Understand the biz model of "pajak gadaI", or pawnbroking by analysing Pappajack Holdings Bhd (PPJ), the first and only Bursa-listed pawnbroker
Though associated with -ve connotation, pajak gadai provides alternativer financing to those that can’t meet banks' criteria
Though associated with -ve connotation, pajak gadai provides alternativer financing to those that can’t meet banks' criteria
PPJ Background (1/2)
Established in 2014, PPJ has grown to 30 outlets. There are 700 pawnbroking license holders in the country and PPJ commands 4% of the market.
The industry is regulated by Ministry of Local Govt Development (KPKT)
Established in 2014, PPJ has grown to 30 outlets. There are 700 pawnbroking license holders in the country and PPJ commands 4% of the market.
The industry is regulated by Ministry of Local Govt Development (KPKT)
PPJ Background (2/2)
The co. listed on ACE Market last April, raising RM50.1 mil.
IPO price: 30 sen
Current price: 53 sen
Market cap: RM354 mil
Appreciation of 76.7% in <1 year!
Financials (P&L, BS) further below
The co. listed on ACE Market last April, raising RM50.1 mil.
IPO price: 30 sen
Current price: 53 sen
Market cap: RM354 mil
Appreciation of 76.7% in <1 year!
Financials (P&L, BS) further below
Pawnbroking loan structure
Loan is referred as "ticket"
Tenor: up to 6 months
Loan value: up to RM10k
Avg PPJ ticket size: RM2-3k
Loan margin: 80-90% of collateral value
Int. rate: Max 2% (main contributor), avg 1.5% - per ANNUM
Customer only pays int. during the tenor
Loan is referred as "ticket"
Tenor: up to 6 months
Loan value: up to RM10k
Avg PPJ ticket size: RM2-3k
Loan margin: 80-90% of collateral value
Int. rate: Max 2% (main contributor), avg 1.5% - per ANNUM
Customer only pays int. during the tenor
Collateral/Items pledged
Customers usually pledge gold jewellery or luxury watches
99% of items pledged to PPJ are gold jewellery - acid tests perform to avoid fakes.
Suspicious items rare incident - from 2018-2020, amounted to RM40k only with no incident in 2021.
Customers usually pledge gold jewellery or luxury watches
99% of items pledged to PPJ are gold jewellery - acid tests perform to avoid fakes.
Suspicious items rare incident - from 2018-2020, amounted to RM40k only with no incident in 2021.
Defaults
PPJ annual default rate ~12%
If customer doesnt redeem/repawn, PPJ will auction items publicly. They will bid for items and sell to gold bullions to recoup loan
If one defines a biz based on revenue, then PPJ is more of a gold seller than pawnbroker - why next
PPJ annual default rate ~12%
If customer doesnt redeem/repawn, PPJ will auction items publicly. They will bid for items and sell to gold bullions to recoup loan
If one defines a biz based on revenue, then PPJ is more of a gold seller than pawnbroker - why next
What's their revenue?
2 streams:
(1) interest income
(2) sale of unredeemed pledges.
Interestingly, (2) contributes majority of revenue - 60.4%
But, gross profit margin for int. more superior
74.4% vs 3.97%
Despite lower revenue, int. income contributes 92.5% of gross profit
2 streams:
(1) interest income
(2) sale of unredeemed pledges.
Interestingly, (2) contributes majority of revenue - 60.4%
But, gross profit margin for int. more superior
74.4% vs 3.97%
Despite lower revenue, int. income contributes 92.5% of gross profit
PPJ's loan book
RM176.1 mil - based on "trade receivables" on balance sheet, we can assume it's the outstanding tickets of customers
How big is MY's pawnbroking industry?
We can make an educated guess
- PPJ's market share is 4%
- loan book
Total market size: RM4.4 bil
RM176.1 mil - based on "trade receivables" on balance sheet, we can assume it's the outstanding tickets of customers
How big is MY's pawnbroking industry?
We can make an educated guess
- PPJ's market share is 4%
- loan book
Total market size: RM4.4 bil
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Links:
1. PPJ Q4 2022 earnings announcement
disclosure.bursamalaysia.com
2. Pawnbroker Pappajack sees good prospects in good and bad times
theedgemarkets.com?
1. PPJ Q4 2022 earnings announcement
disclosure.bursamalaysia.com
2. Pawnbroker Pappajack sees good prospects in good and bad times
theedgemarkets.com?
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