How Does Maxi-Cash Financial Services Ltd Compare To Its Peers?

Maxi-Cash Financial Services Corp Ltd (SGX:5UF) is one of Singapore’s main publicly listed pawnbrokers. As of 16 December 2019, Maxi-Cash’s market capitalisation stands at S$ 144.9 million. In this article, I’ll highlight on its financial results and valuation ratios and would end this write-up with a comparison between it and the other two pawnbroking firms namely, MoneyMax and Valuemax. 

Therefore, here are 10 things to know about Maxi-Cash before you invest: 

• Segment 1: Pawnbroking
  This division has been both the main income and growth contributor to Maxi-Cash. It offers pawners financing where the loans offered is based on a percentage of their pledged items where Maxi-Cash would earn as much as 1.0%-1.5% in interest rates for its first and 1.5% in interest rate for the next 6 months of its loan tenure.
  
  Revenues have increased from S$ 25.9 million in 2014 to S$ 41.1 million in 2018. This has contributed to growth in its profits before tax (PBT) from S$ 1.7 million in 2014 to S$ 9.6 million in 2018. Its rise in both sales and profits was attributed to its expansion of retail networks from 39 retail outlets in 2014 to 44 retail outlets in 2018.
  
  
  

• Segment 2: Retail & Trading of Jewelry and Watches (Retail)
  The retail division has achieved rising sales from S$ 83.7 million in 2014 to S$ 153.6 million in 2018. However, with low profit margins, it is not a key contributor of income to Maxi-Cash for the last 5 years.
  
  
  

• Segment 3: Moneylending
  Maxi-Cash launched its secured lending business in 2017 and has made as much as S$ 8.9 million in revenues in 2018. However, it had incurred a loss before tax (LBT) of S$ 1.1 million in that financial year.
  
  
• Group Financial Results
  Overall, Maxi-Cash had nearly doubled its group revenue from S$ 109.6 million in 2014 to S$ 203.7 million in 2018. It is due to sales increments from both pawnbroking and retail activities during the period. Earnings have risen quickly from S$ 1.8 million in 2014 to S$ 13.3 million in 2017 before dropping to S$ 10.4 million in 2018. The decline is due to a drop in profits from its retail and trading business and a LBT of S$ 1.1 million incurred by its money lending business in 2018.
  
  Overall, it averages 7.63% in Return on Equity (ROE) for the last 5 years. This means, it made S$ 7.63 in annual earnings from each S$ 100 it has in shareholders’ equity from 2014 to 2018.
  
  
  

• Balance Sheet Strength
  In Q3 2019, Maxi-Cash has S$ 78.2 million in non-current liabilities and S$ 139.7 million in shareholders’ equity. Thus, its gearing ratio is 56.0%. The non-current liabilities figure used excludes lease liabilities, which is an accounting change due to the adoption of SFRS(I) 16 Leases.
  
  In addition, Maxi-Cash has current assets of S$ 426.8 million and a total of S$ 292.6 million in current liabilities. Thus, its current ratio is 1.46.
  
  
• Major Shareholders
  Koh Wee Seng, Koh Lee Hwee and Ko Lee Meng are major shareholders of Maxi-Cash through direct shareholdings of 9.29%, 1.38%, and 0.27% and indirect shareholdings of 70.3% held within MLHS Holdings Pte Ltd and Aspial Corporation Ltd. Koh Wee Seng is appointed as its Chairman while Koh Lee Hwee and Ko Lee Meng are its non-executive directors.
  
  
• Latest 12-Months Financial Results
  Over the past 12 months, Maxi-Cash had generated S$ 199.0 million in revenues. Out of which, it had made S$ 13.6 million in earnings or 1.28 cents in earnings per share (EPS).
  
  

Period	Group Revenue(S$ ‘000)	Shareholders’ Earnings (S$ ‘000)	Earnings per Share (EPS) (SG Cents)
Q4 2018	41,895	2,338	0.20
Q1 2019	46,608	2,802	0.27
Q2 2019	45,361	2,798	0.27
Q3 2019	65,096	5,639	0.54
Latest 12-Months	198,960	13,577	1.28

• P/E Ratio
  As of 16 December 2019, Maxi-Cash is trading at S$ 0.14 a share. Thus, it has a current P/E Ratio of 10.94, the lowest in 5 years.
  
  
  

• P/B Ratio
  In Q3 2019, Maxi-Cash has net assets of 13.49 cents a share. Hence, its current P/B Ratio is 1.04, close to its 5-year lowest of 0.96 presently.
  
  
  

• Dividend Yields
  In 2018, Maxi-Cash has paid out 0.95 cents in dividends per share (DPS) and hence, offering 6.79% in dividend yields if it is able to maintain DPS at 0.95 cents per annum in subsequent years to come.
  
  
  

VIA’s Verdict 

The question is:

‘Which of the three pawnbrokers offer investors the best value for money? Is it Maxi-Cash, MoneyMax, or Valuemax?’ 

Here, I’ll answer the question above by comparing the 3 corporations with their financial results and valuation figures. 

1. Financial Results: 

Based on their quarterly results, I discovered that Valuemax had delivered to its shareholders ‘resilience’ and ‘consistency’ in terms of profitability despite it the only one of the three pawnbrokers that has recorded continuous fall in sales for the past 5 years. But, in the case for pawnbrokers, their group revenues are not important for the bulk of them are generated from retail & trading of jewelry & watches where their profit contribution is inconsequential due to low margins. 

2. Valuation Ratios: 

In terms of valuation, the three pawnbrokers are currently trading at the lowest stock prices, thus, offering the lowest P/E Ratio and P/B Ratio presently. Here, if we put the three side-by-side, we would find that Valuemax’s stock price is now the lowest in terms of P/E Ratio, MoneyMax is the lowest in terms of P/B Ratio, and Maxi-Cash is offering the highest dividend yields. 

Stock	Maxi-Cash	MoneyMax	Valuemax
Latest Stock Price(mid-December 2019)	S$ 0.14	S$ 0.15	S$ 0.32
P/E Ratio	10.94	8.43	7.49
P/B Ratio	1.04	0.69	0.85
Dividend Yields	6.79%	3.33%	4.16%

‘Oh No … So, what do we do now?’ 

In this case, it depends on one’s personal preference. For instance, if I intend to invest in one that is most resilient,Valuemax would be a good choice. But then, if I wish to have boost my dividend income, I may have some Maxi-Cash for it is offering the highest in terms of dividend yields. 

As such, if I am into pawnbroking stocks, I can mix-and-match and invest in all 3 of them depending on my own personal needs. 

So, would you invest in Maxi-Cash at S$ 0.14? Or, would you invest in others? 

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