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Friday, 26 July 2013

MoneyMax Financial Services Ltd



MoneyMax Financial Services Ltd ("MoneyMax or the "Company") is offering 53.8m New Shares at $0.30 each for a listing on Catalist. The offer comprises 51.8m Placement Shares and a paltry 2m Public Offer. The prospectus is here. The market cap post IPO is around $106m.

The IPO will close on 31 July 2013 at 12pm.

Principal Business

The Company is a leading market player in the pawnbroking business. In other words, it is a now a "glorified and esteemed" money lender for fast liquidity and lender of last resort (other than the illegal loan-sharks) as seen by the advertisements using Mark Lee (and Michelle Chia for its key competitor).  


Island-wide Coverage



The Company has 27 outlets in Singapore and seems like they are everywhere in Singapore. The questions you have to ask is whether they have reached their maximum potential? Can they bring their business model elsewhere?

Financial Highlights


You can see an interesting trend. The retail trading of pre-owned jewelry generated a lot of revenue but little profits whereas the pawnbroking business generating little revenue but contributed a lot to the profit. As i told you above, it is a glorified and legalized  "lender of last resort" (didn't want to use the name of a fish here). The profit margin of retailing is 2.2% whereas that of pawnbroking is 32.6%!


Based on the post-invitation share cap of 353.8m shares, the EPS assuming the service agreement is in place is around Singapore 1.485c, At the IPO price of 30c, it is listing at a historical PER an unbelievable 20x! I hope the forward earnings (which i am not privy to) better justify this high PE.

Use of Proceeds

The IPO proceeds will be used mainly to expand outlets and for working capital.

Dividends

The Company did not pay out any dividend since incorporation (which is good) but did not commit to pay out any dividend in future either. I would expect the cash dividend to be paid once the business reaches maturity.

Shareholders

The shareholding structure is pretty simple. The founders (more known as the business owners of Soo Kee and SK Jewellery) owns about 84.7% of the Company post listing with the public holding only the remaining 15.2%. I understand from sources that the founders even helped placed out half of the public shares (to families and friends?), which explains why the demand is very hot and is very difficult even to lay hands on the placement tranche.

Story on the pawn-broking industry here

This is what i heard from a person who works in this industry. I am not sure if this is true but you can tell me. There are two types of licenses issued. One is the type of license held by Maxi-Cash and Money-Max. They come under the 'new type' of licenses issued where they can operate more outlets with less paid-up capital but they have to fulfill certain conditions.  I understand the new type of license was given because Singapore wants to clean up this industry which in the past, was more 'shady' and less 'institutionalized'. You can see that Moneymax is actually "CaseTrust" accredited!

Key Competitor

The one and only key competitor is Maxi-Cash Financial Services Ltd which was listed on 22 June last year. My earlier preview last year is here.

Similarities between Money Max and Maxi-Cash
  • Both the owners own a Jewellery business (Maxi-Cash owners own the Goldheart, Lee Hwa and Aspial chains)
  • Both shares are listed at $0.30. (I believe Maxi-cash has a subsequent share split)
  • Both users local artistes to as their brand ambassadors.
  • Both are listed at historical PER of >20x
  • Both have outlets all over the place. (Maxi-Cash has around 29 outlets)
Maxi-Cash

Maxi-Cash's public tranche of 2.25m shares was 88.5x subscribed. The IPO price (adjusted to $0.208) went up by 30% on its first day. After one year, the share price has more than doubled and the market cap now stands at $200m. Maxi-Cash is currently trading at a multiple of 43x!  For FY2012, Maxi-Cash reported revenue of $100.5m and net profit of $4.2m. The adjusted EPS is around 0.975 cents. Hence from a valuation angle, MoneyMax offers better relative (not absolute) value vis-a-vis Maxi-Cash. However, Maxi-cash paid a dividend last year.


Will MoneyMax follow the footsteps of Maxi-Cash as well in terms of share price movement?

What i like about the Company
  • Simple business to understand.
  • Strong historical growth trajectory
  • The Company "discontinue" sales to Soo Kee and SK Jewellery from corporate governance perspective.
  • Offers relatively better "value" than its key competitor, Maxi-Cash
My concerns
  • Is the company reaching saturation point in Singapore?.
  • Is business scalable beyond Singapore since this is a licensed industry?
  • High valuation 
  • Small Float
Mr IPO's views and ratings

On one hand, my mind is telling me the company is over-valued on a stand-alone basis, on the other hand, my heart is telling me that this will somewhat follow the footsteps of Maxi-Cash. The fact that Maxi-Cash is grossly over-valued is "helping" the case to push for a higher Chilli ratings for MoneyMax. I understand the demand for the placement tranche of MoneyMax is very strong. Given the small public float and well organized placement exercise, I will give it a 3 Chilli ratings for this IPO. Please note that I am vested.

26 comments:

Benji said...

Thanks for the write up!! same feeling as you.. it is exp but hoping it will be like maxi cash.

Anonymous said...

Nice write up. Personally I won't even bother to give any chilli ratings for pawnbroking companies. We r in pawnbroking business for decades. IMO, this business has already reached it's saturation point

Anonymous said...

Thank you for the write up. Do you know what is the oversubscription for the placement? >20times? I have this feeling that the oversubscription for placement affects the debut price from the SPH and OUE reit debut. haha

Mr. IPO said...

Can u tell me if the licenses issued same or different ?

Mr. IPO said...

From what I heard, the placement is hot. Tough to get placement shares at all.

Anonymous said...

How to go about applying for placement? thanks

Anonymous said...

Sorry but how to sell shares in Catalist?

Mr. IPO said...

No different from selling main board shares

Anonymous said...

Hi Thanks for the info

Eunice Nah said...

Any idea how much was the dividend paid out by maxi cash ? Thanks?

Mr. IPO said...

You can find that from www.sgx.com
See the announcements from maxi-cash

Harry Coel said...

Awesome post! about marketing companies singapore that play an important role in the marketing such as branding,advertising etc. at affordable price.

Anonymous said...

Hi mr ipo

I thought you do not like such business, referring to your maxicash post, so why now become vested

Anonymous said...

$5 +$6.8 and two bonus issues (1for every5)

Mr. IPO said...

Well done. Finally someone who read this. I don't like this biz still but maxi cash share performance proved me otherwise. Plus the hot placement issue is in swaying factor. It's a short term play for me as I was offered placement shares.

Anonymous said...

hi mr. ipo, possible to share how much placement share you 'showed interest' for and how much they allotted you with? Yep I think I'll be a short term play for me too, hope US market don't crash on Thurs.

Mr. IPO said...

It was pretty funny. One broker asked me if I want. I asked for 100 get zero. Then another called me to ask me if I want xx lots lor. Prefer not to disclose. Thks. :-P

Anonymous said...

Hi Mr IPO,
Your disclosure and openness of shares allotted to you be it through placement or balloting will certainly attract a lot of viewers to your website.

Of course you have the final say.
I am just sharing with you what I personally feel and what I gathered from many of my kakis.

Anonymous said...

Hi Mr IPO, U wrote in http://www.singapore-ipos.blogspot.sg/2012/06/maxi-cash-financial-services.html "The NTA per share post-IPO is S$0.203", but I understand fr MoneyMax prospectus, (IIRC), the book value/share (BVPS) post IPO is 13.3cents per share.
I understand BVPS= NTA/share; thus, how is it fair to say that at the same 30cents IPO price, both are somewhat equally good propositions?

Mr. IPO said...

Errr. I am always very open with my positions. Probably you have not been following me for a while. I like to disclose when I do a post on balloting results. So don't jump to conclusion that I am not disclosing. You mean xx lots still not sufficient for a question from an anonymous reader?

Mr. IPO said...

You will have to decide for yourself whether that is a good proposition. ^_^

Mr DutyFree said...

I am with Mr IPO, he has always been open and good with all his reviews. Best and fairest guru you can find.

Anonymous said...

yes, I agree with Mr DutyFree

Anonymous said...

I agreed with mr duty free too. Thank you for all ur sharings mr ipo

Anonymous said...

Hi mr Ipo would you be doing one on Valuemax ??

SEO Services said...

wah. The company is IPO? Good for investment.

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