What is the News?

We  recently  attended  MoneyMax’s  3Q  results  briefing. MoneyMax  reported  a  decline  of  36.5%  y-y  in  revenue  at S$16.2  million.  This  is  mainly  due  to  lower  revenue  from retail  &  trading  segment,  resulting  from  lower  gold  prices and deliberate decision to increase inventory of pre-owned jewellery  and  watches  in  its  retail  outlets.  Despite  lower revenue, gross profit was higher 7.7% y-y due to a shift from trading  to  retail  sales  of  pre-owned  jewellery.  Retail  sales provide higher margin  of 6-10%,  compared to 1-3%  margin from trading. Net loss of $0.9 million was reported for 3Q. This  was  mainly  attributed  to  the  one-time,  non-recurring IPO  expense  of  S$1.2  million,  higher  advertising  and promotion  spending,  and  increase  in  rental  costs  for  new outlets on Serangoon Road, opened in August 13.

How do we view this?

We believe the strategic shift from  trading to retail sales of pre-owned  jewellery  would  yield  better  results  in  the  long term.  This  was  due  to  higher  margins  offered  from  retail sales as compared to trading sales. MoneyMax continues to improve  its  branding  through  its  marketing  campaign launched in July 2013, in conjunction with IPO.

Investment Actions?

We adjusted our forecast to reflect 3Q13 results and revised our  TP  to  S$0.425,  based  on  DCF  valuation.  TP  was lowered as we have under-estimated advertising and promo expenses for FY13E  in our previous  report.  We continue to be positive on the pawnbroking and the  retail and trading of pre-owned  jewellery  businesses  and  maintain  our  “Buy” rating.

Source: PhillipCapital Research - 29 Nov 2013