PohKong - The Yeoman's Gold
Poh Kong Holdings Berhad (Pohkong - 5080) had a history back then in 1976 where it had started out
with a small outlet in Petaling Jaya, and continuous growing on the rapid business to become the largest
and fastest growing jewellery retail chain store in Malaysia.
With the growing concern on the current economy situation, how would a gold manufacturer and trader
like Poh Kong do to turn this into a window of opportunity?
Poh Kong had saw great interest during the month of April, with volume going more than 5 million in a
several occasion. However, Poh Kong took approx 7 month consolidation at the range of RM 0.50 which
could had finally came to a certain point of saturation.
With the steady price outlook, a break above RM 0.52 with a considerable of volume will be able to see
Poh Kong break out from a short term resistant line and head for a higher climb towards RM 0.60 region.
Poh Kong had recently saw heavy open market accumulation from Singapore based managed fund Yeoman Capital as well as major shareholder buy back.
Making of The Gold Rush
During the month of August, September and October, the concern of the collapse of China had spike
great fear in the equity market, sending waves of gold rush in both the retail and investment market as
buyer search for a tool to preserve the value of their monies. China had been increasing their national
gold reserves in 2015, with a record 600,000 ounces of Gold buy in during July 2015.
At the similar period of time, South Korea had targeted to buy in USD 860 million worth of gold bullion for
the first time this year.
While the major gold exporter had been crowned by India and China, Malaysia gold suppliers had been
exporting about 60 metric tonne of finished gold products in the form or ornaments, which is growing in a
slow and steady pace. 80% of the Malaysian export are headed for Dubai from where jewellery is
redistributed to the other international market.
While Poh Kong draw most of it's revenue from the local market, the current exchange rate which favor a
stronger USD had open up a good opportunity for Poh Kong to continue expanding the export market and
penetrate more new market with new products.
A Tale of Yeoman Capital
Yeoman Capital Management Pte Ltd had made big stories in the KLSE market under the lead of Yeo
Seng Chong and Lim Mee Hwa. The duo had brought Yeoman Capital presence into the limelight of
KLSE with their spectacular investment in United U-Li Corporation Berhad (Ulicorp).
According to historical data, Yeoman Capital had started open market buying in Ulicorp at the range of
RM 1.00, and the investment had saw rocket profits in 10 months with 300% capital appreciation. Ulicorp
had displayed strong quarter result as well as a follow up a private placement exercise in the later stage.
After the stint at Ulicorp, Yeoman current stint is with AJIYA.
Accumulated at the region of RM 2.40, AJIYA is currently traded at RM 4.65 in a short period of 6 months.
That is a whopping 90% increase from it's initial accumulation price. Yeoman Capital is still buying up on
AJIYA despite after a private placement exercise.
Both Ulicorp and Ajiya had reflected strong growing quarterly result as well as a decent growing dividend
to their shareholder.
If you had missed the above 2 mentioned counter, the 3rd one is Poh Kong where Yeoman Capital is
still accumulating in the public market, with the latest buying on 27th November 2015 where
Yeoman Capital bought in 1,050,000 shares at an average price of RM 0.508 from the open market.
An Undercover Gem
Poh Kong debt level might not passed some of the investor liking. With the latest total debts of RM 225
million (long and short term borrowing) and a cash balance of RM38 million, Poh Kong could look like just
another normal company. However, due to the nature of business of the company that is dealing with
gold related products, it's inventories can be considered to as close as cash due to the liquidity of
the inventories. According to the latest inventories for 31st July FYE 2015, Poh Kong is sitting on
RM 551 million worth of raw material, unfinished and finished goods.
Let's take 85% from the total value of inventories which can be converted to cash, that is a whopping RM
468 million of cash equivalent product
Taking that into consideration, Poh Kong could be actually at a net cash position of RM 281 million (RM
468m + RM 38m - RM 225m), which is easily translated to a cash worth of RM 0.685 per share.
Currently, the share is trading at RM 0.52, more than 50% discount from it's NTA of RM 1.12, and
24% discount from it's cash worth per share of RM 0.685.
While the market sentiment is still vulnerable to attacks of mounting of debts, the gold market is the best
tool to hedge against any market uncertainty in the coming days.
Poh Kong can be an interesting company to be invested based on
- Rising gold reserve accumulation in countries like South Korea and China
- Strong USD will enhance and motivates gold export activities
- Yeoman Capital open market accumulation
- Major shareholder open market buy back accumulation
- Trading more than 50% discount from NTA of RM 1.12, and 24% discount from cash worth per
share of RM 0.685
- Gold is a good hedging tool in market uncertainty
- Poh Kong to record stellar Q1 FYE 2016 financial result due to release in December