[First Take] MoneyMax Financial Services Ltd. (5WJ; MMFS SP)
Decision: Pass
Disclaimer: This is a record of my investment decisions, not financial advice. I may change my decisions without notice. Use this only for education and entertainment. Do not rely on this for your investment decisions.
About
Share price: SGD 0.59
Market capitalisation: SGD 517 mn (USD 403 mn)
Enterprise value (EV): SGD 1,214 mn (USD 945 mn)
Average daily volume (ADV): SGD 171k (USD 133k)
LTM P/E: 10x; LTM P/B: 2.5x
Time spent: ~2 hours
Decision
Pass
Background
Over the past 3 years, 5WJ’s share price increased +457% (+78% p.a.). This impressive increase seems to be driven by 3 factors: (a) increase in gold prices; (b) positive sentiment from Singapore’s Equity Market Development Programme (EQDP); (c) upcoming transfer to SGX’s Mainboard
Business model
Breakdown of 2024 profit after tax (before consolidation elimination):
54% from pawnbroking (SGD 22 mn, +74% YoY);
36% from retail and trading of gold and luxury items (SGD 15 mn, +129% YoY);
21% from secured lending (SGD 9 mn, 0% YoY);
25% from others (SGD 10 mn, +98% YoY)
87% of revenue is derived from Singapore. The remaining 13% is from Malaysia.
Reasons
Financial risk looks high. As of 30 June 2025, trade and other receivables (mainly loans to borrowers) is SGD 827 mn. Other financial liabilities (mostly bank loans) are SGD 631 mn. Just 24% of 5WJ’s loan book (SGD 196 mn) needs to default for its equity to turn negative. From my experience with Ramsdens, UK’s second largest pawnbroker, the % of a pawn loan book in default is usually ~20%.
5WJ is effectively a bank. It borrows from banks and lends to sub-prime borrowers. But 5WJ’s financial risk looks higher. 5WJ’s relies on bank loans for funding. Such wholesale funding is more ‘flightly’ and tends to disappear precisely when the borrower (in this case, 5WJ) comes under stress.
Difficulty in assessing the quality of loan book. 5WJ’s financial risk is mitigated by the fact that its loan book relates mainly to collateralised loans. However, management does not disclose its loan-to-value ratio (LTV ratio). There is also the risk that if gold price corrects, whatever LTV ratio that appears prudent now may not actually be sufficient.
In 2024, 5WJ’s allowance for impairment is only SGD 2.2 mn against a gross loan book of SGD 755 mn. This is 0.3%. The same % for Ramsdens is 7%. At first glance, it seems like 5WJ may not have sufficiently provisioned against loan impairments. However, there may be good reasons why this % should be lower at 5WJ. But because management does not disclose key metrics like % of loans book in default, aging of loan book, LTV ratios, it is hard for me to assess whether 5WJ has sufficiently provided for loan impairments.
Capital intensive. Between 2016 and 2024, net profit after tax increased 6x but dividends only increased 2x. This is because the profits have to be reinvested into the loan book. In fact, cash from operations has been negative since 2020. Whereas banks like DBS and UOB can rely on low-cost stable retail deposits to fund their growth, 5WJ has no such privilege. 5WJ has to reinvest all its profits and rely on bank loans to grow. This makes each dollar of earnings from DBS and UOB more valuable than 5WJ’s. I am not sure whether 5WJ (LTM P/B 2.5x) can sustainably trade at a valuation higher than DBS (2.4x), UOB (1.3x) and OCBC (1.6x).