Is MoneyMax Financial Services Ltd the Real Pawn Star?

MoneyMax Financial Services Ltd (SGX: 5WJ) is one of the three pawnbrokers listed on the SGX. As of 14 December 2009, MoneyMax is worth S$ 53.1 million in market capitalisation. Here, I’ll cover MoneyMax’s business model, recent developments, and latest financial results since its IPO in 2013. The following is a list of 10 things to know about MoneyMax before you invest. 

• Network Expansion:
  Since opening its first store in Yishun in 2008, MoneyMax has increased its outlets to 72 in 2018 and thus, making it one of the major players in both Singapore and Malaysia. Its growth is largely attributed to ongoing efforts to acquire existing pawnbroking outlets in both nations:
  
  
  

Year	Subsidiaries	Price (S$ Million)	Principal Activities
2014	51% Easimine Group Sdn Bhd 51% Easigram (Pandan) Sdn Bhd	1.66	9 Pawnbroking Outlets in Malaysia
2015	51% Easigram (Batu Pahat) Sdn Bhd 51% Kedai Pajak Heng Soon Sdn Bhd	1.19	2 Pawnbroking Outlets in Malaysia
2016	51% Pajak Gadai T&M Sdn Bhd 51% Pajak Gadai Money Mine Sdn Bhd	1.66	2 Pawnbroking Outlets in Malaysia
2017	51% Pajak Gadai Hen Teck Sdn Bhd 51% Pajak Gadai Poh San Sdn Bhd 51% Pajak Gadai Poh Guan Sdn Bhd 51% Pajak Gadai Poh Fook Sdn Bhd 51% Pajak Gadai Poh Mei Sdn Bhd 51% Pajak Gadai Malim Maju Sdn Bhd 51% Pajak Gadai Semabok Sdn Bhd 51% Pajak Gadai Rengit Sdn Bhd 51% Pajak Gadai Simpang Renggam Sdn Bhd 51% Pajak Gadai Pasir Gudang Sdn Bhd 51% Pajak Gadai Bukit Mertajam Sdn Bhd	3.59	11 Pawnbroking Outlets in Malaysia
2018	51% Pajak Gadai Bukit Gambir Sdn Bhd 51% Pajak Gadai Butterworth Sdn Bhd 51% Pajak Gadai Kulai Sdn Bhd 51% Pajak Gadai Masai Sdn Bhd 51% Pajak Gadai Pagoh Sdn Bhd 51% Pajak Gadai Senai Sdn Bhd 51% Pajak Gadai Sungai Petani Sdn Bhd Ban Joo Pawnshop Pte Ltd	4.92	7 Pawnbroking Outlets in Malaysia Pawnbroking Outlet in Singapore

• Business Segment 1: Pawnbroking
  MoneyMax derives interest income from pledged loan receivables that are granted to pawners for their possessions such as luxurious watches, precious metals, and gemstones. In brief, here is how it works:
  
  1. Pawners walk into MoneyMax’s branches to seek financing and thus, will present their possessions to be pawned.
  
  2. Upon value assessment of the pawners’ possessions, MoneyMax will offer loans to their pawners based on a percentage of the market value of these possessions. These loans have a tenure of six months and from it, MoneyMax charges an interest rate of 0.95%-2.00% per month.
  
  3. This means pawners will have a period of six months to redeem their possessions from the starting date of pawning. After six months, if they fail to redeem their pledged items, their possessions (above S$ 50) will be sold via licensed auctions.
  
  4. MoneyMax disburses its loans to pawners with funds obtained from money market loans and revolving loans where their tenure is from 1-6 months by the bank. MoneyMax incurs an interest cost ranging from as low as 4.5% to 7.8% per annum. 
  
  Since IPO, MoneyMax had increased its pledged loan receivables assets by a CAGR of 9.7%, up from S$ 128.4 million in 2013 to S$ 204.2 million in 2018, accounting for 75.5% of MoneyMax’s total assets in 2018. This has resulted in an increase in pawnbroking revenues from S$ 17.4 million in 2013 to S$ 37.8 million in 2018.
  
  
  
  

• Business Segment 2: Retail of Pre-Owned Luxurious Items
  MoneyMax sells luxurious items mainly jewellery and watches that are bought from walk-in customers, independent dealers, and traders. This division has achieved growth in revenue from S$ 48.1 million in 2013 to S$ 108.6 million in 2018.
  
  

• Profit Contribution
  Pawnbroking business remains as MoneyMax’s key income contributor despite recording lower sales for the last 5 years.
  
  

Year	Pawnbroking Business	Retail of Pre-Owned Luxurious Items
Revenue(S$ ‘000)	Net Profits (S$ ‘000)	Revenue(S$ ‘000)	Net Profits (S$ ‘000)
2014	19,611	2,489	53,246	-408
2015	24,745	2,652	69,237	1,116
2016	30,148	3,531	95,018	3,748
2017	34,478	5,244	121,923	1,865
2018	37,826	7,607	108,635	-1,220

• Group Financial Results
  MoneyMax had achieved a CAGR of 17.45% in group revenues, growing from S$ 65.6 million in 2013 to S$ 146.5 million in 2018. After a drop in earnings in 2014, MoneyMax’s earnings have grown from S$ 0.9 million in 2014 to S$ 5.0 million in 2018.
  
  

• Balance Sheet Strength
  In Q3 2019, MoneyMax has S$ 10.2 million in non-current liabilities & a total of S$ 76.6 million in shareholders’ equity. Thus, its gearing ratio is 13.3%.
  
  It has S$ 259.6 million in current assets and S$ 199.6 million in current liabilities. Thus, its current ratio is 1.30.
  
  
• Recent Developments:
  MoneyMax has acquired two freehold properties at 304 Orchard Road which have built-in area of 47.0 sqm & 74.0 sqm respectively for a total consideration of S$ 17.0 million. They would be completed by Q1 2020, on 26 February 2019. It is intended to be used for opening of new retail outlets in the future.
  
  
• Major Shareholders
  The Lim brothers namely, Dr. Lim Yong Guan, Lim Yong Sheng and Lim Liang Eng are substantial shareholders of MoneyMax with their direct interests of 12.54%, 10.82%, and 1.23% and their indirect stakes of 61.20% held in Money Farm Pte Ltd.
  
  Dr. Lim Yong Guan is the Executive Chairman & CEO of MoneyMax. His wife, Tan Yang Hong is the COO of the company. His brother, Lim Yong Sheng is a non-executive director of MoneyMax. In addition, they have other family members who are employees of the company such as:
  
  
  

• Latest 12-Month Results
  From Q4 2018 to Q3 2019, MoneyMax had generated S$ 177.8 million in group revenue and S$ 6.3 million in earnings / 1.78 cents in earnings per share (EPS).
  
  
  

Period	Group Revenue(S$ ‘000)	Shareholders’ Earnings (S$ ‘000)	Earnings per Share (EPS) (SG Cents)
Q4 2018	39,268	143	0.04
Q1 2019	39,806	1,038	0.29
Q2 2019	45,850	2,104	0.59
Q3 2019	52,856	3,035	0.86
Latest 12-Months	177,780	6,320	1.78

• P/E Ratio
  As of 14 December 2019, MoneyMax is trading at S$ 0.15 per share. As such, it has a current P/E Ratio of 8.43. It is not meaningful to compare it with its historical P/E as it did not deliver consistent growth in profits. But, with that being said, its current P/E Ratio is the lowest since IPO.
  
  
  

Year	2014	2015	2016	2017	2018	Current
P/E Ratio	107.7	15.9	8.5	9.8	10.6	8.4

• P/B Ratio
  In Q3 2019, MoneyMax has net assets of 21.64 cents a share. Hence, it has a current P/B Ratio of 0.69, the lowest since its IPO in 2013.
  
  
  

• Dividend Yields
  In 2018, MoneyMax has paid out 0.5 cents in dividends per share (DPS) and thus, maintaining its DPS paid in 2016 and 2017. Thus, its dividend yield is 3.33% per annum.
  
  
  

VIA’s Verdict 

Evidently, MoneyMax is trading at its lowest stock price since IPO. For the last 5 years, its earnings and net assets improved and thus, causing it to record below average in terms of P/E Ratio and P/B Ratio and it offers 3.33% per annum in its dividend yield which is its highest since IPO. 

So, would you invest in MoneyMax at S$ 0.15 a share today? 

Well, hold onto your horses. Stay tuned for my subsequent write-ups where I’ll cover on ValueMax and Maxi-Cash. 

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