Tuesday, 19 June 2012

Maxi-Cash Financial Services Corporation Ltd

Maxi-Cash Financial Services Corporation Ltd ("Maxi-Cash" or "Company") is issuing 56m new shares of which 2.25m are for the public and the 53.75m for placement at $0.30 each. Maxi-Cash is basically in the pawn broking business and as of May 12, it has pawnshops in 24 locations in Singapore. Maxi-Cash is wholly owned by Aspial, a listed company on SGX and retails under the brand of Aspial and Lee-Wah. 

The NTA per share post-IPO is S$0.203 and the market cap is S$88.8m. The IPO will close on 20 Jun 2012 at 12pm. The revenue for 2011 was $87.7m and the net profit was $3.1m.  The Company intends to distribute at least 60% of their net profits attributable to shareholders for 2012.

I never imagine pawn-business can actually be listed as it was once considered a 'sunset' industry. The image was 'glamorized' only in recent years by the use of actors and actresses in the advertising campaign and after the casino business is legalized. The financial statements indicate a low 3.6% operating margins and that is common for this industry. In additional the revenue drivers are the sale of pre-owned jewellery and watches. This source of revenue are mainly derived from customers who were unable to redeem the stuff that they have pawned after a period of time. While it provides liquidity to people who are usually unable to borrow from the banks, it also seem to take advantage of the plight of these people. I am not a fan of such business model and will give it a miss.

Based on the fully diluted EPS of 1.1 Singapore cents, the Company is listing at a historical PER of 27x. It could be interesting to find out if the business is directly correlated to the profitability of Genting Singapore!

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