Aspial

[freedom]

if trading of 2nd hand stuff generates so high revenue, why would they continue to operate the pawn business, which does not contribute much and is regulated tightly?

my guess is that somehow they can get 2nd hand Jewellery and Watches directly/indirectly from its pawn business.

[shanrui_91]

if trading of 2nd hand stuff generates so high revenue, why would they continue to operate the pawn business, which does not contribute much and is regulated tightly?

my guess is that somehow they can get 2nd hand Jewellery and Watches directly/indirectly from its pawn business.

http://www.singpawn.org/faq.cfm
http://app2.ipto.gov.sg/IPTOServices/Paw...fault.aspx

"Pledge pawned for $50.00 or under, if not redeemed with the specified six month period, shall become the pawnbroker absolute property.

Pledge pawned for any sum exceeding $50.00, shall further continue to be redeemable until it is disposed off by way of auction sales. Even if the redemption period expires, a grace period will be granted.

Auction Sale of Unredeemed Articles

After the 6 months redemption period, all unredeemed pledges which exceeding $50.00 in pawn amount will be put up for public auction within the first or second week of the following month. This process would then enable the pawnbroker to dispose and transfer the legal ownership of those unredeemed articles."

The only option is that the pawner is unable to redeem his item and choose to sell it to the pawn shop. In any case, i choose to believe that most people go to a pawn shop to pawn and not to sell. They should know that jewellery shop will be able to pay them a higher fee given that the middleman is taken out.

The weird thing is that given that the listing is 2 weeks from now, why has not any official prospectus be released yet?

[CityFarmer]

The potential and volatility of the business is not yet known, thus a PE of 5.8 can either be very expensive or very cheap few years down the road.

If PE of 5.8 goes along with a PB of 0.4, and the equity are value-able, do you still think the investment is risky?

Do take note that under the Pawnbrokers Act in Singapore, a maximum of 1.5% interest rate per month is allowed to be charged, which brings about a huge risk if interest rate rises. If you look at their interest rate for their loans undertaken in 2010 and 2009, it is at an average of 2.5% and 2.8% which partly explain why they make a loss. In the long run, we should not expect our Sibor to remain at such a low rate.

1.5% per month equal to 18% annually. I did not explore further, but IMO the pawning interest should not be an issue.

Another risk lies in the default of loans and hence pawn shop often loans cash at around 60-70% of the valuation of the item. Under the Pawnbrokers Act again, any object that has not been redeemed within 6 months will be sent to a public auction. In the case that bid received is lower than the 60%+ 8.5% interest rate, the pawn shop will then have to write off part of the receivables. However, should the bid exceed the 60%+ 8.5%+ expenses incurred, the surplus will be returned to the person who has pawned off the item.

Pawnshop provides secured loan, with pawned item as collateral. You are right, pawn shop often loans at 60-70% of the valuation, but it is hardly risk involved. The un-redeemed items will be sent to public auction, and pawnshop owner is allow to participate, so the auction result is always desirable. IMO, the biggest risk is the over-valuation of the items by pawnshop

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if trading of 2nd hand stuff generates so high revenue, why would they continue to operate the pawn business, which does not contribute much and is regulated tightly?

my guess is that somehow they can get 2nd hand Jewellery and Watches directly/indirectly from its pawn business.

I understand the logic and i do believe you are right.

[shanrui_91]

"The IPO Shares represent 18.9% of the Group’s enlarged share capital of 296,000,000 Shares immediately post-IPO."

Therefore, the PE and P/B ratio are 30 and 2X respectively. This document is full of small details that needs to be examined closely just like how i miss the most important detail at the last page.

the interest rate for pawning business is very important because they are not using pure equity to finance the loan. Essentially, they have to borrow from banks to finance those loans that exceed their cash holding. Just like for banks, they have to borrow from depositors, other banks or central bank to finance their loan portfolio. This is also one of the reason why you see a substantial increase in debt of $100m undertaken by the company. Half of it went to property development and half of it went to financing business.

[shanrui_91]

https://sites.google.com/site/researchre...edirects=1

Found the prospectus at last. the segmental revenue is correct with Maxi-cash being more of a 2nd hand dealer than a pawn broker.

The reason is that "Revenue from our pawnbroking business is derived from interest income earned from providing collateral loan services." which means they only recognise the interest income as revenue and not the loan. I wonder what is their COGS then? Profit margin is 10% in 2011 for pawn broking. However, as they do not recognise loan as revenue, ROA is very low which is typical of financial institution

For Retail and Trading of Pre-Owned Jewellery and Watches, they buy 2nd hand jewellery and watches from walk-in customer. Alternatively, they will purhase from the public auction pieces that has not been redeemed. Its unexpected high revenue is likely due to the fact that it is a high-end 2nd hand shop that sells jewellery, gold bar and luxury watch. This segment has very low profit margin but higher ROA as a result of higher turnover given that they only hold $9m in inventories. The key risk will be should gold prices dive down, they may suffer some losses as a result of their business model. Given that they have relatively high turnover, this may not be that much of a concern.

As a result of expanding their pawning business, they have recorded negative cash from operation for the past 3 years.

[CityFarmer]

"The IPO Shares represent 18.9% of the Group’s enlarged share capital of 296,000,000 Shares immediately post-IPO."

Therefore, the PE and P/B ratio are 30 and 2X respectively. This document is full of small details that needs to be examined closely just like how i miss the most important detail at the last page.

Where is the reference of your statement?

My working is referring to the registered final offer document of the IPO

http://info.sgx.com/webcorannc.nsf/Annou...endocument

[shanrui_91]

Where is the reference of your statement?

My working is referring to the registered final offer document of the IPO

http://info.sgx.com/webcorannc.nsf/Annou...endocument

The document you stated refers to the financial statement of aspial group post IPO not maxi-cash.

I got my information from the prospectus on page 50 of the pdf where PER is 25X and NTA is at 47.8% premium.

"Our market capitalisation based on the Issue Price and our company’s post- Invitation share capital of 296,000,000 Shares"

I have no idea why given that prospectus has been released, there is no sign of it on Sgx website

[CityFarmer]

The document you stated refers to the financial statement of aspial group post IPO not maxi-cash.

I got my information from the prospectus on page 50 of the pdf where PER is 25X and NTA is at 47.8% premium.

"Our market capitalisation based on the Issue Price and our company’s post- Invitation share capital of 296,000,000 Shares"

I have no idea why given that prospectus has been released, there is no sign of it on Sgx website

Yes, i had make a serious mistake on my calculation. I should had been more careful. It can make a big different in profit/loss.

The numbers are there in the prospectus, PE 25, PB 1.5. Market capitalization is 89 $Mil @$0.30, with share outstanding of 296 Mils

Is it still worth to participate? ... thinking...

[CityFarmer]

To conclude my view on Maxi-Cash

- Retail & Trading of 2nd hand items have only margin of 2-3%, it is not the biz to look for.
- Pawnbroking income have only 10% margin now, probably due to under-utilized shop or human resources. Pawnbroking seem good biz model, but competition will be heated up with more pawnbroking license awarded. Larger margin of safety may required.
- Pawnbroking biz need long history to conclude its efficiency and effectiveness. Doubt warrant larger margin of safety

With PE 25 of Maxi-Cash IPO, it is hardly an interesting deal. I am closing my research on Maxi-Cash.

It is a rewarding exchange of views with all of the participants. Special thanks to shanrui_91 to highlighted my mistake.

Let's move on to next interesting deal...

[shanrui_91]

no need to thank me. I have been tricked by its non-core pawn business too. For the market cap, it is only when I read the newspaper that I realise it is $88m.

Pawnbroking is not that good a biz model, of the $108.5 loaned out they recognise the $8.50 as the revenue which causes a higher profit margin. If you were to base on ROE, their returns are much lower than that of our 3 local banks. Another factor is that their profit margin is capped by the Pawnbroking act which states a maximum interest rate of 1.5%

The prospectus has just been released today which means that retail investors will only have 7 days to digest the information, isn't it a bit too rush?