G1

Ang Bin Xiu JonathanHarvard Chan Song Kai

Imane TaoutiOng Weijie Jeffrey

Teo Kok Hong NicholasYeo Ding Run

Pawnbroking

Consolidation of an industry

Pawnbrokinghas ties to Ancient Greece & China.

Short story

In the 5th Century, pawnshops were established, owned, and operated by Buddhist monasteries; only later did they become more widely seen in society.

During the Southern Song dynasty, wealthy laypeople would sometimes form partnerships with Buddhist monasteries and open pawnshops (in doing so they also managed to avoid certain property taxes from which monasteries were sometimes exempt).

Pawnbroking History

Earliest pawnbrokers in China

5th Century

Pawnbroking takes off in Greece

6th Century

King Edward pawned his jewels

14th Century

Pawnbroker’s Act passed in England

2011

2012

Consolidation of Industry

IPO of Singapore’s first pawnbroker,

Maxi-Cash, raising $59 million and

reaching a P/E of 65.6. MoneyMax & ValueMax followed suit a few years

later.

Main Pawnbrokers

Main Pawnbrokers

• Largest pawnbroker• Established in 1988

• Expanded to Malaysia

• IPO in 2013

ValueMax

• First shop in AMK Central

• 35 Outlets• By the SK Group

MoneyMax

• 4 City Outlets• Aspial Group• Most Outlets

Maxi-Cash

MoneyMax ValueMax Maxi-Cash

MARKET CAP AS AT

08/03/15$86,700,000 $197,400,000 $112,500,000

IPO PRICE$106,000,000 $272,100,000 $59,700,000

IPO DATE31 July 2013 30 Oct 2013 22 Jun 2012

LISTING BOARDCatalist SGX Mainboard Catalist

NET INCOME (2014)

$800,000 $9,000,000 $1,800,000

TOTAL ASSETS$181,000,000 $249,900,000 $247,200,000

FLOAT13.05% 24.03% 13.38%

P/E106.383 21.948 62.5

P/B1.5 1.309 1.756

9Drivers of the Pawnbroking industry

Cost of living

Casinos

Population Growth

Changing behaviorChanged consumer

perception

Rising prices

& slowing

economy

Leads to 20% increase in

pawnbrokingactivities

Targeted population of 6.9 million in 2030,

growing acceptance of pawnbroking

Weakened stigma of a pawnshop. Pawnshops extend

a credit line, and the new pawnshops deliver

convenience

Through modernization and re-branding. Less intimidating shop

appearance and with local celebrity endorsements.

CEO - Lim Yong Guan

Managed Soo Kee group of

companies

Dip. Of Business Admin

CEO - Yeah Hiang Nam

40 years of experience with

gold and jewellery

1988, first foray into

pawnshops – Ban Soon

Pawnshops.

Established ValueMax in 1999

CEO – Ng Leok Cheng

• New CEO of Maxi-Cash from 5th Jan

2015, replacing Koh Lee Hwee, VP of

Aspial Group

• Responsible for the overall

management and business operations

• Independent Director of Maxi-Cash

(April 2012 to January 2015)

Co-founder – Lim Yong Sheng

Managed Soo Kee group

BSc. Electrical Engineering

MD - Yeah Lee Ching

Graduate Gemologist

MBA from NUS

Secretary of Pawnbrokers

association

Chairman – Koh Wee Seng

CEO of Aspial Corp Ltd

BBA, NUS

Co-founder – Lim Liang Eng

Retailing of Soo Kee group

jewellery

NJC, Dunman High

MD - Yeah Chia Kai

Certified diamond grader

Foundation certificate in

Gemology

Non-Executive Director – Ko Lee Meng

Executive director of Aspial

Heads Aspial retail merchandising

department

Head of merchandising team

• Unwelcoming façade• Single Outlet• Non-CASE Certified

• Modern façade• Multiple Outlets• CASE Certified

Retail & Trading

Suppliers & Walk In

Unredeemed Pledged Articles

These items are not redeemed by certain

pawners

Jewellery Retailers, Wholesalers, Refiners

Walk-In Individuals

Walk-in individual, Dealers, Unredeemed collateralPawnshops take in these watches, gold bars and pre-owned jewelry

Jewelry1. Jewelry is reconditioned

and sold as pre-owned jewelry

2. If there is no demand, jewelry will be processed into scrap

Gems and gold scrapsSome of these gems and gold are processed and melted into bars

Resale of scrapsReselling these bars to refiners, goldsmiths and factories

How did the pawnshop benefit?Pawnshops earn money from the sale of pre-owned jewelry, gold bars and scraps.

Business Model: Retail & Trading

Customer• Pledges a collateral to

obtain a loan • Customer redeem

collateral within 6 months by repaying loan + interest

• After 6 months, unredeemed collateral will be auctioned off

If there is no demand at auctionThe collateral will be reconditioned and resold as pre-owned jewelry

How did the pawnshop benefit?Pawnshop earns interest and/or admin fee

Business Model: Pawnbroking

Pawn TicketPawnbroker gives pawner a pawn ticket. Charges maximum 1.5% interest per month, $0.5 for inspection of sale, and $0.5 for form of declaration for item of value below $50 and $1 for form above $50

Terms of RedemptionRedemption can be

done within 6 months from first day of

pawning. For item exceeding $50, longer

term can be specified. A customer may renew

the loan by paying the interest charged

Sale of AuctionIf redemption is not done, a pledge for sum exceeding $50 will be disposed by auctioneer licensed on behalf. Pawnbroker may bid and purchase at sale.

At any time after sale, up to 4 months, pawner can inspect sale book.

SurplusPawnbroker, on demand, pays surplus to holder of

pawn ticket within 4 months. If no demand is paid, surplus will be paid

to Accountant General within 14 days after

expiration period of 4 months.

Pawn Process

Auctioneering: an alternative

HistorySince 500BC in

Babylon

Items accepted- Fine Art- Real Estate- 2nd hand goods- Industrial machinery- Wine- Commodities

(Fishes)

Popular TypeEnglish auction Highest bidder wins

PurposeFor liquidation of assets

ComparisonVSPAWN aUCTION

Immediate Speed From weeks to months

Upon stipulated payment Ownership Loss

19.56 EAR (6 month loan) Fees charges

Comparison with Banks

Size

Up to 8x monthly income or 100%

of asset value

60-80% of collateral

Speed

24 hours

Within minutes

Interest Rate (EIR)

10.3% – 19.5%

12.7% – 19.6%

Stringent Assessment

Pledge and Proof Identity

Financial Institution

Bank Loans

Pawnbroker

Credit Assessment

Due Diligence

Pawnbrokers purchase insurance policiesto cover its operations. Even thoughpawnbrokers have insurance policies tocover loss and damage to pledgedcollateral and counterfeit pledgedcollaterals.

In the pawnbroking business, determining a collateral’s true value and its authenticity are of utmost important in the business. Determining an item requires decades of on-the-job experience due to

industry norms and the risks involved in value judgment.

Watch Counterfeits

MovementA watch expert can examine the watch and its internal mechanisms to determine its authenticity.

SoundLuxury watches have extremely smooth mechanisms and without the ticking sound

DocumentsCheck watches against their certificates, matching serial numbers and boxes.

MaterialThe material, finishing, and

color of counterfeit watches will sometimes be off.

WeightCounterfeit watches are

typically made with cheaper and lighter materials than

the original

Typefaces and engravingsEngravings on fine watches are

generally sharper and more distinct. Typefaces can differ in

size, shape and color too.

Gemstone Authenticity

SparkleReal stones have been worn through weather and other forms of nature, therefore synthetic gemstones have more sparkle than real ones.

CutA synthetic gemstone will have well defined cuts and rounded

edges, where as a read gemstone’s cut is more natural

and uneven.

WeightSynthetic gemstones tend to weigh more than real ones as chemicals are added to make it look realistic.

DiamondsDiamonds should not turn

foggy when you breathe onto it and it must be able to cut

glass.

Key Metrics

How every thing is affected.

GOLD Volatile

Commodity

Affected by Demand & Supply

Large amount of pawnbrokerscollaterals are in gold

Sharpest fall in 30 years

Mitigating Volatility

Peg loans at a lower percentage of resale value to maintain profit margins Increase input in retail and trading

businesses due to higher and more stable yields

Pegging Loans

Retail and Trading

PawnbrokerRevenue

increase/(decrease)in FY2013 as a percentage

Gross Profit Margin 2013

Gross Profit Margin 2012

(13.3%) 35% 29.4%

(30.6%) 6.4% 5.1%

12.5% 2% 4.19%

Results

High end luxury watches are pegged to Swiss Franc

Luxury Watches

54% market share in value of watch market

in pawnbrokingbusiness

Market Share

Value of watches held by pawnbrokers rose.Increased pawning activities of luxury watches to obtain higher liquidity at a low cost

Rising Swiss Franc

Swiss Franc

Ministry of Law has proposed a few laws that affects pawnbrokers

Legal Framework

Tighter Licensing Requirements

Enhanced Process Relatedto Pawn Tickets

Removal of ExistingAuction SystemAnti-Money Laundering

Measures

-Minimum paid capital for retail branches-Increased security deposits from $20,000 to $100,000-Results in lower liquidity & ROA

-Sale of pawn tickets to pawnbrokers- Increase acceptance of using items as collaterals

-Lower cost-Higher loan to valuations -> increase attractiveness in loan services ->higher transaction volumes -> increase revenue and earnings

-Higher staffing requirement-Results in an increase in overhead costs

Interest Rates

Step

Pawnbrokers charge at an

interest of 1.5% per month on their

loans

DescriptionThis translates to

an effective annual rate

(EAR) of 19.56%!

Recent increase in SIBOR will squeeze its profit margins

1.5% 19.56% Cost of Borrowing%%

Performance of Pawnbroking Industry

What happened? How it happened and why?

Loans: S$1.6bn to S$5.4bnPledges: 2.7m to 4.2m

Falling gold prices led todecreasing revenue

Consistent Earnings only for ValueMax

Industry Outlook

Premium Pawnbroking

Growth in pawnshop earnings

Premium Pawnshops

For HNWI

Pledges >S$50,000VIP Private rooms

Trends:• Customers taking up

larger loans• Growth of premium

pawnshops in US, UK & HK

Mass media marketing with local Celebrities

Improves image &acceptance of

pawnshops

Location

Green: Maxi-cash Blue: MoneyMax Red: Valuemax

Increased adoption of technology. A parallel to online banking.