Towards Financial Freedom

Maxi-Cash Financial Services - Unattractive Despite Positive Surprise

kiasutrader
Publish date: Thu, 06 Nov 2014, 11:43 AM
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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