(15-06-2012, 10:51 PM)shanrui_91 Wrote: [ -> ]Maybe we should transfer all the posts related to Maxi-Cash to its own thread instead of Aspial.
I welcome the exchange of idea with you, this is what the forum is essentially for in the first place.
Till the day when Maxi-Cash formally out from Aspial, it is still appropriate to discuss it here
Anyway, i will let admin to decide.
I would like to say, i enjoy the discussion so far. It forces me to review my previous thought.
My definition (did i say it is 2nd nature of engineer
), profitable means ROA/ROE > 10%
Let's continue. Instead of embedded your comment here, i would like to summaries the key points of your view.
- Pawnshop biz model profitability rely critically on the benefit of economic of scale, similarly as bank biz which you refer as example
- The present ROA/ROE of Maxi-Cash shows the in-ability to be profitable. The current ROA/ROE will be prohibited for investor to inject more fund, thus restricted Maxi-Cash to expand further to achieve the economic of scale
I had to admit that you are hitting on the softest part of my view on Maxi-Cash profitability.
I will address the ROA (ROE) point first. The current ROA of Maxi-Cash is 1.8% and ROE is 6.4%. The next logical question to ask, is the current ROA/ROE is restricted by its biz model with present asset/equity holding? or is the current ROA/ROE is restricted by its current state of under-utilized asset/equity holding? I will think it is likely due to the latter.
I do believe Maxi-Cash biz model should be able to achieve better ROA/ROE even with present asset/equity holding. The expense ratio is 90% of revenue for pawnbroking biz. It may due to Maxi-Cash is expanding fast, a heavy under-utilization of their pawnshops and human resources. Extra start-up expense occur which can be one-time.
There are still 27% of loan facilities yet to be utilized, and extra fund injected from IPO, before new fund raising needed.
So you may ask my view on optimum ROA/ROE. The bank expense ratio (base on net margin) is 60%. Maxi-Cash had edge in interest rate charged, 17% pa vs bank interest income ~2% pa, but Maxi-Cash loses out on bank non-interest revenue. After adjustment, i will estimate the expense ratio to 80%. Assuming all others remain, the net profit become ~5 mils, ROE is ~11% and ROA is 3-4%
Let move on to your 1st point of your view. I fully agreed the profitability of Maxi-Cash rely (critically) on the benefit of economic of scale. But with a footnote that it may not required the similar size as bank before it is profitable.
Having said all above, since there are estimations and assumptions instead of hard facts. IMO, with the PE of 25 and PB 1.5, probably not a wise move to participate.