POHKONG (5080) - PohKong - Glittering Gold

Poh Kong Holdings Berhad (PohKong - 5080) is no stranger in the Malaysian gold retailing industry. Dated back to 1976 from operating 1 outlet, currently PohKong is operating more than 100 outlets all over Malaysia. Currently, besides retailing on the the brand name of Poh Kong, new retail concept such as Diamond & Gold, Diamond Boutique, Gold Boutique and Oro Bianco are the brainchild of Poh Kong Holdings Berhad.

Last year, Poh Kong had saw major shareholder, Yeoman Capital Management Pte Ltd sweeping off massive of shares from the public into their Yeoman 3-Right Value Asia Fund. The latest feat at January 2016 saw another 650,000 units bought in the open market.

Currently, Yeoman Capital Management is holding 6.2% of Poh Kong share through direct and indirect stakes. While it is not known how big is Yeoman appetite in Poh Kong, but sources had indicated that Yeoman Capital will likely to continue increasing is shareholding towards 8 to 9%, translating to approximately 12 millions of Poh Kong share from the open market.

While there are 3 listed gold retailing company in Malaysia, namely Poh Kong, Tomei and Degem, Poh Kong is the largest among all according to market capitalization. Poh Kong also has the best liquidity in the market compared to the other 2, with 410m shares outstanding.

Gold starts to glitter
What is so interesting in the current development of gold? And what is the role of gold in the current state of global economy? Will it be worth while to hunt into gold now before a massive panic gold rush starts to spike the whole gold market?

These are some common question that might be floating in the mind of retailer.

It is important to note that Gold had actually broken away from a 3 year down trend that had started since 2013. The recent break away is a crucial indication that trader, investor and retailer need to take note about. A technical view will suggest gold to penetrate into the USD 1500 an ounce as the next stop of hike. But how would the fundamental aspect in the current state of economy would support the increasing value of gold?

Gold in natural form does not produce anything, nor will it gives you dividend by holding it. As such, gold will tend to lose it's glitter when the economy is bullish as other form of asset will bring in better returns. However, when equity market failed to deliver, it will cause massive volatility in the market when big funds starts to move around with their money. Cashing out equity would see fund being parked into money market while continue to search for a better vehicle to loop into. However, if currency is also facing a risk of devaluation through excessive quantitative easing or slashing of interest rate, fund manager will move their fund around to search for asset that can protect the value of funds, either real estate, bonds or safe heaven commodity such as gold and silver.

Now, what is the current state of economy?

Real Estate - over priced and over supply, mortgage crash?
Equity - lack of participation, performing worst?
Currency - Facing excessive QE and interest slashing?
Bonds - Risk of bond defaults? Junk Bonds on the rise?

When all the 4 above fail, fund will seek for safe heaven commodity in order to protect the value of their fund, which in turn will be gold and silver.

As a matter of fact, the data had shown that massive amount of funds had been poured into buying gold by China and Russia since July 2015. To date, the government of China and Russia is still spending billion in purchasing tons of gold bullion.

In fact, analyst forecast that the prices of gold might shoot over USD 2000 an ounce due to excessive money printing for the past 4 years and shortage of physical gold in order to cater for a huge amount of fund. This effect will cause spillover buying in other precious metal such as silver as an alternative.

How would this translate into an opportunity for PohKong ?

Back in 2015, Poh Kong had saw great interest, with Yeoman Capital Management sweeping huge amount of shares into it's portfolio. The group had continue to increase it's holding gradually since then. Yeoman Capital Management lifted many investor eye brown when they made great name in the KLSE market through their investment in Ulicorp at the range of RM 1.00. Currently, Ulicorp is standing tall at the range of RM 5.00.

It's current movement into investing in Poh Kong had definitely been studied in detailed and executed based on best practices.

Back then in 2012 when gold price peaked out at almost 1900 an ounce, it had caused frenzy in China and Hong Kong, with retailer from young and old rushing into goldsmith to get their gold and jewellery as a method to protect their wealth.

Goldsmiths in China are being queued round the clock when the public gold frenzy pops.

With the current state of economy where equity are falling due to lower corporate earning, currency are falling due to excessive QE and interest slashing, A rated bonds are giving out almost zero return, junk bonds are high risked on defaults, real estate is facing wave of oversupply and overpricing, the best possible answer could only be Gold and Silver.

Will Poh Kong be able to catch this mega gold frenzy wave that is coming it's way soon?

As for investor like you and me, what will you do now if you see this coming?

Conclusion
As a conclusion, with gold broken away from 3 year down trend, equity, real estate, bond and currency losing value, gold is position for a high chance of value appreciation. With Poh Kong tackling strong at the range of RM 0.58, a strong break out at RM 0.60 will see Poh Kong trading higher towards RM 0.65.

POHKONG (5080) - PohKong - Glittering Gold
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