Well Chip Group Berhad has reported a net profit of RM51.8 million for the first half of its 2026 financial year (1HFY26), meeting market expectations by accounting for 49% of full-year earnings forecasts.
Following the release of its financial results, research houses maintained an OUTPERFORM call on the stock with an unchanged target price of RM1.60, citing strong operational efficiency, robust pawn loan growth, and ongoing outlet expansion.
The group also declared an interim dividend per share (DPS) of 5.1 sen for 1HFY26, which remains well on track to fulfill full-year dividend expectations.
Higher-Margin Pawnbroking Segment Drives Growth
A favorable product mix and surge in gold prices significantly enhanced Well Chip’s financial performance over the period:
Revenue & Receivables Surge: Propelled by elevated gold prices, pawnbroking revenue expanded by 49.4% year-on-year (YoY) in 1HFY26, alongside a 45% YoY increase in overall receivables growth.
Segment Mix Shift: As retail sales experienced softening, pawnbroking increased its share of total revenue to 57% in 1HFY26, up from 45% in 1HFY25.
Gross Margin Expansion: Driven by the higher-margin pawnbroking segment, the group’s gross profit margin (GPM) broadened significantly to 63%, compared to 55% recorded in the previous corresponding period.
While pawnbroking loan disbursements moderated by 12% quarter-on-quarter (QoQ) from a high base in 1QFY26 as management adopted a more cautious stance amid Middle East geopolitical tensions, outstanding loans still registered a 6% QoQ growth. Analysts view this expansion as an indicator of longer borrowing durations, which continues to provide underlying support to overall profitability.
Network Expansion into Malacca and New Regions
Well Chip is actively scaling its retail and pawnbroking presence after securing conditional approvals from the Ministry of Housing and Local Government (KPKT) for 12 new outlets—six approved in December 2025 and an additional six in May 2026: The group currently operates 27 outlets. Up to two new outlets are targeted to open by 3QFY26, with up to two additional locations—including an entry into Malacca—expected by year-end. The remaining approved outlets will be staggered for launch across 2027 and 2028. Analysts anticipate meaningful financial contributions from the new network starting in FY27, accounting for a standard 12-month break-even period per location.
Despite a slight uptick in loan delinquencies in July from a low baseline, analysts expressed low concern regarding loans disbursed during the peak gold prices of 1QFY26. Well Chip lowered its loan-to-value (LTV) ratio to 75–80% (down from its typical 85%), ensuring outstanding loans remain well-collateralized against recent gold price corrections of roughly 20%.
Valuation and Capital Structure Outlook
Analysts maintained their valuation framework based on a Gordon Growth Model (GGM)-derived Price-to-Book Value (PBV) of 1.60x (assuming a cost of equity of 10.3%, terminal growth rate of 3.0%, and return on equity of 18.0%).
Ahead of shareholders’ approval for a proposed rights issue expected around late October, earnings models have incorporated a conservative minimum subscription scenario. Beyond the rights exercise, Well Chip plans to utilise debt financing to fund the expansion of its 12 new outlets, further optimising its capital structure.
Well Chip continues to outperform listed local peers, offering an attractive earnings profile highlighted by:
- 3-Year Earnings CAGR: Expected at 50%, outstripping the industry average of approximately 40%.
- Dividend Yield: Offering a competitive yield exceeding 5%.
- Net Margins: Industry-leading net profit margins approaching 30%, compared to the peer average of around 19%.
