Hot Penny Stocks – Kingold Jewelry (KGJI)

The ADP Employment Report for the month of January 2012 was released on Tuesday morning. Their current estimate is 175,000 jobs created in the month of January. That’s slightly lower than the consensus forecast of 185,000.

Despite the bad news the market continues to hold strong.

Earnings season continues this week with Amazon (AMZN), Exxon Mobile (XOM), and The New York Times (NYT) all reporting. 

 

QUICK FACTS
Ticker                                        KGJI
Industry                                     Gold
Recent Price                             $1.57
Market Cap                               $77.3 m
Shares Outstanding                  50.2 m
Average Volume                       113,300
Dividend Yield                           N/A
Website                                     http://www.kingoldjewelry.com

 

COMPANY DESCRIPTION

Kingold Jewelry (KGJI) is a Chinese company in the business of designing, producing and selling 24-karat gold jewelry and other products.

Kingold sells their finished products wholesale and retail. Those include jewelry, Chinese ornaments, and gold bars. Some of their designs are made in-house. Others are customized products made for retail chains.

In 2001 the Bank of China liberalized their gold policy. They loosened their grip on gold imports and ownership which created massive new demand. Kingold was founded the following year to capitalize on the surging demand.

Jewelry holds an important place in Chinese society today. One of the first things to go after the Chinese Revolution was personal wealth, such as jewelry. Now that gold ownership has been liberalized, jewelry has become a symbol of the expanding middle class.

 

FINANCIALS

KGJI’s most recent quarterly numbers were released on November 9, 2011. 

The company reported revenue of $210.7 million in the quarter. Up from last year’s third quarter revenue of $169.7 million. This is an increase of 24.2%.  Kingold also reported a net income of $9.7 million… an increase year-over-year from a net income of $4.8 million.

As of September 30, 2011, the company reported $3.2 million in cash and $400,000 in long term debt.

 

KEY METRICS ANALYSIS

Trailing P/E                               2.8 x
Price / Sales                             0.1 x
Return on Assets                      24.4 %
Insider ownership                     43.6 %
Short Ratio                               1.7 x
Current Ratio                            23.6 x
Total Debt To Equity                  0.3 x

 

RECENT EVENTS

On January 16, 2012 Kingold announced the opening of their first company owned direct retail store. The company’s new retail facility is located in Wuhan, one of the country’s largest cities.

The company chose to open the store in the ritzy Wuhan World Trade Plaza Mall. The 80,000 square meter shopping mall is the largest in the Hubei province. The company estimates that 60% of the city’s jewelry sales take place in this shopping plaza. 

The store was opened just ahead of the Chinese New Year holiday on January 23.

This is Kingold’s second step towards reaching out directly to consumers. In 2011 the company launched an e-commerce website, http://m-gold.com.cn.

 

MANAGEMENT TEAM

Zhihong Jia – CEO
Bin Liu – CFO
Bin Zhao – General Manager, Director
H. David Sherman – Independent Director

 

STOCK ANALYSIS

 

 

 

 

 

Chart courtesy of stockcharts.com

 

KGJI’s 52-week low was $0.88 and the 52-week high was $3.15.  Right now the stock is trading at $1.57.  The 50-day moving average is near $1.42 a share and the 200-day moving average is at $1.43.  The company has a market cap of $77.3 million and 50.2 million shares outstanding.