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MoneyMax: Upping The Ante On The Pawnbroking Industry
Corporate Digest | 21 August 2013
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By: Shane Goh
Articles (99) Profile

Clear glass drawers, brightly lit rooms and treating each client as their friend are but small touches as MoneyMax Financial Services seeks to shed the traditional pawnbroking image and transit into a modern financial service offering.

Walk into a MoneyMax outlet and you would be forgiven for thinking that you entered a high-end jewellery shop. Professionally dressed with ties and white gloves, accessories usually associated with luxury brands, a friendly staff greets you even before your first step into the premise; assuming it is not swamped with customers requesting a closer look at the fancied items.

We recently spoke with MoneyMax’s chief executive officer, Peter Lim, and walked away with a vibe of a manager who is both passionate and well versed about his trade. Lim, the founder of Soo Kee Group – a firm which targets the mid- to high-end customer base – entered the jewellery industry in 1991 and has expanded the brand to include Love & Co that is catered to the newly-weds. Even as he pondered on the MoneyMax venture, Lim chose a field which was closely related to Soo Kee’s business instead of diversifying into a different industry, choosing to focus his efforts in an area where he possessed the expertise and experience in.

In fact, many of MoneyMax’s employees made the switch over from Soo Kee, bringing a wealth of experience in the jewellery industry and crucially, the trust factor between management and staff. Quoting Lim, “Building a company from scratch, especially its manpower, is difficult. Having the Soo Kee’s long serving members join in the new venture enabled MoneyMax to expand rapidly, from the opening of its first outlet in 2008 to its existing 29 stores.”

His dedication to uphold a high service standard has led the business to obtain the ISO 9001:2008 Certificate of Approval and CaseTrust accreditation in 2009 with a follow up of the Singapore Excellent Service Award in 2011. This pursuit of quality has in turn bolstered the firm’s ability to expand rapidly over the past seven years without compromising on the calibre of its employees.

Pawnbroking Provides Better Margins
A quick peek into their prospectus shows a growing business with revenue achieving a 34.7 percent compound annual growth rate over the past three financial years with a surge in their retail and trading segment leading the charge. However, a closer look at their bottom line tells a vastly different tale as profits before tax for the segment hovered between $1.1 million and $1.7 million per annum.

Conversely, its pawnbroking unit has experienced significant profit before tax growth from $0.3 million in FY10 to $5.7 million in FY12, suggesting that the firm enjoys better margins from this segment instead. Based on last year’s financials, MoneyMax’s retail and trading and pawnbroking segments posted profit margins of 2.2 percent and 32.6 percent respectively.

Financial Highlights Of MoneyMax

Source: MoneyMax Prospectus

However, a cautionary light must be cast onto their rising net debt over the past few years, from $28.6 million in FY10 to $80.5 million last year, as the low global interest rate environment has benefitted the firm’s aggressive growth story but an upcoming quantitative easing tapering could spell the end of cheap loans. “We will draw down our reliance on financial institutions for funding. Following our IPO (initial public offering) success, we are sitting on a potential war chest of $18.3 million which could be laid out for expansion and working capital purposes,” reassured Lim.

While the firm does not have a pre-conceived direction for its developments, Lim noted that the net proceeds will not be used to reduce its debts or distribute dividends, but to grow the business and repay the faith of their shareholders.

Going To Where Their Customers Are
Unfazed by the competition from chain stores such as ValueMax and Maxi-Cash as well as long running traditional family shops, MoneyMax believes their approach to customers provides an edge over the competitors. Understanding that their clients wish to solve an immediate cash flow problem encourages the firm to offer a high valuation for each pawned item brought forward. Apart from alleviating their worries, MoneyMax is able to earn a better interest rate, due to the higher valuation, while keeping their default rate at a minimal level, resulting in a win-win solution for both the company and their customers.

The verdict on the saturation level of pawnshops in Singapore remains out in the open, but one thing certain is MoneyMax’s push for high service standard has upped the ante on the local pawnbroking industry. Would MoneyMax be able to replicate a similar success story overseas?

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

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MoneyMax Financial Svcs  0.134 -0.003 -2.19%   
Business: Co is a leading pawnbroker in the region. [FY18 Turnover] Retail & trading of pre-owned jewellery & watches (74.2%), pawnbroking (25.8%).

Insight: May-19, 1Q19 revenue rose 6.6% mainly due to incre... Read More

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