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MoneyMax IPO: A “Maxi-Cash”- Like Strong Debut In The Making?
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By: Mr.IPO
Articles (33) Profile

MoneyMax Financial Services is offering 53.8 million new shares at $0.30 each for a listing on Catalist. The offer comprises 51.8 million placement shares and a paltry 2 million public offer. The market capitalisation post IPO is around $106 million.

The IPO will close on 31 July 2013 at 12pm.

Principal Business
The company is a leading market player in the pawnbroking business. In other words, it is a now a “glorified and esteemed” money lender for fast liquidity and lender of last resort (other than the illegal loan-sharks) as seen by the advertisements using Mark Lee (and Michelle Chia for its key competitor).

The company has 27 outlets in Singapore and seems like they are everywhere in Singapore. The questions you have to ask is whether they have reached their maximum potential? Can they bring their business model elsewhere?

Financial Highlights

You can see an interesting trend. The retail trading of pre-owned jewelry generated a lot of revenue but little profits whereas the pawnbroking business generating little revenue but contributed a lot to the profit. As I mentioned above, it is a glorified and legalised “lender of last resort” . The profit margin of retailing is 2.2 percent whereas that of pawnbroking is 32.6 percent!

Based on the post-invitation share cap of 353.8 million shares, the EPS (earnings per share) assuming the service agreement is in place is around Singapore 1.485 cents, At the IPO price of $0.30, it is listing at a historical PER (price earnings ratio) an unbelievable 20x! I hope the forward earnings (which I am not privy to) better justify this high PE.

Use Of Proceeds
The IPO proceeds will be used mainly to expand outlets and for working capital.

The Company did not pay out any dividend since incorporation (which is good) but did not commit to pay out any dividend in future either. I would expect the cash dividend to be paid once the business reaches maturity.

The shareholding structure is pretty simple. The founders (more known as the business owners of Soo Kee and SK Jewellery) owns about 84.7 percent of the company post listing with the public holding only the remaining 15.2 percent. I understand from sources that the founders even helped placed out half of the public shares (to families and friends?), which explains why the demand is very hot and is very difficult even to lay hands on the placement tranche.

Story On The Local Pawn-broking Industry
This is what I heard from a person who works in this industry. I am not sure if this is true but you can tell me. There are two types of licenses issued. One is the type of license held by Maxi-Cash and Money-Max. They come under the ‘new type’ of licenses issued where they can operate more outlets with less paid-up capital but they have to fulfill certain conditions. I understand the new type of license was given because Singapore wants to clean up this industry which in the past, was more ‘shady’ and less ‘institutionalised’. You can see that MoneyMax is actually “CaseTrust” accredited!

Key Competitor
The one and only key competitor is Maxi-Cash Financial Services which was listed on 22 June last year.

Similarities Between MoneyMax and Maxi-Cash

  • Both the owners own a jewellery business (Maxi-Cash owners own the Goldheart, Lee Hwa and Aspial chains).
  • Both shares are listed at $0.30 (I believe Maxi-Cash has a subsequent share split).
  • Both users local artistes to as their brand ambassadors.
  • Both are listed at historical PER of >20x.
  • Both have outlets all over (Maxi-Cash has around 29 outlets).

Maxi-Cash’s public tranche of 2.25 million shares was 88.5x subscribed. The IPO price (adjusted to $0.208) went up by 30 percent on its first day. After one year, the share price has more than doubled and the market capitalisation now stands at $200 million. Maxi-Cash is currently trading at a multiple of 43x! For FY12, Maxi-Cash reported revenue of $100.5 million and net profit of $4.2 million. The adjusted EPS is around 0.975 cents. Hence from a valuation angle, MoneyMax offers better relative (not absolute) value vis-a-vis Maxi-Cash. However, Maxi-Cash paid a dividend last year.

Will MoneyMax follow the footsteps of Maxi-Cash as well in terms of share price movement?

What I Like About The Company

  • Simple business to understand.
  • Strong historical growth trajectory.
  • The company “discontinue” sales to Soo Kee and SK Jewellery from corporate governance perspective.
  • Offers relatively better “value” than its key competitor, Maxi-Cash

My Concerns

  • Is the company reaching saturation point in Singapore?
  • Is business scalable beyond Singapore since this is a licensed industry?
  • High valuation.
  • Small float.

Mr IPO’s Views And Ratings
On one hand, my mind is telling me the company is over-valued on a stand-alone basis, on the other hand, my heart is telling me that this will somewhat follow the footsteps of Maxi-Cash. The fact that Maxi-Cash is grossly over-valued is “helping” the case to push for a higher Chilli ratings for MoneyMax. I understand the demand for the placement tranche of MoneyMax is very strong. Given the small public float and well organised placement exercise, I will give it a 3 Chilli ratings for this IPO. Please note that I am vested.

Mr. IPO has been covering companies listing in Singapore since July 2007. His IPO blog can be found here. All views and opinions found on his blogs are personal and can be very biased.

Please click here for more information about this author.

Maxi-Cash Financial Services Corp  0.125 -- --   
Business: Pawnbroker. [FY18 Turnover] Retail & trading of jewellery & branded merchandise (75.4%), pawnbroking (20.2%), money lending (4.4%).

Insight: May-19, 1Q19 revenue slid 13.5% due to lower sales... Read More

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