• 4Q13 Revenue increased 13% y-y. For the full year, revenue declined 13% y-y at S$75.6 million on lower retail and trading revenue
• FY13 net profit was lower at S$1.8 million, due to higher costs in conjunction with IPO and with new retail outlets launch.
• Final dividend of 0.3 cents per share declared, representing 54% payout.
• We remain positive and reiterate a " Buy" rating with revised TP of S$0.405.

We met up with the management recently after MoneyMax's 4Q13 results announced on 26 Feb 14. Decline in FY13 revenue was mainly due to lower retail & trading revenue. This was a result of lower gold prices and management's decision to increase inventory of pre-owned jewellery and watches in its retail outlets. The strategic shift from trading to retail sales yielded higher gross margin at 35.0%, compared to 29.4% FY12 gross margin. Pawnbroking revenue remains flat despite decline in gold prices, as pawnshop pledges received continue to rise. Fullyear net profit declined mainly due to 1) one-off IPO expense of S$1.2 million, 2) higher ad and promo expenses, which is expected to taper off after end 2013, 3) expenses incurred for refurbishment of existing outlets and 4 ) increases in rental costs from launch of new retail outlets. Excluding one-off net IPO expense, FY13 net profit was estimated at S$3.1 million.

Final dividends declared came as a surprise, given the absence of dividend payout guidance in its prospectus. We view the payout on a conservative level and expect future payout to remain as such while the Group focus on its retail expansion.

How do we view this

The decline in FY13 net profits was mainly due to higher expenses in conjunction with IPO launch in 2013. Increase in advertising and promotion expenses was due to high production costs incurred. Higher staff costs from expansion of retail outlets as well as increased corporate activities contributed to the increase in expenses. We expect better net profits in FY14F in view of:

• Advertising and promotional expenses to taper off after 2013
• Modest recovery in gold prices observed in Jan-Feb 14
• Positive on both retail and pawnbroking segments ahead

Investment Action

We updated our estimates for FY14F earnings and remain positive on better earnings outlook ahead. We maintain our " BUY" rating with a new target price of S$0.405, with implied 29% capital upside potential and 23.8x FY14F PE multiple.    ...last\ $0.315...


Source: Phillip Securities Research - 3 Mar 2014