Maxi-Cash Financial Services Corp Ltd’s Latest Earnings: Big Surge in Profit Seen

Maxi-Cash Financial Services Corp Ltd (SGX: 5UF) released its results for the first-half of 2016 on Monday evening.

As a quick background, Maxi-Cash runs a network of pawnshops and jewellery retail outlets around Singapore. Its network currently numbers around 40.

With that, let’s look at the company’s latest results.

Financial highlights

The following are some of the latest financial figures for Maxi-Cash:

  • Revenue for the first-half of 2016 surged by 30% year-on-year to $76.3. million. At the same time, net profit attributable to shareholders rocketed 215% from $1.7 million a year ago to $5.2 million.
  • As of 30 June 2016, Maxi Cash had $6.7 million in cash and equivalents and $66.8 million in borrowings. This is an improvement from a year ago when there was $7.9 million in cash and equivalents and $157.3 million in borrowings.
  • Meanwhile, the firm clocked in negative free cash flow for the first-half of 2016 with cash flow from operations coming in at a negative $14.0 million and capital expenditure coming in at $0.8 million. A year ago, Maxi-Cash reported a negative $6.0 million in cash flow from operations and $0.3 million in capex.

To sum up, Maxi-Cash saw a quarter of growth with big jumps in both revenue and earnings; these were powered by contributions from both the pawnbroking business as well as the jewellery retail business. Moreover, the company’s balance sheet had improved from a year ago.

But, Maxi-Cash also reported an amount of S$126.7 million that is due to a related company in its current liabilities for the reporting quarter. This amount is non-trade related and there was no such account in the balance sheet a year ago. Moreover, the company continues to churn out negative free cash flow.

Maxi-Cash had declared an interim dividend of S$0.005 per share for the reporting period. There was no dividend for the same period a year ago.

In a separate announcement made on the same day as the release of its financial results, Maxi-Cash revealed that it is proposing a rights issue on the basis of one rights share for every four existing shares. The exercise could see Maxi-Cash issue up to 145.5 million new shares of itself at a price of S$0.145 each.

The funds raised from the rights issue would be used mainly to pay off advances given by its majority shareholder Aspial Corporation (SGX: A30) and to provide resources for general working capital needs and future investments/acquisitions, if any. Aspial has made advances totaling S$8.0 million to Maxi-Cash since 2009 to help the latter finance its business activities.

Valuation and the road ahead

In the earnings release, Maxi-Cash had commented on its future outlook. It said:

“The Group expects its operating environment to remain challenging with keen competition, volatile gold prices and weak retail sentiment.

To meet these challenges, the Group will have to continue to leverage on its well located stores, efficient operating system, creative sales and marketing programs, motivated staff and also seek out new business opportunities.”

“Following the announcement by the governing authority that pawnbrokers be allowed to sell new jewellery, the Group has progressively put in the application to the authority for each of its stores to sell new jewellery since mid April 2016.

The Group has started to sell new 916 and new 999 gold jewellery under the LeGold brand in all its stores since the beginning of August 2016.”

Maxi-Cash’s shares last changed hands at S$0.15 each on Monday. This translates to a historical PE ratio of 12.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.