Tuesday, June 19, 2012

Maxi-Cash Financial Services Corporation Ltd (大興當)

Maxi-Cash Financial Services Corporation Ltd (大興當)

Offer Price: $0.30
Offer Size: 56m new shares
Public Tranche – 2.25m shares
Placement Tranche – 53.75m shares
NAV per share (post-IPO): S$0.203
Historical PE: 25x (FY10)
Market Cap (post-IPO): S$88.8m
Open: 12 June 2012
Close: 20 June 2012, 12.00 noon
Trading: 22June 2012, 9.00 a.m. (on “ready” basis)

After a break of less than a month, we have another IPO listing
in such a testing period and it is in a so-called recession-proof
business: Pawnbroking and the retail and trading of pre-owned
jewellery and watches. Maxi-Cash opened their first opened their
first pawnshop in Ang Mo Kio Central in Feb 09. An additional 
nine pawnshops were added in 2009, followed by six pawnshops
in 2010. As of May 12, Maxi-Cash has pawnshops and retail outlets
in 24 strategic locations in Singapore. It is therefore noteworthy
that Maxi-Cash has the largest network of pawnshops and retail
outlets and its market share of the pawnbroking business in terms
of the number of licensed pawnbrokers is close to 13.0%. Its major
competitors in the industry are ValueMax (9 shops) and other smaller
individual pawnshops or retail outlets dealing in pre-owned jewellery
and watches.

I remembered that I started to see many pawnbrokers setting up
shop in neighbourhood shopping centres when I was "running" around
the island and the shops look modern and still have the unwelcomed
and cold look that unless you are desperate and tight on finanical
solution then you will choose to step into. I was wondering whether
they will have business as my mindset is still stuck at the old-type
traditional shop with very high counter and the jail-like vertical bars. 
Then came the various advertisements and commercial on TV, Bus
posters and definitely on the Internet using actors and actresses like
Michelle Chia, Huang Wen Yong, Mark Lee, Edmund Chen, and of course 
Aunty Lucky and her (his) slogan of "It is not embarrassing" or
"一点也不embarrassing" with another competitor. To say the truth,
I am quite surprise but not shocked to see Maxi-Cash go listed
in such a short time and maybe that is why it choose to listed in
the Catalist board.

Ok, back to the fundamental of Maxi-Cash.
The company had recorded only its first profits in FY 2011 after being
3 years in operation with a 3.1 million profit-after-tax.
Maxi-Cash will raise about S$15.1 million from the listing
of shares and they will use the net proceeds as followed:

(a) approximately S$6 Million will be to fund the expansion of our 
business operations
(b) approximately S$9.1 million will be for general corporate and
working capital requirements

Based on the offer price of 30cts, Maxi-Cash with an NAV of just
20.3cts  will have a 47.8% premium of Invitation Price per Share
over the Adjusted NAV per Share. This is a OK rich valuation
of the stock offer price BUT the Historical PE of 25x is considered
to be unreasonably high, which is something that I don't feel 
comfortable with. Maxi-Cash intends to distribute at least
60% of their net profits attributable to shareholders for 2012.
Post listing, the parent company Aspia will own 81.1% of Maxi-Cash
and the public will hold the remaining 18.9%

One of my concern is that the government may implement measures
to regular the usage of advertisements in public places and maybe 
even on TV or the newspaper, and it will have a huge  negative effect
on the company. 

My personal recommendation is to Subscribe for the public
offering with a decent STAG profit potential and to sell within the 
open trading day. I don't think at the listed price of 30cts and a PE 
of 25x, it can go far. With only 2 million shares for public offering, 
the chances of getting the stock is significantly low and if you don't
want the risk the $2 application fee, you can give the IPO a miss 
and wait for it to consolidate and you may be getting it at a lower price.

Source: Maxi-Cash IPO Prospectus, IPO Fact Sheet
by UOB and Amfraser

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