Jewelry retailers apply for listing in the future or are difficult to protect themselves

Zhitong Finance was informed that recently the jewelry retailer Hong Kong Futai Holdings Co., Ltd. (hereinafter referred to as Futai Holdings) submitted a GEM listing application to the Hong Kong Stock Exchange. The proceeds are intended to expand the retail network, renovate existing stores, build its own design teams, and strengthen marketing and promotional activities.

Futai Holdings is principally engaged in the procurement, marketing, distribution and retail of jewellery products. Its jewellery products include gold jewelry, white gold and jewellery inlaid jewelry. In addition to the above businesses, Forte Holdings also purchases recycled money from consumers at its retail outlets and sells them to recycling dealers. As of September 30, 2016, Futai Holdings has a total of six retail stores in Hong Kong entitled “Futai Jewelry”, mainly located in Hong Kong residential areas such as Tsuen Wan and Jordan.

According to the Frost & Sullivan Report, the retail sales value of jewellery in 2014 and 2015 declined due to the overall coldness of the retail market in Hong Kong. Details of the retail sales value of the Hong Kong jewelry retail market are as follows:

Despite the sluggish environment, Futai Holdings still handed over a better-looking “transcript”. From 2014 to 2015, Futai Holding's revenue was 175 million Hong Kong dollars (the same below), 201 million, an increase of 14.9% year-on-year; net profit was 5.585 million, 15.406 million, an increase of 175.9% year-on-year.

Forte Holdings said that the increase in revenue was mainly due to the decline in gold prices, the increase in sales of gold jewelry, and the increase in sales of recycled gold business by more consumers selling their recycled gold to the group. In addition, the substantial increase in net profit was mainly due to the increase in gross profit margin of the jewellery retail business.

From 2014 to 2015, the gross profit margin of Forte Holdings' jewelry products sales was 19.5% and 27.6%. Benefiting from the gross profit margin growth of the business, the overall gross profit margin of the group was 17.2% and 22.5%, respectively, up 5.3 percentage points year-on-year.

It is worth noting that Frost & Sullivan expects that due to the uncertainty of the overall retail market in Hong Kong and the future tourism market in Hong Kong, it is expected that the Hong Kong jewellery market will continue to show a downward trend from 2016 to 2018, and will gradually decline until 2019. recovery.

Although the performance of Futai Holdings has risen against the market in the past two years, it is still unknown whether it can maintain its performance growth in the context of the overall industry slump.

From the results of the six months ended June 30, 2016, the growth rate of Futai Holdings has been slowing down – revenue is 97.77 million, up 3.5% year-on-year; net profit excluding listing expenses is 5.7 million, down from the same period last year. 38.8%. The slowdown in revenue growth and the decline in net profit are related to the jewellery business and sales to major wholesale customers as compared to the same period in 2015.

Futai Holdings also gave investors a “vaccination” in the application materials. It is frank that the retail market for jewelry in Hong Kong is still in a downturn, so the Group’s retail revenue from the jewelry business will face a risk of decline in the next few years.

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