TOMEI CONSOLIDATED BERHAD

Highlights
Within expectations Tomei Consolidated Bhd (Tomei) FY11 results were within our expectations. Net profit of RM31.2m clocked in at 96% of our full year target whilst revenue of RM505.4m was 10% higher than our estimate. For the full year under review, revenue surged 42% YoY, while operating margin improved marginally from 10.4% a year ago to 10.7%. The better results were contributed by both manufacturing & wholesale and the retail segments on higher gold prices (Figure 2). Revenue contribution from manufacturing & wholesale sales jumped 53% from
RM74.4m to RM113.6m. PBT contribution soared 70% to RM8.3m from RM4.9m. Higher earnings in the manufacturing & wholesale segment was mainly due to higher sales volume to other jewellery retailers. Revenue contribution from the retail segment rose 39% to RM391.8m whilst PBT from retail segment rose 41% to
RM24.2m. Improved consumers spending in gold investment products and higher retail price in gold contributed to better results. The acquisition of the
'Goldheart' brand with 4 additional retail outlets also contributed positively to the group.

On a quarterly basis, 4Q revenue was relatively flat at
RM137.1m compared to previous quarter's RM135.3m. PBT of RM10.7% was however 27% lower QoQ, impacted by fluctuation in gold prices. On a yearly basis, 4Q results
were generally better than the corresponding quarter of last year. Revenue surged 46% YoY and net profit rose 25% YoY to RM6.2m from RM5.0m a year ago.

Fair Value of RM1.10 Gold prices fluctuated and peaked at USD1,900.23/oz on 5 September 2011 before it fell to as low as USD1,545.97/oz on 29 December 2011. It then picked up to close to USD1,770/oz recently. Tomei is undervalued, compared to the gold price movements (Figure 1). We have introduced our FY13 forecast and are maintaining our BUY recommendation on Tomei with a fair
value of RM1.16.

Source:Jupiter Securities Research 24 Feb 2012