Tuesday, August 23, 2011

Tomei vs PohKong... Aug11

Tomei’s balance sheet shows that its inventory rose to rm270 million as at March 31, 2011 from rm196 million as at Dec 31, 2008. Its market cap however, is only about rm90 million (at 64.5 sen), barely one third the value of its gold inventory. Logically, its share price should trend in tandem with the price of gold as its inventory is mostly held in gold.

Poh Kong’s inventory was rm420 million as at April 30, 2011 compared with rm399 million as at April 30, 2008. At market cap of 41.5 sen, its market cap stood at 170 million.

The appreciation of the ringgit against the US dollar should be taken into account when accessing the price of gold locally. When the ringgit strengthens the price of gold actually drops in ringgit terms. However, currently the price of gold has increased at a much faster rate than the ringgit’s appreciation against the US dollar and thus is still much higher in ringgit terms.

Tomei’s net profit rose to rm21.3 million or 15.62 sen per share. Revenue surged to a record rm356 million.

The rather high borrowings of jewelers is one factor why their share prices do not climb as fast as the price of gold.

The stronger gold prices and higher value of inventories could come in handy in getting loans to expand.

Tomei’s gearing stood at 0.76 times as at March 31, 2011 based on short and long term borrowings of rm120 million and shareholders; equity of rm158 million. It had cash balance of rm5.9 million. After offsetting its debt obligation of rm120 million, Tomei’s inventory value (net of debt) is worth about rm150 million, this translates into rm1.08 per share.

As for Poh Kong, its gearing as at April 30, is 0.45 times based on long term and short term loans of rm150 million and total equity of rm335 million. Cash reserves amounted to rm26.1 million. Taking into account the rm150 million on its balance sheet, Poh Kong’s inventory, net of debt is about rm297 million which is equivalent to 72.5 sen per share.

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