Editor’s Note
This article highlights the financial dynamics of Manpower Jewelry’s planned NASDAQ listing, noting a sharp rise in gold product revenue alongside a significant drop in gross margin. Investors should consider these contrasting trends when evaluating the offering.
Recently, Manpower Jewelry from Hong Kong publicly filed its prospectus with the U.S. SEC for a U.S. listing, planning to list on NASDAQ under the ticker symbol MPJS. The company plans to issue 1.5 million ordinary shares, representing 5% of the post-offering shares, at an offering price of $4 to $5. Additionally, existing shareholders plan to sell 1.3 million shares (MPJS Investment Co., Ltd., a common investment holding company held by Mr. SZE Kam Fuk, Ms. SZE Sau Lan and Ms. SZE May Moon). The expected market capitalization from this offering is around $130 million.
According to the prospectus, Manpower Jewelry was founded in 2010 and is a jewelry retailer and wholesaler based in Hong Kong. Its first retail store opened in 2010, initiating its jewelry retail business. Currently, Manpower Jewelry operates 5 retail stores in Hong Kong, primarily targeting the mid-market and middle-income customer segments. Its product portfolio includes mid-range gem-set jewelry, gold jewelry products, loose diamonds and gemstones, gold ornaments, and silver jewelry products.
In terms of financial performance, for the fiscal years 2023 and 2024 (ended October 31) (hereinafter referred to as the reporting period), Manpower Jewelry’s revenue was HK$66.42 million and HK$109 million, respectively, with corresponding net profits of HK$5.05 million and HK$5.98 million.
Breaking down by business segment, revenue from Pure gold products was HK$45.1856 million and HK$80.027 million, respectively; revenue from diamond jewelry was HK$12.6705 million and HK$12.4526 million; and revenue from selling recycled gold was HK$5.6314 million and HK$11.5246 million, respectively. In short, the company’s flagship product is gold products, and the significant growth in their revenue has driven the company’s overall revenue growth.
It is worth noting a phenomenon: although gold prices have risen, sales performance is not optimistic. Data from the China Gold Association shows that China’s total gold consumption in 2024 was 985.31 tons, a year-on-year decrease of 9.58%. Among this, gold jewelry consumption was 532.02 tons, a year-on-year decrease of 24.69%.
Similarly, the surge in gold prices has lowered Manpower Jewelry’s gross margin. During the period, the company’s gross margin was 25.70% and 18.94%, respectively. The company stated that the decline in gross margin in 2024 was mainly due to the gross margin for pure gold products dropping from 16.68% to 11.55%.
Furthermore, as of October 31, 2024, the cash flow generated from the company’s operating activities was negative, at -HK$158.3 thousand. Behind this “bleeding,” Manpower Jewelry has had to rely on external financing to support its business growth and expansion. During the period, the company’s total bank borrowings were HK$23.3789 million and HK$18.2215 million, respectively. If operating losses occur or negative cash flow persists in the future, it may lead to increased liquidity risk.
Gold products are the flagship products of Manpower Jewelry, and their subsequent fluctuations have a significant impact on the company’s operational growth.
Major institutions are optimistic about the gold price trend for 2025. Goldman Sachs has raised its year-end 2025 gold price target from $3,300/oz to $3,700/oz and believes that in extreme scenarios, such as a deep U.S. recession, gold prices could reach $4,500/oz. JPMorgan Chase expects gold prices to approach $3,675/oz in Q4 2025 and believes prices could break through $4,000 by Q2 2026. UBS expects the average gold price in Q3 2025 to potentially reach $3,500/oz, and if geopolitical risks or inflationary pressures intensify, prices could break $3,800.
In reality, soaring gold prices may not necessarily be good news for brands. For example, when international gold prices are high, brands, as suppliers of gold jewelry, have almost no pricing power and only charge fixed processing fees. Therefore, brands cannot control costs.
Moreover, the purchasing preferences and channels of gold market consumers have changed. For instance, an increasing number of young consumers buy gold jewelry for personal wear, not for specific consumption scenarios like gifting, festivals, or weddings. Therefore, they value quality-to-price ratio.
These factors all affect brands’ ability to profit. The same applies to Manpower Jewelry.
Additionally, from a competitive landscape perspective, the Hong Kong jewelry market is mature and stable with a relatively high industry concentration. A few large jewelry retailers and international brands hold over 60% market share. As a local jewelry retailer, Manpower Jewelry, while having a certain degree of customer recognition, still faces significant pressure against market leaders. Especially since jewelry is a capital-intensive industry, expansion is not an overnight task and poses higher tests for the company’s cash flow and operational stability.