To The Moon

In the announcement of annual results for the year ended 31 December 2021 of Perfect Group International Holdings Limited (‌‌$PERFECT GROUP(03326)$‌), the Directors propose the payment of HK$0.02 per share as the final dividend for the year ended 31 December 2021. However, the proposed final dividend is subject to approval by the shareholders of the Company. At today share price of HK$ 0.244, this is an 8% dividend yield.

So what exactly is this company doing?

Business segment:

The principal business of Perfect Group International Holdings Limited (the Group) is designing, manufacturing and sales of high-end fine jewellery (primarily mounted with diamonds) (the “Jewellery Business”) and the investment in and development and sales and rental of properties for the Group’s integrated and comprehensive industry park located at 1st Ring Road South Extension Foshan, Guangdong Province, the PRC (the “Property Business”) as an integrated and comprehensive industry park (the “Perfect Group Jewellery Industry Park”).

Property Business

Between the two segments, Property business has higher gross margin (about 53%) yet this is not the principal business of the group. And following the completion of construction work of the Perfect Group Jewellery Industry Park, the Group has since the second half of 2018, started to deliver

the completed units, therefore most the revenue was recorded in year 2019 (465.9 mil) and 2020 (225.1mil). The revenue for 2021 was 63.0mil.

However, the Group has also leased out part of the units of Perfect Group Jewellery Industry Park. The leasing of properties and the provision of management services in the Perfect Group Jewellery Industry Park have generated stable income for the Group. The rental income has increased from 5.0 mil in year 2020 to 14.3mil in year 2021.

Jewellery Business

As the principal business, jewellery business contributes 84% of total revenue, and 36% of consolidated results for 2021. For 2020, jewellery business contributes 38% of total revenue, and 2% of consolidated results.

This is improving, however, throughout the year 2021, the Group continued to be affected by the outbreak of the Covid-19 which restrained the Group from participation in various shows, fairs and exhibitions held both in Hong Kong and overseas. But the sales team was able to visit overseas customers more frequently which in turn generated more sale orders during the year ended 31 December 2021 as compared to the year of 2020.

As reported, sales to Hong Kong and Dubai were improving by 137% and 70% respectively, comparing to year 2020. Meanwhile, sales to the PRC has increased 249%due to the Group’s expansion of the wholesale jewellery market in the PRC. However, the overall gross profit margin was dragged down as during the year ended 31 December 2021 the PRC market constituted a greater portion of the revenue for the Jewellery Business and their gross profit margin was significantly lower as the Group was at the stage of exploring the market.

Financial health

The reported current ratio was 2.8 and the the gearing ratio was 0.04 (very little debt). The group is in healthy financial position.

Risks

The performance of the Jewellery Business will be highly dependent on the state of recovery of the global economy, the relaxation of travel restrictions and the number of exhibitions and shows being held in various locations.

Earnings per share (EPS) for year 2021 is HK$ 0.0287, the dividend of HK$0.02 per share is about 70% of the EPS. If the business does not improve as expected, this dividend may not sustainable.