Feature

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Degem Bhd

DEGEM 7119

Main

Consumer Products

www.degembhd.com

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The pride of Diamond & Platinum is its signature Estrella® Diamond, where eight perfectly symmetrical and identical hearts and arrows

are in perfect symmetry and alignment of its facets. All 57 facets are so indentical and exact in size and alignment that it produces an extraordinary

evenness of light returned to the eye.

Branding of DeGemA strong brand is invaluable as the battle for customers intensifies day by day. Therefore it becomes important for business owners to invest in research, define clear goals and brand build. DeGem Bhd believes strongly in brand building and continues to do so despite being in business for over 30 years.

DeGem, founded in the early 1980s as a traditional family business has today the most diverse portfolio of rare and precious jewels. As a respected jeweller with one of the

largest collection of diamonds and gemstones in Malaysia, DeGem recognises the importance of strong branding in the industry and is constantly dedicated

to nurturing its retail brands.

DeGem’s jewellery products are marketed under the DeGem, and Diamond & Platinum brands. The DeGem brand caters for the mid- to high-end seg-ment of the consumer market, where high brand value and loyalty is greatly

emphasised.

Diamond & Platinum is the market leader of contemporary jewellery in plati-num and white gold, tailored for the young and trendy consumers. Diamond

& Platinum offers its consumers a choice of high quality diamond and gemstonejewellery at affordable prices. The pride of Diamond & Platinum is its signature

Estrella® Diamond, where eight perfectly symmetrical and identical hearts and arrows are in perfect symmetry and alignment of its facets.

DeGem designs and manufactures its own jewellery, and markets it domestically and overseas through its own retail outlets, and sells wholesale via its design and distribution unit in Hong Kong.

DeGem has invested its vast experience in developing two house-hold brands, Infinity and Soleluna. While Infinity is highly sought after by couples for their engagement and wedding keepsake, Sole-

luna fulfils demand from a niche market looking for big and bold, yet affordable, jewellery for the working class. DeGem is also the sole

distributor of the renowned Lazare Diamond® in Malaysia.

Who are we?DeGem Bhd was incorporated on January 1997 as a private limited company and was

converted into a public limited company on March 1997. The company was listed on the Second Board of the Kuala Lumpur Stock Ex-

change (now Bursa Malaysia) in October 2001. In June 2003, DeGem’s listing status was transferred to the

Main Board of the exchange upon completion of a bonus issue of 1-for-2, increasing its

issued and paid-up capital to RM60 mil-lion.

DeGem prides itself on its diverse portfolio of rare and precious jew-els, sourced from cutters around the world with whom DeGem has excel-lent relationships, ensuring that only

quality jewels are added to DeGem’s inventory.

Paul Choong, DeGem executive director told Public Listed in an interview that the com-

pany is well known for its design and delicate craft, and its ability to marry the beauty of precious gems with avant

garde jewellery designs. The company’s range of exclusive and unique creations can satisfy the most discerning clients

“More people understand the concept and investment value of jewellery. Previously, people buy gold as an investment but the landscape has changed today. There is strong fundamental demand for diamonds and platinum jewellery,”

The company’s range of exclusive and unique creations can satisfy the most discerning clients when it comes to high-end jewellery. In fact, DeGem has regular customers from near and far, Choong said.

Choong said the skill of DeGem’s craftsmen is the foundation of its consistency in being elegant, aesthetic and having a unique produc-tion.

“To this end, DeGem places great emphasis in technical training for its production team. We are keeping our fingers on the pulse of the latest technological advancements and techniques employed in product quality improvement. This ensures we bring out the best in every product that we design and manufacture,” he said.

DeGem, with a market capitalisation of approximately RM135 mil-lion as at end October 2010 is focused on two strategies - vertical integration to generate above average margin, and diversifying in-come sources via regional expansion. Choong said DeGem’s opera-tions are vertically integrated, right from sourcing, designing and manufacturing to the distribution of its products.

Choong said the integration is vital to the preservation of the quality of its products, which in turn helps retain the loyalty of its custom-ers. He said such integration is also cost effective in ensuring not only sustainable profit margins for the Group but competitive pric-ing for its customers.

Focus on fine jewelleryDeGem’s focus is on the diamond and gemstone fine jewellery segment, which provide better profit margins than gold products. Choong believes that

although demand for fine jewellery may be susceptible to the volatility in economic conditions, rising affluence enhances con-sumer optimism and buying sentiment.

“More people understand the concept and investment value of jewellery. Pre-viously, people buy gold as an invest-ment but the landscape has changed

today. There is strong funda-mental demand for diamonds and platinum jewellery,”

Choong said.

DeGem has a maximum production capacity of 3,000 units a month. Four

characteristics known as the “4 Cs” are commonly

used as the basic descriptors of the diamonds and gemstones -

carat, cut, colour and clarity.

“Carat, colour and clarity comes naturally. The only human factor

is the cut. The cut determines the sparkles. The carat is the weight,

which determines the price. It is the 4 Cs that make expensive

jewellery especially diamonds so precious,” Choong ex-

plained.

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Design, Distribution and RetailWith understanding of Asian customers’ preferences for diamonds and gemstones jewellery, DeGem has strategically positioned itself for direct regional expansion into Singapore, Indonesia, Brunei and Hong Kong, while strengthening its foothold in Malaysia.

The company currently has five boutiques at exclusive retail address-es within the Klang Valley, two in Singapore, and one in Jakarta, In-donesia. DeGem expanded its operations in Singapore in 2010 with the opening of its second brand boutique at The Shoppes at Marina Bay Sands integrated resort.

DeGem’s design and distribution centre is based in Hong Kong, which is the hub of the international jewellery business. From this strategic base, DeGem supplies to retailers in Europe, Asia Pacific, the Middle East and Southeast Asia, contributing significantly to its overseas revenue.

Choong said market demand patterns from the design and distri-bution unit allows the company to keep abreast of changes in con-sumer preferences and trends in the jewellery industry.

In line with its long term plan to become an acclaimed regional jeweller, DeGem regularly organizes and participates in events such as fashion shows, exhibitions and road shows to showcase its jewel-lery and promote better awareness and appreciation of its products.

Market ResilienceDespite the global economic downturn affecting the first half of the financial year 2009, DeGem achieved satisfactory results for the full year as people continued to buy jewellery for important occasions. The company posted lower revenues of RM189.4 million, a mar-ginal decrease of 9.5 per cent from RM209.2 million in 2008.

Profit before taxation was, however, higher at RM22.2 million in 2009 compared to RM20.0 million in the previous year, an increase of 10.7 per cent year-on-year,

DeGem registered a higher net profit attributable to shareholders of RM15.4 million in 2009 against RM14 million in 2008, which translated into earnings per share of 11.47 sen against 10.45 sen. Its shareholders’ fund strengthened increased by 9.4 per cent to RM144.7 million.

Net assets per share increased further to RM1.11 per share from RM1.00 per share, a consistent improvement for the past 3 years. The total debt to equity ratio remained at a healthy level, fairly close to the previous financial year end of 0.23 times.

Choong is upbeat on the industry saying that it will continue to grow as more people come to appreciate the value for diamonds. DeGem is building its overseas markets to garner new customers.

He said the demand for basic jewellery item has so far remained resilient. “We see improved market sentiment and strong demand for fine jewellery,” he said.

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* Forecast by Mercury Securities Sdn Bhd

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OctJewelmart Inter-national Sdn Bhd invested HK$6.39 million in Grand-max Corporation Ltd (“GCL”) by subscribing ad-ditional shares in GCL. The funds would enable GCL to have funds to develop new markets for the Degem Group through the establishment of distribution network targeting consumers in the Middle East, United States and Europe.

NovJewelmart International Sdn Bhd acquired 60 per cent equity interest in Meca Jewellery Ltd (“MECA”) as part of the Group’s expansion programme to penetrate in the European jewellery retail business.

MarDeGem complet-ed bonus issue of 21.0 million new ordinary shares of RM1.00 each on the basis of 1 for 2.

JunTransfer of DeGem’s listing from the second board to the main board of KLSE.

NovDeGem set up Diamond & Platinum (B) Sdn Bhd (D&P), 80% owned by DeGem to penetrate the market in Brunei Darussalam

NovDiamond & Platinum Sdn Bhd subscribed 99.99% share-holding in Venus Diamond Sdn Bhd to enable an-other outlet to be operated under the D&P chain

Dec DeGem re-organ-ised Diamond & Platinum (B) Sdn Bhd to be operated under Diamond & Plati-num Sdn Bhd.

May Diamond & Platinum Sdn Bhd, 60% owned by DeGem, ac-quired remaining shareholding of D&P2 Jewellery Sdn Bhd.

AugDeGem com-pleted subdivision of ordinary shares of RM1.00 each in DeGem into ordinary shares of RM0.50 each (“Share Split”).

AprDeGem’s wholly-owned subsidiary, Jewelmart Inter-national Sdn. Bhd, acquired two (2) Ordinary Shares of SGD1 each representing 100% equity interest in Degem Prestige Pte Ltd for the purpose of trading in diamond and jewellery in Singapore.

MayDeGem Group embarked on a share buyback programme since 20 Novem-ber 2009 to actively manage its capital. A total of 1,527,100 ordi-nary shares have been bought from the open market to improve its earnings per share and return on equity.

MarDeGem acquired remaining 40% equity interest of Diamond & Plati-num Sdn Bhd.

FebDiamond & Plati-num Sdn Bhd set up Diamond & Platinum Pte Ltd in Singapore to expand its products to wider range of customers.

JanJewelmart International Sdn Bhd set up Jew-el2Cash Pte Ltd, in Singapore to venture into pawn broking business in Singapore.

OctDeGem’s listing on the second board of KLSE.

DecDeGem acquired 80% shareholding in Titanpuri Sdn Bhd.

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MayP.Y.T Jewel & Time Sdn Bhd, a wholly-owned subsidiary of DeGem and its subsidiaries, disposed show-rooms located at Petaling Jaya and Subang Jaya, Se-langor, together with certain inventories and fixed assets

AugDeGem acquired 100% equity interest of Rancak Riang Sdn. Bhd.

SepRancak Riang Sdn Bhd acquired 100% equity interest of Grand-max Corporation Limited (“GCL”), Hong Kong. The primary business of GCL shall be to create and design new range of jew-ellery especially for the overseas market. GCL shall develop new markets for the Degem through the establishment of distribution network targeting consumers in the Middle East, United States and Europe.

SepRancak Riang Sdn Bhd acquired 100% equity in-terest in Fareway International Ltd (“FIL”), Hong Kong. FIL is involved in the manufacturing of jewellery. FIL shall complement and enhance the efficiency of Degem’s current manufacturing operation in Malaysia through lower cost of production. FIL shall produce the low to mid price jewellery range and for Grand-max Corporation Ltd.

SepInticraft Sdn Bhd, wholly-owned sub-sidiary of DeGem, acquired 70.0% equity interest of Solireno Sdn Bhd which is involved in the manufacturing and trading in gold jewellery.

Corporate Milestone

BERHAD

Feature