Puzzling Business Modal of Listed Pawnbrokers

by: Tam Ging Wien

All examples and stocks quoted here in this article and on the ProButterflyTM site are for learning purposes; it does NOT constitute a Buy/Sell recommendation. Contents are reflective of personal views and readers are responsible for their own investments and are advised to perform their own independent due diligence. If in any doubt about the investment action you should take, you should consult a professional certified financial advisor.


Out of complete curiosity, we decided to do a comparative analysis of pawn brokers listed on SGX.

They roused our curiosity one day when we were out in Chinatown for lunch and we noticed quite a number of pawn shops around the area. Pawn shops are essentially micro-financial institutions that will take smaller assets such as watches, jewelry and gold as collateral in return for a micro-loan.

Certainly if it’s a micro-loan, the loan interest rates can’t be cheap right? Well actually, it really isn’t. Pawnbrokers are regulated and can charge up to a maximum of 1.5% interest a month or 18.0% per year compounded monthly. That’s actually slightly cheaper than the 24.0% on credit cards but really expensive compared to other forms of loans such as personal loans and overdrafts.

On top of that, we don’t expect most pawnbrokers to provide high financing and would assume that they would have a much lower loan-to-value ratio to the asset. So if you don’t pay them back, they would just sell off you asset and pocket a hefty profit from it. The contract periods are also for a maximum of six months, so it wouldn’t take long to find out if your customer is not able to redeem their items.

Unredeemed assets will be auctioned off in a public auction. Should the items fail to sell, it will be returned back to the pawnbrokers to be reconditioned and resold to the open market as pre-owned assets.

We figured they must be profitable, so we decided to look into the 3 listed pawn brokers in Singapore:

  • MaxiCash
  • MoneyMax
  • ValueMax

Market Share

Based on the most updated list of licensed pawnbrokers in maintained by the Ministry of Law, there were a total of 223 pawnbroking firms in Singapore as at 01-Nov-2017. The list can be accessed here at this link:

Based on the list above, we counted 42 license for MaxiCash, 38 for MoneyMax and 22 for ValueMax. This means that these 3 listed firms control nearly half of the pawnbroking licenses issued in Singapore.

Furthermore, statistics provided my Ministry of Law shows that the total loans disbursed by all pawnbrokers in Singapore stood at $5.51bil. In the last 5 years, the highest amount disbursed reached $7.07bil in 2012.

Source: Total Value of Loans Disbursed by Pawnbrokers in Singapore

Based on the annual reports of all 3 listed pawn brokers, the total revenue for 2016 stood at $541.6mil. Assuming all pawnbroking licensees disburse approximately the same amount of loans and therefore collect a similar amount of revenue per year, then we could estimate that the total market size is approximately $1,190bil.

The relative market share of the 3 pawn brokers are listed below. Surprisingly, the despite having the least number of outlets, ValueMax generates the highest revenue among its peers.

Source: Respective Annual Reports

Risk in Pawnbroking

As the pawnbroking business is very closely associated to gold, therefore the fluctuations of gold prices would certainly impact the business.

Assets pledged during periods of high gold prices would receive a much higher loans. However should the gold prices tumble shortly after the loan will disbursed, the pawnbroker would be holding on to an asset that has insufficient value to compensate for the disbursed loan.

On the flip side, should gold prices soar and customers fail to redeem their assets, the pawn brokers would stand to gain significantly as they would have acquired the gold at a lower price and sold them at a higher price.

Comparative Analysis

Using its latest full year financial figures, we tabulated the revenue, profits, cash flow, assets and equity of all the pawnbrokers and performed the standard financial analysis ratios.

FY2016 ending 31-Dec-2016
(SGD '000)








Gross Profit




Pre-tax Profit




Net Profit




Operating Cash Flow




Total Assets




Total Equity




Total Shares




Price per Share





Gross Profit Margin




Pre-tax Profit Margin




Net Profit Margin




Asset Turnover




Equity Multiple




Return On Assets (ROA)




Return On Equity (ROE)




Price-to-Earnings (P/E) Ratio




Price-to-Book (P/B) Ratio




Source: Respective Annual Reports

What we found surprising that that the pawnbrokers are actually highly leveraged businesses! The ValueMax having the most conservative Equity Multiple is already 2.38! The other 2 exceeded 3 times.

Another observation that we found puzzling was the negative operating cash flow that was being posted by all three players. It seems that the profits that they have been making didn’t translate into cash flow. We were curious to know if this was a just a peculiarity for 2016.

Trend Analysis

We therefore followed up with a trend analysis of the revenues, profits and cash flows. Figures for FY2017 were annualised based on the lastest published financial statements to derive a forecast.

Source: Respective Annual Reports

Revenue trends show that ValueMax was experiencing weaker sales figures year-on-year while its peers had positive sales growth figures.

Source: Respective Annual Reports

However, profits for all 3 players shown a mark increase over the last 5 years including ValueMax despite showing a fall in revenue.

Source: Respective Annual Reports

Cash flow trends for all 3 players were consistently negative in the last 5 years. Except for ValueMax which finally showed a positive operating cash flow in FY2017. This is despite posting consistently growing profits. It seems that much of the profits were not translating into cash flow.

Perhaps, they had poor cash collection? To test the theory, we also plotted the trends of their receivables.

True enough, all 3 players show an increasing receivables trend. The CAGR growth of the cumulative receivables clocked-in at 12.9% while the growth in cumulative revenue was only 0.6%. Clearly there is something wrong with the business when the receivables are growing at a much faster rate than the sales.

Source: Respective Annual Reports

Without sufficient cash flow from their operations, these pawnbrokers would certainly have to keep borrowing to stay afloat. This probably explains why they are so highly leveraged.

But why is it that they are not able to convert these profits to cash? Why are their cash collections so poor? Are they having a problem liquidating assets which have been unredeemed? Is this a trend among only the 3 largest players, are the other smaller players also experiencing such a trend? Or is this simply the way the pawnbrokering business works?

We found these aspects of the pawnbroking business rather puzzling. We are also not able to clearly identify the reasons for this.

The investment guru Warrant Buffet once said, "Never invest in a business you cannot understand".

We clearly are not able to understand the nature of the pawnbroking business. There are simply too many questions which we are not able to find an answer for. Rather than invest in something we don’t understand, we will rather pass up on this opportunity than to take a risk which we are not able to put a finger on.

Perhaps, one of our readers could explain this puzzling business modal to us!


Disclosure Statement

The views and opinions expressed herein are those of Tam Ging Wien (“the author”) and do not necessarily reflect the official policy, position or view of the author’s employer, organization, committee or other group(s) or individual(s).

The author at time of writing does not hold any stake in any of the pawnbrokers mentioned in this article.



50% Complete

Investment Newsletter

Subscribe for our exclusive weekly newsletter. We do not share that content on the blog. It includes in-depth analysis on equities, IPO's & REITs. Join our exclusive inner circle today and get an edge in your investing!