Tomei Consolidated Berhad - BUY FV RM1.16

Stock Name: TOMEI
Company Name: TOMEI CONSOLIDATED BHD

Research House: JUPITER

Price Call: BUY

Target Price: 1.16

Within expectations Tomei Consolidated Bhd(Tomei) FY11 results were within our expectations. Net profit of RM31.2mclocked 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 andthe retail segments on higher gold prices (Figure 2). Revenue contribution frommanufacturing & wholesale sales jumped 53% from RM74.4m to RM113.6m. PBTcontribution soared 70% to RM8.3m from RM4.9m. Higher earnings in the manufacturing& wholesale segment was mainly due to higher sales volume to other jewelleryretailers. Revenue contribution from the retail segment rose 39% to RM391.8mwhilst PBT from retail segment rose 41% to RM24.2m. Improved consumers spendingin gold investment products and higher retail price in gold

contributed to better results. Theacquisition of the 'Goldheart' brand with 4 additional retail outlets also

contributed positively to the group.

On a quarterly basis, 4Q revenue wasrelatively flat at RM137.1m compared to previous quarter's RM135.3m.

PBT of RM10.7% was however 27% lowerQoQ, impacted by fluctuation in gold prices. On a yearly basis, 4Q results weregenerally better than the corresponding quarter of last year. Revenue surged46% YoY and net profit rose 25% YoY to RM6.2m from RM5.0m a year ago.

Fair Value of RM1.10 Gold prices fluctuatedand peaked at USD1,900.23/oz on 5 September 2011 before it fell to as low asUSD1,545.97/oz on 29 December 2011. It then picked up to close to USD1,770/ozrecently. Tomei is

undervalued, compared to the gold pricemovements (Figure 1). We have introduced our FY13 forecast and are

maintaining our BUY recommendationon Tomei with a fair value of RM1.16.

Source: Jupiter Securities