the anticipation of the US interest-rate hikes and currency fluctuations that alter consumer sentiments that could lead to market uncertainty,” he said in the article.
“The surge in the jewellers’ share prices comes amid the enthusiasm seen in the gold bullion market and prices of the precious metal have been rising steadily, hitting record highs last week,” added article said.
In August 2020, the gold trading volume was higher than usual while share prices of jewellers soared in tandem with the gold upcycle as reported by The Edge.
Despite that, The Edge’s article also posed a question on whether the investors buying into jewellers are being rational as the world is focused on tackling a recession caused by the COVID-19 pandemic.
“The movement control order (MCO) interrupted our business from Mar 18 to May 3. However, business has been picking up gradually since May. The sales momentum is increasing as the government has now relaxed the restriction on the movement of people since June 10,” Choon said in the article.
Luckily enough, the group recently turned a profit in its fourth quarter ended July 31, 2020, reporting a net profit of RM8.01 mil versus a net loss of RM2.31 mil in the preceding quarter as its retail business gradually improved following the relaxation of the MCO.
However, looking at it on a year-on-year basis, the group’s net profit is down 24.2% from RM10.57 mil in 4Q FY2019 while revenue fell 22.67% from RM231.86 mil.
“On prospects, Poh Kong said it will continuously monitor the impact of the prolonged pandemic and the uncertainties it caused on its operations, financial obligations as well as performance, adding that the external factors are largely beyond its control,” the article noted.
As of 3.11pm today, Poh Kong Holding Bhd’s share price dropped 1.18% to 84 sen with 431,400 shares traded, hence giving the company a market capitalisation of RM345 mil. – Oct 23, 2020
