MoneyMax Financial Services

[CityFarmer]

The company share market price "normalising" back to its IPO price of 30 cents. At the moment, the market price is 33 cents as of 11am.

Will the other two listed pawnbrokers' announce similar performance?

(not vested)

[CityFarmer]

MoneyMax included in MSCI Singapore Micro Cap Index

MoneyMax Financial Services says it has been included in the listing of the MSCI Singapore Micro Cap Index.

MoneyMax is among the 19 companies added to the MSCI Singapore Micro Cap Index following an announcement by MSCI Inc. on the Semi-­Annual Index Review for the MSCI Equity Indices made on Nov 7.

MSCI Inc. is a leading investment guide to around 8,000 clients worldwide, offering investment support tools such as indices, portfolio risk, and performance analytics.

Peter Lim, MoneyMax’s Executive Chairman and Chief Executive Officer, says, “We are proud to be included in the MSCI Singapore Micro Cap Index so soon after the completion of our Initial Public Offering in August 2013. We hope this will help MoneyMax reach out better to the investment community as we execute our growth strategy.”
http://www.theedgesingapore.com/the-dail...index.html

[CityFarmer]

I assume the "leasing" is not with retail loan, but trade financing, based on the partner list. It seems more non-bank institutions are offering trade financing, and taking market share from bank?

Have you observed the same?

AP Oil, MoneyMax in JV to provide financial leasing in China

SINGAPORE (Oct 18): SGX-listed AP Oil International and MoneyMax Financial Services have entered into a joint venture with two other companies, Zongshen and Free Trade Port Co., to undertake a financial leasing business in Chongqing, China.

AP Oil and MoneyMax will each hold a 12.5% equity stake in the joint venture company, while Shenzhen Stock Exchange-listed Zongshen will hold a 70% interest and Free Trade Port Co. will hold the remaining 5% equity interest.
...
http://www.theedgemarkets.com.sg/sg/arti...sing-china

[weijian]

These legalized "Ah Long$" look to have a pretty good business model I reckon.

FY23 numbers (in mil)
Interest Income % = NII/(avg receivables over 2 years) = 67/535 = 12.5%
Interest Cost % = Cost/(avg liabilities/payables over 2 years) = 23.6/517=4.6%
NIM = 12.5-4.6 = 7.9%
NPL = Provisions/receivables = 0.954/600 = 0.16%

Lending at 12.5% rates with NPL=0.16%. Is Pawn broking such a superior business model where you can have the cake and eat it too? The collateral is really worth its value?

A few other thoughts:

- This Pawn Broker does not seem to need to depend on customer deposits (unlike banks and financing firms) to grow their loan book. They are limited by their ability to borrow short term loans (3-9months) which matches to majority of the duration of their loans to customers (>70% of loans are "current"). Total receivables for FY23=600mil, FY19=233mil, FY15=161mil --> 40% CAGR FY19-23 (4years), 11% CAGR FY15-FY19 (4years) and 34% CAGR FY15-23 (8 years).

- While higher interest rates are expected to eat into NIM, but loan growth looks impressive (34% CAGR over 8 years). Interest income % is capped at 12.5% (effective rate) --> reckon this is capped by regulations and so there is some regulatory risk here. But such high CAGR increase in loan book probably handle the regulatory risk sufficiently and if rates do drop in future, it will improve its NIM.

[Big Toe]

A few things to bear in mind

1. Quantum is relatively small for each customer and the cost to service each one is high. Few will go into a pawn shop to pawn/buy a 1kg gold bar.
2. They do hold a fair amount of pawned gold that are not redeemed, the recent run up in gold prices gives them tailwind.
3. I like this biz but market is saturated. Unless they are able to innovate further and offer some new services.

[weijian]

Hi BigToe,

Thanks for the comments. Now let's look at its cost/income ratio and benchmark it to a traditional bank (DBS) and financing firm (SingFinance).

- Since MoneyMax has retail ops and COGS of its retail products, some estimation has to be done at the segmental reporting area. The cost is been estimated by taking the "revenue - PBIT" value for its lending business = 89-46.5 = 42.5mil.

*Income for lending business = 55mil.
*Income for lending + retail gross profit = 65mil

- Cost/income ratio of MoneyMax = 42.5/55 = 77%
- Cost/income ratio of MoneyMax = 42.5/65 = 65% (if we believe the retailing business is part of the lending business model)
- DBS=42%
- SingFinance=47%

So it does seem that cost of servicing is much higher for pawn brokers, that is probably why their NIM is also 300% more than banks/financing firms I suppose.