Maxi-Cash Financial Services Corporation

[CityFarmer]

My Comments:

New business at what price? These modern pawn shops need to content with rising rentals and they increased market share by under-cutting (normalised profits). In addition, it will be interesting to note if changes in precious commodity prices such as gold will have an adverse impact on their profit margin should they have taken the wrong view on their price trend.

Fundamentally, to pay such a high PE for a to maturing finance business, I think one should be looking at proven but overlooked finance houses.

Not Vested

The business model of pawn shop has been proven profitable. It is similar as credit card service business but lesser risk with its collateral

The risk of changes in gold price is real, but it is moderated effectively by prudent loan-to-value ratio.

Having said so, Maxi-Cash PE of 39 versus average banking and finance sector's PE of 11-12 is over-priced IMO. I assume bonus issue and high dividend payout ratio play an important role to push-up the valuation.

The rational of bonus issue after less than a year of IPO, and high dividend payout ratio for growing strategy of a capital intensive business are few un-answered questions of mine.

(not vested)