Maxi-Cash loses a whopping $300K in operations

Employee benefits surged 30%.

Maxi-Cash Financial Services registered a 5% revenue loss in 2Q14, owing to higher operating expenses.

In a report by RHB, Maxi-Cash posted revenue of $28.6 million, as well as a $300,000 operating loss. Employee benefits surged 30% yoy, while other expenses also rose 9% yoy mainly due to increase in the number of outlets Maxi-Cash operates.

RHB adds that net PAT was up 160% y-o-y to $150,000, mainly due to a tax rebate of SGD135,000.

Going forward, with plans to still open more outlets and cross the 40-outlet mark, Maxi-Cash is expected to continue incurring higher costs, given that its pawnshops are still underperforming its peers.

Here’s more from RHB:

Net PAT will likely continue to suffer from higher costs until its newer pawnshops build up a sizable pledge base, which may likely happen only after 2-3 years.

With a sluggish outlook, we cut FY14F net PAT by 74% to SGD800,000. In addition, the new bonus issue to shareholders in Feb 2014 – totalling 93.7m shares – has further diluted its EPS and P/BV. As a result, we downgrade Maxi-Cash to SELL (from Neutral) with a 1.9x P/BV TP of SGD0.21 (from SGD0.27), representing a 27% downside return from current levels.