Market Analysis
” Growing Demand for Gold Jewellery,
Post-Pandemic “
Domestic Market
Consumer demand for gold in all forms is predicted to rise steadily from 2022 onwards due to a potent combination of factors, such as increasing affluence across most of the world, the return of in-person socialising (and the need to prepare gifts and tokens of appreciation), and the popularity of consumer electronics in general. In line with most expert predictions, we foresee demand for the following gold and gold-containing products increasing:
JEWELLERY
Gold jewellery is a common gift at weddings, anniversaries, birthdays, and many other commemorative events. As in-person celebrations resume after the end of lockdown restrictions, demand is expected to rise accordingly
ORNAMENTSAND KEEPSAKES
Corporate, entertainment, and sporting events where gold medals and plaques are frequently given out will also resume as Covid-19 becomes endemic, driving further demand for gold ornaments and keepsakes.
CONSUMER ELECTRONICS
A less well-known use of gold is in consumer electronics, where it forms an important part of the circuit boards that smartphones and tablets need to function. Demand for gold will only grow as consumer electronics become more widespread and affordable.
Consequently, the domestic market for gold jewellery, which is currently valued at RM6 billion per year (equivalent to about 25 metric tonnes of gold), is projected to expand at a CAGR of 1.5% for the foreseeable future, offering us ample opportunities to increase sales and grow our market share.
Global Market
2023
Continued Growth
2022
> RM 6.0 Billion
2021
RM 5.1 Billion (Jan-Nov)
2020
RM 4.1 Billion
2009
RM 2.2 Billion
Malaysia is estimated to be the 3rd largest exporter of gold jewellery worldwide. According to the Penang Goldsmith Association, the value of Malaysian gold jewellery exports is predicted to surpass RM6 billion in 2022 (compared to only RM2.2 billion in 2019) following the US Federal Reserve’s plans to raise interest rates at an aggressive pace (which spurs investors to move away from the US dollar towards gold). This projection is highly accurate as it is based on the real performance of Malaysia gold jewellery exporters over the past 2 years: in 2020, a pandemic year, the value of gold jewellery exports rose to RM4.1 billion; the fifirst 11 months of 2021 then recorded an even more impressive RM5.1 billion.
Bullish on Long-Term Gold Price Trends
Gold has been always seen as a strategic asset, outperforming many other asset classes. Despite periods of strong volatility, the gold price has been on a consistent uptrend from 1970 onwards. This trend is expected to persist as global retail and institutional investors seek a safe haven to store their wealth amidst a volatile geopolitical and macroeconomic outlook. While gold prices will undoubtedly continue to flfluctuate in the short term, Fitch Solutions is of the opinion that gold prices in upcoming years will still be elevated compared to pre-pandemic levels, which makes the Mega Group’s gold jewellery an attractive option for investor seeking to diversify their investment portfolio.
Few Direct Competitors in the Gold Industry
Of the estimated 1,000+ gold manufacturers and distributors in Malaysia, the vast majority (95%) are very small companies that only occupy one part of the gold supply chain (i.e. only manufacturing or distributing gold products, but not both simultaneously). Lacking the resources or drive to expand further, most of them have already exhausted their growth potential. In contrast, the Mega Group is one of the larger players in the gold industry, with a presence in most parts of the gold supply chain. This vertically-integrated business model, combined with the presence of proper SOPs, internal controls, and a corporate governance framework, puts us in a far better position to continue growing and satisfying consumer demand.
ESG Status Justifies a Premium Valuation
As mentioned in a previous section on the Mega Group’s ESG-compliant business practices, companies that adhere to ESG standards are more likely to attract investment and sales as society in general becomes more aware about the negative impacts irresponsible business practices can have on people and the planet. Since the Mega Group as a whole is ESG-compliant and set to become even more so, we believe we can command a premium valuation (comparable to that of existing publicly listed companies) during our IPO for being more investor-friendly than the majority of industry peers.