• 2Q14 revenue up 7% yoy, down 21% yoy at S$15.2m on better retail sales.
• Net profits reported higher yoy at S$0.3m (2Q13: S$0.2m), offset by higher expenses due to additional new outlets and higher headcount.
• Expect slowdown in outlet expansion in Singapore, allowing the group to reap the gains as newer outlets build up sales and pledges.
• Concerns over considerable slowdown in nationwide pawnshop pledges received, which may pose limitation in pawnbroking revenue growth.
• Suspend coverage over limited price catalysts in near term.

MoneyMax announced its 2Q14 results on 11-Aug 2014. Revenue was higher YoY due to better retail sales. Gross profit was at S$6.1m with improved gross margin at about 39.9% (2Q13: 33.7%), due to better yields from retail sales over trading and stable gold prices. MoneyMax continue to open several new outlets, bringing its total outlets to 37 in Singapore currently.

How do we view this

1H14 net profits accounted for 35% of our previous FY14F earnings forecast and below expectations. Going forward, we think MoneyMax would probably be slowing down expansion of new outlets in Singapore. While MoneyMax would be able to reap the gains from its expanded outlet network in Singapore, we expressed concerns that growth in the number of pawnshops pledges received in Singapore appeared to have slowed down considerably. For the 1 st five months in

2014, both pledges received and pledges redeemed account for less than 42% of the full year amount in 2013 respectively. This may pose limitation in pawnbroking revenue growth, despite the increase in pawnshop outlets. Modest recovery in gold prices may offer some respite for the pawnshop business but uncertainty remains in gold prices outlook.

Venture into Malaysia would offer significant growth opportunities for the group. However, we expect positive contributions would be more visible from FY16F onwards.

Investment Action

As we see limited price catalysts in the near term and concerns over pawnbroking revenue growth limitation, we are suspending coverage on MoneyMax. Our last recommendation was Neutral.

Source: Phillip Securities Research - 13 Aug 2014