20 February 2014

Maxi-Cash FY2013 Result - Tumbled Net Profit Despite a Decent Revenue Growth

Income Statement

Maxi-Cash FY2013 EPS slumped 51% to 0.47 cents as compared to 0.97 cents a year go, mainly attributable to increasing material cost and labor cost which were faster than revenue growth, offset by rental income and other income. Depreciation cost increased by 22% due to more PPE acquired in FY2013.

Balance Sheet

Net Current remains flat at S$58M. Large part of current assets are receivables, mainly due to the increase in pledge of book for the group's pawnbroking business. The NAV was at 13.53 cents compared to 17.91 cents corresponding period previous year, as there was a total 140M number of shares placement valued at S$5.8M.

Cash Flow
Net cash used in the operating activities for FY2013 was $24.4 million compared to $43.3 million for the corresponding period in the previous year. The decrease was mainly due to the lower increase in trade receivables for the pawnbroking business and inventories (as compared to that of FY2012) and partially offset by higher increase in trade and other payables and larger increase in income tax paid.

Net cash used in investing activities of $1.4 million in FY2013 compared to $2.4 million in FY2012. The lower net cash used in investing activities in FY2013 was mainly due to no prepaid rent paid and marginal increase in renovation expenses for pawnshops and retail outlets in new locations.

Net cash generated from financing activities was $29.9 million in FY2013 compared to $64.4 million in FY2012. The lower net cash generated from financing activities in FY2013 was mainly due to net repayments of short-term bank borrowings in FY2013 as compared to net proceeds from short-term bank borrowings in FY2012, lower advances from immediate holding company (non-trade) and dividend paid, partially offset by proceeds raised by the Company from the issuance of 56,000,000 new shares in the capital of the Company pursuant to its initial public offering on Catalist in FY2012.

As a result of the above, there was a net increase of $4.1 million in the cash and cash equivalents, resulting in a cash and cash equivalents of $11.6 million as at 31 December 2013.

Management Comments
Despite the challenging business environment as a result of the lower gold price, the Group’s leadership position and track record in the pawnbroking industry has enabled it to continually grow its pledge book and increase its retail sales. The Group will continue to capitalize on its current largest network and highest pledge book value in Singapore as well as its strong “Maxi-Cash” brand name as the leader and innovator in the
pawnbroking industry to capture more market share.

In FY2013, the Group as an innovator in the pawnbroking industry in Singapore, introduced island-wide renewal of pawn tickets for all its pawnshops, the first of its kind in Singapore. The island-wide renewal program which provides the convenience for the pawners to renew their pawn tickets at all its 35 pawnshops has received positive response from the pawners.

At present, the Group is the largest pawnshop chain in Singapore with a total of 35 outlets, four of which were opened in FY2013 and three in 1Q2014. The Group expects to open more new shops in the next six months.

The Group will continue to differentiate itself, not just by having the largest store network and highest pledge book value in Singapore but with innovation and high customer service standard.

Barring unforeseen circumstances, the Group expects to see continued growth in its pledge book value and revenue of its retail and trading of preowned jewellery and watches business in FY2014.

My Own View
The company may reverse the trend of low profit margin once the gold price has stabilized in this year. As more shops are opened, we may see an increase in investment cash outflow as well as increase in working capital. However, with current high PE ratio, I would rather observe whether the company could improve the operating profit before any further action.


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