On-going store restrategisation plans. The group has started to restrategize its branches (by shutting down unprofitable branches and opening new branches in strategic locations as well as refurbishing existing stores) since 1H12. The ability of the group to identify underserved pockets of markets thus far and together with the strong gold prices have resulted in recording a strong 3-year CAGR of 20.4% and 27.1% in turnover and net profit respectively. Moving forward, the group intends to shift its focus to the higher-income target market in conjunction with its ongoing store refurbishment plans.

Gold prices on the rise. With gold price back on the rise (USD1731/oz at the time of writing), we believe Tomei is well in place to benefit from its large inventory holdings raked up in 1H12 (RM355.6m vs RM255.3m for FY11) and upcoming store openings as almost 90% of its RM397.4m current assets consist of gold, jewellery and others.

Decent yield.Although Tomei does not have a dividend policy, the group has consistently declared an average of 20% in payout ratio since its inception. By assuming a similar payout ratio for FY12, the group is expected to declare a DPS of 3.8 sen, translating into a decent dividend yield of 5.2%.

Decent upside as well. Based on our projected net profit of RM41.0m in FY13, Tomei is trading at a PER of 2.5x, a significant 44% discount to the industry average of 4.5x. Our Tomei fair value is set at RM0.88, based on a targeted FY13 PER of 3.0x. The discount is justifiable in our view, given the group's gearing of 1.03x, which is much higher than the industry's average gearing ratio of 0.31x. Nevertheless, if the company manages to reduce its gearing meaningfully, we believe it would warrant a rerating.

In 1H12, Tomei opened eight new outlets located at Setia Mall, Paradigm Mall, Alor Star Mall, Mentakab Star Mall, Johor Premium Outlet and Aeon Ipoh.

Tomei has also refurbished four outlets during the same period, with five more due for refurbishment in 2H12.

In November 2011, Tomei launched its GoldSilver2U.com website, which allows consumers and investors alike to purchase gold and silver bullion around the clock.

' Resistance: RM0.77 (R1), RM0.84 (R2)

' Support: RM0.70 (S1), RM0.67 (S2)

' Viewpoint: S-T (Neutral), M-T (Bearish), L-T (Neutral)

Comments: Tomei has formed a falling wedge pattern since the start of the year denoted by the converging trend lines. Having rebounded from the support line at RM0.70, the share price may look to retest the resistance at RM0.77 in the short term.

Tomei Consolidated Berhad was founded in 1968 as a small scale jewellery designer and manufacturer and has since grown its retail network to 75 outlets and five retail brands. At present, Tomei is an integrated jewellery designer, manufacturer, wholesaler, and retailer.

The group has presence across the region, namely Malaysia, Vietnam (sice 2007) and China (since 2009).

The five retail brands under Tomei are Tomei, My Diamond, T.H. Jewelry, Le Lumiere and Goldheart, with different target markets each.

Tomei Consolidated Berhad derives its revenue from four main geographic segment, ie. Malaysia, Vietnam, China & Hong Kong and other export markets. The 1H12 revenue breakdown by geographic segments are:

' Malaysia (93.1%)

' Export Markets (4.5%)

' China & Hong Kong (2.1%)

' Vietnam (0.3%)

Source: Kenanga