Poh Kong expects gold prices to rise next year

Gold prices depend on a lot of factors, including geopolitical tensions, demand and overall economic situation, says Choon


POH KONG Holdings Bhd expects gold prices to improve next year as investors seek a safe haven amid challenging global and domestic economic conditions.

Gold prices are estimated to hover between US$1,60 0 (RM6,573.60) and US$1,700 in 2020, against the current average of RM1,500, the jewellery trader’s executive chairman and group MD Datuk Choon Yee Seiong said.

“Gold prices depend on a lot of factors, including geopolitical tensions and demand, but the main factor is the overall economic situation.

“Today, a lot of unexpected things have happened, which contributes to more investors looking for gold, which is a safe haven,” he told a press conference after the company’ AGM in Kuala Lumpur yesterday.

Gold was trading at US$1,511 per troy oz as at 7pm yesterday.

As for Poh Kong’s earnings, Choon expects the company’s performance for the financial year ending July 31, 2020 (FY20) to be in line with its results for the first quarter ended Oct 31, 2019 (1Q19).

For 1Q19, the group’s net profit more than doubled to RM8.08 million from RM3.16 million recorded in the previous year, on the back of an overall uptrend in gold prices.

Earnings per share for the three months in focus came in higher at 1.97 sen versus 0.77 sen in 1Q19.

However, quarterly revenue fell 20.7% year-on-year (YoY) to RM205 million from RM258.36 million in 1Q19 due to a decrease in demand for gold jewellery products.

During FY19, Poh Kong opened three new outlets in IOI Puchong (kiosk), Selangor; AEON Mall, Nilai; and Mid Valley Southkey Mall, Johor Baru.

The pace of business expansion is relatively slower in FY20 compared to the previous year, according to Choon.

“We’re still looking for potential malls. Nothing is confirmed yet, but maybe we will open just one or two new outlets as we are cautious in terms of spending,” he said.

“The capital expenditure for new outlets depends on the size. Normally it is between RM3 million to RM5 million per outlet, including the inventories,” he added.

Poh Kong is also expanding its online channels, in line with the trend of traditional retailers jumping on the e-commerce bandwagon as consumers increasingly turn to online shopping.

The group is currently selling its products on e-commerce platforms Lazada, PrestoMall, Shopee and Superbuy, and plans to expand to one more e-commerce platform in 2020.

It is also working on its own e-shop, targeted to be launched in the first half of next year.

“We had an increase of more than 60% in online sales from FY18 to FY19. However, online sales contribution to total sales is still considerably insignificant compared to sales from physical outlets,” Choon said.