Buying momentum is rising again for the gold and jewellery retailer Tomei Consolidated Bhd. The counter surged to its year high of RM2.16 in May. It was trading at a low of RM1.06 last August. In the past year, Tomei jumped 63.4% to RM1.83 on July 30。

As it is, Tomei is seen as a beneficiary of higher gold prices and this is evident in its strong track record in terms of financial results during gold bull run. Gold is widely seen as a hedge against inflation, currency devaluation, and market volatility.

The price of gold has jumped to a record high, touching over $2,000 per ounce for the first time in history. The precious metal has been on an uptrend since the start of the year, as investors seek a safe haven amid the global pandemic, economic downturn, and geopolitical tensions.

Investors like Tomei for its better financial performance, valuation, and dividend policy versus its competitor, Poh Kong. Tomei’s net profit skyrocketed 76.4% to RM20.9 million in the first quarter ended March 31, 2024 (1QFY2024), from 11.9 million a year before, boosted by higher sales during the festive seasons. It was the highest quarterly net profit recorded by the jeweller since 2QFY2022.

Earnings per share came in higher at 15.11 sen, from 8.56 sen a year earlier. Its revenue for the quarter jumped 35.8% to RM322.8 million from RM237.7 million a year ago, driven by stronger performance of its retail and manufacturing and wholesale segments.

When it comes to profitability, Tomei has a higher gross margin of 21.72%, indicating better efficiency at converting raw materials into finished goods and better control over production costs. It also displayed better efficiency at converting sales into cash as shown in its free cash flow margin of 0.2%.

Another positive indicator is the company’s ability in providing a higher return on equity of 14.9% and return on invested capital of 12.2%, showing better efficiency at generating profits.

As such investors should consider buying Tomei and hold it for the long term, as gold is anticipated to be in high demand and rise further.