KUALA LUMPUR (April 14): Kenanga Investment Bank has initiated coverage on Well Chip Group Bhd (KL:WELLCHIP) with an 'outperform' call and a target price of RM2.00, implying a 53.8% upside from its current price of RM1.30.

The research house said the pawnbroking group’s recent share price weakness presents an accumulation opportunity, underpinned by strong earnings fundamentals and the resumption of its long-delayed outlet expansion plans.

Kenanga noted that approvals for six new outlets, which had been delayed following the group’s July 2024 listing, were finally secured in December 2025. 

The new branches — four in Johor and two in Melaka — are expected to be completed by the end of the financial year ending Dec 31, 2026 (FY2026), with earnings contribution likely to start from FY2027 and become more meaningful by FY2028.

The investment bank also highlighted Well Chip’s regional expansion into Perak through the acquisition of three mature pawnshops in May 2025 for RM63.4 million, describing the move as a key earnings driver for FY2026.

For FY2025, Well Chip posted a 72.4% jump in net profit to RM86.1 million, driven by stronger contributions from its higher-margin pawnbroking segment and the inclusion of the Perak outlets. Revenue rose 21.6% to RM270.2 million.

Looking ahead, Kenanga is forecasting net profit to rise further to RM106.1 million in FY2026 and RM118.3 million in FY2027, supported by a full-year contribution from the Perak operations and continued demand for pawn loans.

The research house said demand for pawnbroking services remains robust as consumers increasingly turn to pawn loans as a quick and accessible source of short-term financing, particularly amid persistent cost-of-living pressures.

Despite investor sentiment in the sector often moving in tandem with gold prices, Kenanga said Well Chip’s earnings are becoming increasingly resilient as its core pawnbroking business now contributes a larger share of revenue and profit.