Broker Name: Maybank Investment Bank Berhad
Date of Report: August 27, 2025
Well Chip Group Delivers Standout 1H25 Results: Growth Momentum Accelerates, Target Price Raised

Introduction: Well Chip Group Surges Past Expectations in 1H25

Well Chip Group Berhad (WELLCHIP MK), Malaysia’s leading pawnbroking and retail & trading (RT) player, has delivered a stellar performance in the first half of 2025, outpacing analyst projections and reinforcing its position in the non-bank financial sector. The company’s earnings growth, margin expansion, and aggressive network expansion are driving robust investor interest. Maybank Investment Bank Berhad maintains its BUY rating and target price of MYR1.48, pegged to a 14.4x FY25E EPS, highlighting continued optimism about Well Chip’s growth trajectory.

1H25 Financial Performance: Strong Earnings and Margin Expansion

Well Chip’s 1H25 results exceeded expectations, with net profit for the first half reaching MYR38.2 million—a 45.8% year-on-year jump and already 62% of Maybank’s full-year forecast. The surge was powered by higher loan disbursements, improved product mix, and cost efficiencies.

Key Highlights:
Pawnbroking gross profit margin expanded by 11 percentage points YoY, driven by lower operating costs.
Retail & Trading segment saw margin expansion of 3.6 percentage points YoY due to a better product mix and cost efficiency, offsetting an 8% YoY decline in RT revenue from lower scrap gold sales.
Blended GP margin reached 55.4% for 1H25 (vs. 43.5% in 1H24).
Net profit margins improved to 30.3% in 1H25 (vs. 22.1% in 1H24).

Business Expansion: Aggressive Growth in Network Footprint

Well Chip is actively expanding its physical network to capture new market opportunities. In 1H25 alone, the company:
Completed the acquisition of three pawnshops in Perak.
Opened a new pawnshop in Johor in June 2025.
Each new pawnshop is projected to contribute approximately MYR1.5 million in earnings annually.
Management has confirmed plans to launch six additional pawnshops in Johor and Melaka by the end of FY26E.
This expansion underlines the company’s commitment to growth and broadening customer reach.

Valuation: Premium Justified by Superior Asset Quality

Well Chip is valued at a premium to its non-bank financial institution (NBFI) peers, reflecting the superior quality of its loan book—backed by gold and luxury watches, assets that are highly liquid in the event of default.

Well Chip’s fair value is set at a 20% premium to the NBFI sector mean, justified by the quality and liquidity of its collateral assets.

Key Financials: Robust Growth Across Metrics

Key Observations:
Revenue and net profit are expected to continue their upward trajectory through FY27E.
Margins and returns on equity, while moderating slightly, remain robust for the sector.
Dividend yields and payout ratios indicate a healthy return profile for shareholders.

Segmental Analysis: Pawnbroking vs. Retail & Trading

Well Chip’s performance is powered by two core divisions:
Pawnbroking:
1H25 revenue: MYR56.4m (+29.9% YoY)
1H25 gross profit: MYR52.5m (+47.2% YoY)
Retail & Trading:
1H25 revenue: MYR69.4m (-7.8% YoY)
1H25 gross profit: MYR17.2m (+7.6% YoY)
Despite a drop in RT revenue due to lower scrap gold sales, improved product mix and cost controls drove margin gains.

Balance Sheet and Cash Flow Highlights

Cash & short-term investments: MYR69.8m (FY24A), projected to decline as expansion continues.
Accounts receivable: MYR531.2m (FY24A), reflecting high loan activity.
Inventory: MYR27.3m (FY24A), expected to stabilize.
Net gearing: Reduced from 88.5% (FY23A) to 26.6% (FY24A), indicating stronger financial health.
Free cash flow is projected to recover after a negative outflow in FY24A, supporting dividend payouts and further expansion.

Growth, Profitability, and Efficiency Metrics

Risk Factors: Challenges on the Horizon

Investors should remain vigilant of several risks that could impact Well Chip’s outlook:
Cybersecurity threats, including malware and hacking risks.
Volatility in gold prices, which impacts collateral values.
Risks of unlawful or suspicious pawn transactions.
Potential constraints from cash capital requirements.
Physical security risks related to handling cash and valuables.

Share Price Performance and Outlook

Well Chip Group’s share price has shown strong upward momentum, with a 12-month target price set at MYR1.48 (8% upside from current levels). The company’s 52-week range is MYR0.95 to MYR1.58. Price performance has outpaced the Kuala Lumpur Composite Index in recent months, reflecting investor confidence.

Historical Recommendations and Ratings Definition

Maybank IBG Research rating system:
BUY: Expected return above 10% in the next 12 months (including dividends)
HOLD: Expected return between 0% and 10%
SELL: Expected return below 0%
Recent recommendations for Well Chip Group have consistently been “Buy,” with target prices adjusted upward as performance and outlook have strengthened.

Conclusion: Well Chip Group Positioned for Sustainable Growth

Well Chip Group has delivered an impressive first half of 2025, outperforming on both financial and operational fronts. With a strong balance sheet, expanding network, and premium asset quality, the company is well-poised for continued growth. While risks remain, the fundamentals and strategic direction point to sustained shareholder value creation.
Investors seeking exposure to Malaysia’s non-bank financial sector will find Well Chip Group a compelling choice, supported by robust earnings, attractive margins, and a clear roadmap for expansion.

Contact Information

Maybank Investment Bank Berhad
33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur
Tel: (603) 2059 1888
For more information, please reach out to the retail research team or your regional Maybank office.