Mercury Securities: YX Precious Metals to grow earnings on expansion plans post-listing

by NURUL SUHAIDI / pic source: YX Precious Metals

MERCURY Securities Sdn Bhd has a ‘Recommendation’ call on ACE Market bound YX Precious Metals Bhd with a target price (TP) of 34 sen a share, a premium to its offer price of 28 sen a share.

The broker is positive on YX Precious Metals due to its attractive expansion plans and cheap valuations.

YX Precious Metals has more than 12,000 stock keeping units and is better positioned to meet varying customer demands.

YX Precious Metals also offers customers the option to purchase gold jewellery in small quantities with a mix of different designs, offering convenience for small retailers, the brokerage stated in a report on the company today.

This approach enables YX Precious Metals to cultivate customer loyalty, retain an established customer base and attract new customers.

“The TP is based on financial year 2023 forecast (FY23F) earnings per share of 2.4 sen and a price earnings ratio (PE) of 14.3 times which is a 40% discount to the industrial sector five-year average PE,” the report by Mercury Securities stated. 

As of 2021, YX Precious Metals managed to secure a market share of 6.1% and 1.8% respectively from the jewellery wholesale and manufacturing industry in Malaysia.

YX Precious Metals is in the midst of upgrading and expanding its facilities to increase production efficiency, as well as expanding the range of in-house design and manufacturing of hollow gold jewellery.

The new equipment and machinery will enable YX Precious Metals to better serve customers such as jewellery retailers who intend to target a wider cross-section of end-consumers.

The company has 315 customers as of FY21, spanning across markets in Malaysia and export markets such as Singapore, Germany, Myanmar and Hong Kong.

In FY21, 98% or 310 of YX Precious Metals’ customers were resellers and 2% or five customers were jewellery manufacturers. Some 79% or 250 customers have a longstanding relationship with YX Precious Metals for more than six years.

Risk factors include fluctuation in global gold prices which may dampen YX Precious Metals’ performance.

YX Precious Metals is scheduled to list on June 23 and aims to raise RM31.26 million from this listing exercise to fund its expansion plans.

Upon listing, YX Precious Metals will have a market capitalisation of RM104.2 million based on the issue price of 28 sen per share and its enlarged issued share capital of 372.15 million share.