PETALING JAYA: Kenanga Research believes Well Chip Group Bhd
’s earnings growth is becoming increasingly driven by fundamentals rather than gold-price sentiment.
“Since listing, Well Chip’s sustainable pawnbroking business is making up a larger proportion of revenue at 58% in the fourth quarter of financial year 2025 (4Q25) while contributing 78% of total gross profit.
“As such, we believe earnings are becoming more resilient and less susceptible to gold price volatility, a trend that should be further supported by the rollout of the six new outlets,” it said in its initiation report on the company.
Pawnbroking now accounts for 58% of revenue and 78% of gross profit, up from 38% and 73% respectively earlier, reinforcing earnings resilience.
Although Well Chip’s share price has historically tracked gold movements more closely than listed peers, Kenanga Research believes that relationship is weakening.
It noted that tighter loan-to-value ratios below 80% now provide a stronger buffer against price swings.
The research house has an “outperform” call and a target price of RM2, arguing that the recent weakness in its share price offers a fresh accumulation opportunity.
Kenanga Research valued the stock at 2.05 times financial year 2026 (FY26) book value, deriving a RM2 target price from projected return on equity of 18%, while noting that the group’s “core pawnbroking business is akin to banks and are loan book driven”.
The key earnings catalyst is the long-delayed rollout of six new outlets, after regulatory approvals from the Housing and Local Government Ministry were finally secured in December 2025.
While contributions are expected from FY27, Kenanga Research said more meaningful earnings accretion should only emerge by FY28 because new outlets typically require up to 18 months to reach breakeven.
Nearer term, FY26 earnings will be driven by the full-year contribution from three acquired Perak pawnshops, purchased for RM63.4mil in May 2025.
These mature outlets generate annual pawnbroking revenue of about RM25mil each, significantly above Well Chip’s Johor outlets, although margins are lower at around 12% versus the group’s 80%.
For FY26, Kenanga Research forecasts net profit of RM106.1mil, up 23% from FY25’s RM86.1mil, followed by RM118.3mil in FY27.
Its FY25 itself was strong, with net profit surging 72% despite revenue rising only 22%, reflecting stronger contribution from higher-margin pawnbroking income.
At current levels, the stock trades at 7.4 times FY26 earnings with projected dividend yields approaching 5%, which the research house views as attractive, given its expected medium-term expansion trajectory.
