Pawnbrokers

Pawnbrokers

Postby winston » Sat May 31, 2014 9:00 pm

Singapore pawnbrokers were the traditional banks for the poor, but no more.

Store fronts protected by staid-looking grilles used to be a mainstay in pawnshops, but these have now made way for outlets that are manned by uniformed staff and resemble commercial bank branches.

Pawnshops are gaining favour among the younger generation, unperturbed by the stigma such shops were once associated with. In fact, they have also become an important clientele for an industry with an image that is now softer, thanks to endorsements from local celebrities.

Next, with the growing presence of players with outlet chains, the number of pawnshops in Singapore has rose to over 214 currently from 138 in 2009. The number of pledges received at Singapore pawnshops increased by approximately 46.9% to 4m in 2012 from about 2.7m in 2007.

In addition, loans disbursed by Singapore pawnshops soared 343.8% to SGD7.1bn in 2012 from around SGD1.6bn in 2007. With instant cash approval and lower interest rates than credit card loans, this uptrend will likely continue.

The ideal scenarios for most pawnbrokers are:
i) a steady increase in gold prices, or
ii) steady movement in gold prices with minimal violent fluctuations.

In addition, the big decline in gold prices has already been reflected via impairments made to their inventories. The shares of the three listed pawnbrokers have taken a big hit of late. The share prices of ValueMax Group (ValueMax) (VMAX SP, BUY, TP SGD0.56), MoneyMax Financial Services (MoneyMax) (MMFS SP, NEUTRAL, TP SGD0.34) and Maxi-Cash Financial Services (Maxi-Cash) (MCFS SP, NEUTRAL, TP SGD0.27) have fallen by 22%, 15% and 20% respectively from Oct 2013.

Gold prices have since recovered and remained steady at USD1,100->USD1300. If gold prices continue to remain steady with minimal fluctuations, we may see a turnaround in these companies’ FY14 revenue and profits.

Our preferred pick would be ValueMax Group with a FY14F 1.9x P/BV if SGD0.56 mainly due to
i) undervalued compared to its peers in terms of valuation
ii) more areas for growth – Malaysia & High End Pawnbroking
iii) fixed dividend policy.

Source: DMG
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Pawnbrokers

Postby winston » Thu Jun 19, 2014 5:18 pm

The Ministry of Law has announced that it will form an advisory committee to review regulations for the licensed moneylending industry and make recommendations on measures such as:
i) capping interest rates for loans,
ii) restricting fees,
iii) capping the aggregate amount of loans taken by each borrower, and
iv) setting other policy parameters to strengthen the regulatory regime.

We believe the tightening of the moneylending industry should be positive for pawnbrokers as more people are expected to turn to pawnbrokers, given fewer loans available as well as the decrease in the number of money lenders.

In addition, the overall image and the perception of moneylending may also improve – which should benefit pawnbrokers indirectly.

In 2013, the total amount of loans dropped 22.5% y-o-y to SGD5.47bn from SGD7.07bn, mainly due to the sharp plunges in gold prices. However, total amount of loans
redeemed including interest, was still higher at SGD5.6bn, justifying the low default rates across the sector.

In addition, loans given out by pawnbrokers improved gradually to SGD441.1m in March 2014 from SGD431.5m in Jan 2014 coupled with increased pledges received to 362,300 in March 2014 from 342,000 in Jan 2014 substantiating our belief that FY14 will see a turnaround.

We think 2Q14 could be an inflection point for pawnbrokers, especially ValueMax. Maintain BUY with our SGD0.56 TP, pegged to a 1.9x FY14F P/BV.

Source: DMG
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Re: Pawnbrokers

Postby winston » Tue Jan 27, 2015 7:08 am

Asian banks turn away millions of customers every year – here are three undervalued pawnbrokers ready to greet them

by Lars Henriksson


I ran into an old acquaintance, a former investment banker, a few days ago. He was brimming with excitement over his new business venture.

“It will do well regardless of how the economy is doing,” he said.

I was intrigued and asked him for more details.

With a smile, he explained his plans to enter the pawnbroking industry.

Over the last few months, he’s been preparing for the grand opening. He applied for a pawnbroking licence and invested hundreds of thousands of dollars in a huge safe. Just one product will be accepted: gold. It’s easy to value, needs limited storage space and can be sold off easily.

The first outlet is due to open shortly, located in an old retail shop next to a high-street bank.

The proximity to the bank, he stressed, was crucial. Most bank branches have their own in-house security staff equipped with rifles which will hopefully deter potential criminals from the area. “Free security for me”, he said.

My friend’s pawnbroker will also attract customers who have had their loan applications turned down by the bank.

The more he told me about the scale of the opportunity for Asian pawnbrokers, the more excited I became.
Lack of competition means pawnbrokers make enormous profits

In Thailand, high-street banks only offer loans to borrowers with a minimum income of roughly $300 per month, backed up by solid financial documentation and a good credit history.

By those criteria, about 20m people in Thailand are excluded from normal banking. Similar situations exist across Asia. In addition, the continent is filled with millions of foreign workers who don’t have access to conventional banks.

There’s no shortage of other options but the problem is that most of them are very dangerous. Many borrowers end up falling afoul of ‘Ah Longs’ – loan sharks in Malaysia and Singapore, who charge exorbitant interest rates and have a stringent debt collection regime.

My friends tell me horror stories about how late payers are bombarded with texts and phone calls. They might find red paint splashed on their door or written warnings shoved through their letterbox. Next come the threats of physical violence.

Pawnbrokers, on the other hand, are strictly regulated, offer interest rates that are priced somewhere between conventional banks and loan sharks and involve no risk of harassment. It is also very difficult to obtain a pawnbroking license, resulting in less competition and fatter profits.

As with many promising Asian investments, it is hard to find easy ways to invest in this sector. However, I did some research and came across three exciting candidates.

Three pawnbroker stocks from across Asia

In Hong Kong, [b]Oi Wah Pawnshop Credit Holdings Ltd. (1319 HK) provides short-term financing, including pawn loans. It also provides mortgage loans under its moneylenders license.

In Singapore, Maxi-Cash Financial Services Corp Ltd. (MCFS:SP) deals in pre-owned jewellery and watches through pawnshops and retail outlets.

In Thailand, Srisawad Power 1979 Public Company Ltd. (Sawad) provides personal loans, home loans, loans for international labours, and other related financial products. It has also recently branched out into debt-collection and insurance broking.

All three of these stocks are set to grow enormously in the next few years. Here’s why.

Investors haven’t been paying attention to these three winners

Firstly, all three of these stocks are relatively new to the market, having only gone public over the last three years. As a result, many investors haven’t spotted them.

Secondly, the stocks have received minimal research coverage (perhaps with the exception of Sawad).This suggests investors have yet to understand their business models.

Thirdly, the stocks are hard to classify, as technically speaking, they are ‘financials’ but not banks, insurance firms etc.

Other investors will eventually wise up to the real value of these stocks but by the time they do, most of the growth will have already passed them by.

Obviously, risks do exist. The main challenge for pawnbrokers is their dependence on external funding. There’s also the possibility of regulatory changes as well as competition from high-street banks and other financial intermediaries.

Source: The New World
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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