WITH international borders fully reopened since the lifting of pandemic restrictions, Taka Jewellery : 42L 0% is pinning its hopes on overseas trade shows as a primary growth driver in the post-pandemic era.

 

The Catalist-listed group has seen a surge in demand from new trade buyers in South-east Asia and South Asia in recent months, particularly from Vietnam, Myanmar and Sri Lanka, said Michael Teo, the group&rsquo s managing director.

 

&ldquo Last time, buyers from these countries didn&rsquo t spend a single cent, but now they can spend about S$100,000 to S$200,000 (at each trade show),&rdquo he said in an interview with The Business Times.

 

Teo attributed this shift to a burgeoning middle class and a younger population eager to splurge on jewellery.

 

The upsurge from the region has also offset slowing sales from South America and the Middle East &ndash two of the group&rsquo s biggest markets &ndash which, combined, contribute to about 40 per cent of total exhibition sales today.

 

For the first half ended December 2023, Taka Jewellery&rsquo s wholesale and exhibition segment posted revenue of S$27.1 million &ndash a 6.2 per cent decline from the same period a year earlier. The lower revenue was led by reduced export sales &ndash also known scrap jewellery sales &ndash to overseas customers, as a result of lower volumes of pre-owned jewellery traded in.

 

Revenue from this division accounted for nearly 39 per cent of the group&rsquo s total revenue.

 

Teo also pointed out that the wholesale and exhibition segment suffered during the pandemic, with border closures resulting in the cancellation of trade shows overseas.

 

The group only resumed participation in international shows in March 2022, but the recovery has been sluggish.

 

Teo said certain shows have downsized after reopening, with the number of buyers still below pre-pandemic levels.

 

Still, he expects Taka Jewellery&rsquo s overall revenue for FY2024 to surpass that of FY2023 and FY2020 &ndash the last financial year before the thick of the pandemic. This is because the group has observed a higher quantum of sales at recent trade shows on average, as compared to last year.

 

This has in part been driven by an uptick in demand for coloured gemstones from trade buyers, he said, as the market continues to be divided between lab-grown and natural diamonds as a jewellery of choice.

 

&ldquo International trade buyers are still waiting to see whether lab-grown or natural diamonds will dominate the market,&rdquo he explained.

 

Rather than take a position on which way consumers will swing, trade buyers are choosing to &ldquo play it safe&rdquo and put their money on coloured gemstones as an alternative, given the steady demand for these stones from consumers over the years, he added.

 

Teo&rsquo s optimism over the group&rsquo s prospects comes even as it posted a 1.6 per cent decline in total revenue to S$70.6 million for H1, from S$71.7 million the year before.

 

Net profit fell 14 per cent to S$5.4 million, from S$6.3 million in the year-ago period.

 

Growth in other segments

Aside from the drag from its wholesale and exhibition segment, Teo noted that Taka Jewellery&rsquo s other two core segments &ndash retail and financial services &ndash have been growing revenue-wise.

 

For H1, the group&rsquo s retail arm raked in revenue of S$41.6 million &ndash up 1.2 per cent from S$41.2 million in the year-ago period.

 

Teo said the group will be ramping up expansion in Singapore, after it shut three retail stores during the pandemic.

 

While the group ventured into e-commerce and livestreaming to drive sales in 2020, he noted that in-person purchases continue to make up the bulk of sales as jewellery is a big-ticket item.

 

Taka Jewellery opened two new stores at Lucky Plaza in Orchard Road and Northpoint City in Yishun earlier this year, bringing its total number of stores in Singapore to 16. Teo plans to open two to three more stores by end-December 2024.

 

But manpower remains the group&rsquo s biggest challenge, he said, adding that the labour shortage has curbed any plans to open retail outlets overseas.

 

Due to the high value of its products, Taka Jewellery hires only full-time employees at its retail stores and overseas exhibitions. The group has around 150 employees.

 

The company in 2021 changed its name from TLV Holdings to Taka Jewellery, to increase shareholders&rsquo awareness of its better-known jewellery businesses.

 

But investors may need more than that to buy in.

 

The stock&rsquo s total return is at minus 8.3 per cent in the past 12 months, versus a return of 5 per cent by the local bourse&rsquo s key benchmark, the Straits Times Index.

 

Since its initial public offering in 2015, the counter has posted negative returns of 66.6 per cent, or minus 12 per cent on an annualised basis.

 

Taka Jewellery was trading at a 70 per cent discount to its net asset value per share of S$0.2232 as at end-December 2023. The counter closed at S$0.066 on Friday (Mar 22).

 

Chasing market share

Amid rising inflation and cost-of-living pressures, gold&rsquo s record-high prices should give Taka Jewellery reason for cheer.

 

As of late, more consumers have been trading in their pre-owned gold jewellery under the Top Cash pawnshop brand, said Teo. The brand operates four pawnshops in Singapore.

 

At the same time, the brand has maintained its consumer interest rate unchanged for the past eight years, at a monthly rate of 0.7 per cent. Teo noted that this rate is below the market standard, with most competitors charging monthly rates ranging between 1 and 1.5 percent.

 

For H1, Taka Jewellery&rsquo s financial services segment &ndash which consists of both pawnbroking and business-to-business moneylending &ndash contributed S$1.9 million to total group revenue.

 

This was up 11.2 per cent from S$1.7 million the year before, due to higher interest income earned from the pawnbroking business.

 

&ldquo Our rate is still flat, which is why we&rsquo ve gotten more pawnbroking transactions. But our profits have dropped because of the higher costs of borrowing,&rdquo said Teo.

 

&ldquo It&rsquo s about giving the best value to the customer,&rdquo he added. &ldquo By sacrificing a bit, we gain a lot more market share in the long run.&rdquo

TLV Holdings announced on Thursday that it is proposing to change its name from TLV Holdings to Taka Jewellery Holdings to increase shareholders' awareness of its better-known jewellery businesses.

 

The company has already received approval for its application to the Accounting and Corporate Regulatory Authority (Acra). The name will be reserved until Jan 11, 2022.

 

In its regulatory filing, the company said that it also intends to diversify into the moneylending business. TLV said that it would provide loans to corporations for working capital requirements, as well as providing mezzanine loans for corporations to finance their expansion and acquisition plans.

 

Mezzanine loans are a hybrid of debt and equity financing and give TLV the right to convert or acquire an equity interest in the borrower in addition to interest income. Shares of the borrowing corporation may also be held as collateral for loans.

 

TLV said that these services fall under the definition of " excluded moneylender" and will not require any licences or approvals under Singapore' s Moneylenders Act.

 

The move comes as the board believes the moneylending business will allow TLV to efficiently utilise its earnings generated from its existing businesses to potentially provide recurring interest income that will improve the company' s profitability and long-term growth.

 

In 2018, the company had identified moneylending as a potential area of expansion as it is complementary to its existing business activities. It first ventured into offering term loans to corporations then. 

 

The company also continues to provide lending through its Top Cash pawnshops against collaterals not limited to gold and diamond jewellery.

 

The company currently has three other existing business activities in jewellery exhibitions, retail jewellery sales under the Taka Jewellery and Top Cash brands and pawnbroking of pre-owned jewellery under the Top Cash brand.

 

For the full year ended June 30, 2021, the group made a net profit of S$2.4 million, a turnaround from the loss of S$393,000 the group reported in the 15 months ended June 30, 2020. However, revenue declined by 15 per cent to S$96.8 million in the same period.

 

The company attributed the decline in turnover to international travel restrictions and a challenging business environment amid the Covid-19 pandemic. As a result, revenue for the wholesale and exhibition business declined 48 per cent to S$25.6 million. 

 

The group&rsquo s retail business made up 70.5 per cent of the company&rsquo s revenue, while the financial services and wholesale and exhibition business revenue constituted 3.1 per cent and 26.4 per cent of revenue respectively.

 

As the business diversification plans change the risk profile of TLV, the company will convene an extraordinary general meeting to seek shareholders' approval for both the diversification plans and the name change. Shareholders will receive a circular in due course.