One of Singapore’s top 3 pawnbroking chain player – ValueMax Group Ltd (SGX:T61) had recently went into the money lending business. This was briefly explored in our earlier article “ValueMax Group Ltd – From Pawnbroking to Fore-closuring?” and today we would be diving deeper into the details of their new business segment!
Who Is VM Credit Pte Ltd And What Do They Do?
Prior to the S$1mil acquisition by ValueMax, VM Credit was owned by the founder of ValueMax- Yeah Hiang Nam. Yeah Hiang Nam is the current Managing Director and Chief Executive Officer (“CEO”) of ValueMax. The CEO is the highest ranking executive in a company and is in charge of the overall asset allocation of the company. In simpler terms, you could say that he’s the captain of the ship.
VM Credit had a moneylender’s license and operated as a provider of both secured and unsecured loans. In general, one could only offer secured loans with a pawnbroking license. According to a report on The Edge Singapore dated Oct 6, 2014, VM Credit was established several years ago as a means for traders to finance their investments. An investing term for this would be trade financing.
On a side note, transactions between related parties are nothing new in businesses. As long as they don’t disadvantage shareholders, we have no issue with them!
What Was ValueMax’s Rationale For This New Business Segment?
1) Expanding range of customers through increased scope of acceptable collateral
2) Growing demand for provision of loan against less liquid assets (Properties)
3) Many asset-rich but cash-poor customers
What Are the Main Factors Of This New Business?
1) For properties as collateral, ValueMax accepts all private residence (No HDB), commercial and industrial properties as well as privately owned land in Singapore
2) A maximum loan to value (LTV) of 60% – Basically if the property is valued at S$1mil, the loan provided would only be S$0.6mil
3) If the customer cannot fulfil obligations, that property would be repossessed and sent for auction, after which the proceeds would be akin to what happens for the pawnbroking business – ValueMax keeps the principal and interest while the excess goes to the borrower
4) Interest rate of 1% with a minimum loan period of one month; This was 0.5% lower than for pawnbroking business
Advantages Of Moneylenders Over Banks
1) Faster procedure = lower waiting time
2) Less regulations
Disadvantages Of Moneylenders To Banks
1) Higher interest rates
2) LTV might be higher depending on the type of property for banks
Value In Action
Will ValueMax other two competitors – Maxi-Cash Financial Services Corp Ltd (SGX:5UF) and MoneyMax Financial Services Ltd (SGX:5WJ) follow in its footsteps?
Let’s just wait and see 🙂
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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.