PETALING JAYA: Well Chip Group Bhd, which is slated for listing on the Main Market today, is expected to ride strong growth in the pawnbroking industry that will fuel its earnings and expansion plans.
According to an independent market research report, the Malaysian pawnbroking industry is expected to expand at a four-year revenue compounded annual growth rate of 11.4% from RM3.56bil in 2024 to RM5.3bil in 2028, mainly driven by demand from individuals that need immediate financing and from the unserved population.
Maybank Investment Bank (Maybank IB) Research said, based on the total estimated market size of RM3.1bil in 2023 (computed based on the revenues of pawnbroking players in the country), Well Chip’s revenue in financial year 2023 (FY23) made up 6.6% of industry revenue and 36.1% market share of the pawnbroking industry in Johor.
Besides strengthening its presence in Johor, the pawnbroker also plans to venture into Melaka. The group aims to open five new pawn shops in Johor and two in Melaka within 24 months of its listing, subject to the issuance of a pawn broking licence for the new shops.
The group has earmarked RM40mil from its initial public offering (IPO) proceeds for the initial set-up costs and working-capital requirements for the seven new shops.
Maybank IB Research said, based on the group’s pro-forma financial statements, Well Chip is trading at an historical FY23 price-earnings ratio of 19.5 times, at its IPO price of RM1.15.
In comparison, other listed pawnbrokers such as Pappajack Bhd
and Evergreen Max Cash Capital Bhd are trading at 38.1 times annualised first quarter financial year 2024 (1Q24) earnings per share (EPS) of 2.7sen and 26.2 times annualised 1Q24 EPS of 1.7sen, respectively.
