An integrated manufacturer and retailer of gold, jewelleries and diamonds. Founded in 1968, TOMEI is a leading retailer of gold, diamonds, and jewellery with 60 stores under its own brands namely Tomei, Le Lumiere and Goldheart. The group also owns 70% stake in YXPM, which mainly engages in wholesale, design, and manufacture of precious metal jewellery. In terms of revenue breakdown, retail accounted for 64.6%, with the remainder coming from wholesale and manufacturing.

Higher gem-set sales to lift the group’s profitability. Leveraging on TOMEI’s 55th anniversary or known as the “emerald wedding anniversary”, TOMEI will focus on growing its gem-set sales in FY23, which made up about c.20-25% of the group sales. During its 4Q22 result briefing, we gather that TOMEI has procured a large number of gems in preparation for the said theme, with the group inventories increased by 28.3% YoY. We also gather that a higher proportion of sales from gem-set will lift TOMEI’s group-level margin, due to the more lucrative pricing mechanism based on design and workmanship, as opposed to gold products that are priced based on global gold price and workmanship. Also, one key event that we note of that might drive TOMEI’s profitability even higher will be the ongoing tight supply-demand situation in the gem market. If China's return to the market leads to higher gem prices and an industry-wide price hike in gem-set, TOMEI's margin could be further strengthened.

Upcoming Hari Raya to boost sales. TOMEI is well-positioned for strong sales during the upcoming Hari Raya festive season, with the event typically driving peak sales for the company's 916 gold products. In addition, TOMEI expects the cash handouts from the government, such as the recent Rahmah Cash Handout that will be paid out in April, July, and November, will result in higher gold sales. This cash handout will provide up to RM2.5k to households with a combined income of less than RM2.5k.

Higher high formation. Technically, TOMEI is trading near its uptrend support levels of RM1.03-1.05, with indicators on the mend. A successful breakout above RM 1.13 hurdle will spur the share price toward RM1.17-1.23-1.35 levels, forming a higher high pattern. Cut lost at RM0.99.

Source: Hong Leong Investment Bank Research - 7 Mar 2023