Towards Financial Freedom
Maxi-Cash Financial Services - Unattractive Despite Positive Surprise
Maxi-Cash's 3Q14 NPAT grew 114% YoY to SGD0.72m due to an increase in pawnbroking loans. However, a decline in the retail of preowned jewellery segment caused 3Q14 revenue to dip 2% YoY to SGD27.92m. While we raise our FY14 NPAT estimate to SGD1.6m in view of this positive quarter, we believe Maxi-Cash's earnings still lag massively behind its peers'. Maintain SELL with a revised TP of SGD0.22 (from SGD0.21), implying a 15.4% downside.
A positive surprise. Maxi-Cash Financial Services' (Maxi-Cash) 3Q14 revenue dipped 2% YoY to SGD27.9m, due to a decline in the retail of pre-owned jewellery business. However, an increase in pawnbroking loans led to a 114% YoY surge in 3Q14 NPAT to SGD0.72m, vsSGD0.34m in 3Q13. Expenses such as employee benefits rose 22% YoY mainly due to an increase in the number of outlets. Going forward, we expect expenses to increase further given the company's large store network. In addition, its net gearing remained high at 204% and we believe it is likely to remain around this level going forward.
Regional expansion plans not yet in sight. Both Valuemax Group (VMAX SP, BUY, TP: SGD0.60) and MoneyMax Financial Services (MMFS SP, NEUTRAL, TP: SGD0.32) have already expanded into Malaysia, providing the next leap in growth. However, Maxi-Cash still does not have any concrete plans to expand its business outside of Singapore. We think the company may continue to fall behind its peers in terms of regional expansion, as untapped locations in Singapore might be limited with Maxi-Cash already having 38 stores as of 3Q14.
Maintain SELL with a revised TP of SGD0.22 (1.9x P/BV). Following the positive earnings surprise, we raise our FY14 NPAT estimate by 200% to SGD1.6m from SGD0.8m. However, even if Maxi-Cash manages to hit our FY14 NPAT estimate, it may still be underperforming and lagging behind its peers in terms of earnings and outlook. With its expenses projected to increase further and no regional expansion plansin sight, we prefer its peer Valuemax Group. Thus, we maintain our SELL call on Maxi-Cash, with a revised SGD0.22 TP (from SGD0.21), pegged to 1.9x peer average FY14F P/BV, representing a 15.4% downside from current levels.
Source: OSK-DMG
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