Pawnbrokers

Pawnbrokers: DMG initiated on the sector and prefers ValueMax (BUY, TP $0.56) on its valuation relative to peers, more growth areas and its fixed dividend policy. Pawnshops are gaining favour among the younger generation, unperturbed by the stigma such shops were once associated with. Next, the number of pledges received at Singapore pawnshops increased by approximately 46.9% to 4m in 2012 from about 2.7m in 2007. In addition, loans disbursed by Singapore pawnshops soared 343.8% to $7.1b in 2012 from around $1.6b in 2007. With instant cash approval and lower interest rates than credit card loans, this uptrend will likely continue. The ideal scenarios for most pawnbrokers are: i) a steady increase in gold prices, or ii) steady movement in gold prices with minimal violent fluctuations. In addition, the big decline in gold prices has already been reflected via impairments made to their inventories. Gold prices have since recovered and remained steady at US$1,100-US$1,300. If gold prices continue to remain steady with minimal fluctuations, house reckons there may be a turnaround in these companies’ FY14 revenue and profits. House has Neutral rating on MoneyMax (TP $0.34) and Maxi-Cash (TP $0.27).