by winston » Thu Nov 13, 2014 2:59 pm
not vested
Valuemax kept at ‘buy’ with 44 cents price target by OSK-DMG
SINGAPORE (Nov 13): OSK-DMG is maintaining its “buy” call for ValueMax Group ( Financial Dashboard) with a target price of 57 cents.
In a Nov 13 report by OSK-DMG, analyst Jarick Seet said it is keeping its buy call on the pawnbroker cum money-lender, despite a weak quarter as he expects property loans to pick up.
Despite revenue rising 7.5% y-o-y to $87.6 million from $81.4 million, ValueMax’s 3Q14 NPAT plunged by 45.4% to $1.8 million from a year ago due to fewer pawnbroking loans given out as a result of falling gold prices and a rise in manpower and rental expenses from its new outlets.
Due to fewer pawnbroking loans which yield higher margins, gross margin also declined to 7% in 3Q14 from 8.5% in 3Q13.
However, Seet believes property loans could be a potential catalyst for earnings. Still, he expects the property loans segment to contribute significantly only from FY15 onwards, despite acquiring the money-lending licence earlier.
OSK-DMG expects Valuemax to add conservative estimates of about $25 million and $30 million of loans from this new business segment in FY15 and FY16 respectively.
Going forward, it also expects potential strong EPS growth of 20.6% and 12.5% in FY15 and FY16 respectively, coupled with the opening of new pawnbroking outlets in Malaysia and Singapore.
Nonetheless, despite a disappointing 3Q14, Seet expects a better 4Q, which is traditionally the strongest quarter of the year.
With two more outlets in Malaysia commencing business by the end of FY14, Valuemax will operate a total of 30 outlets by then.
OSK-DMG expects costs to increase further, which might be a drag on its bottomline in the near future. As a result, it has lowered its FY14 and FY15 NPAT estimates by 10.5% and 21%, to $11 million and $13.2 million respectively. In addition, its has lowered its target price to 57 cents from 60 cents, pegged to 1.9x FY15F P/BV.
“Despite a weak quarter, we still like Valuemax as it is still performing significantly better than its local listed peers,” said Seet. “It remains our Top Pick for the pawnbroking sector in Singapore.”
Valuemax is down 3.4% to 42 cents as at 2:40 p.m. local time.
Source: The Edge
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