MoneyMax bets on Malaysia growth with drive-through pawnshops

MONEYMAX Financial Services is deepening its presence in Malaysia, touting its drive-through pawnshops as a differentiator. This follows its entry into the market under its own brand name for the first time in 2022.

The Catalist-listed pawnbroker last year opened 10 new stores in Malaysia: eight in Johor Bahru (JB), one in Selangor and another in Penang. Since May this year, it has added two more stores, in JB and Penang. It now has 43 stores in Malaysia – slightly less than the 49 in its home market of Singapore.

The company has been operating in Malaysia since 2014, under a joint venture agreement. The pandemic created an opportunity for expansion, as several properties in ideal locations had been vacated.

“What makes these locations attractive is they are areas with good business traction and footfall. We managed to secure the leases to these strategic locations,” said the company’s group general manager, Lim Chun Seng.

Of the new stores, six feature a drive-through concept. Customers can drive up to the counters in their cars or motorcycles, and pawn their valuables without having to alight.

The 30-year-old was speaking to The Business Times together with his father, Lim Yong Guan – also known as Peter Lim – MoneyMax’s chief executive and chairman, at the company’s Changi office.

The idea of a drive-through pawnshop may sound gimmicky, but the Lims said it meets actual needs. Many Malaysian customers arrive in cars or on motorbikes, and struggle to find parking. Some also fear for their safety when leaving the store with large amounts of cash.

Said Peter Lim: “If they can do the transaction just like (at) McDonald’s, using the drive-through concept, I think this is what the customer needs… We talked to customers, analysed a lot of data and found that this is the key to our success.” The company now plans to open more drive-through stores across Malaysia.

Staying ahead of headwinds

The Lim family is well known in Singapore business circles, with Peter Lim also having co-founded local jewellery retailer SK Jewellery Group. MoneyMax, started in 2008, has three core segments: pawnbroking, the retail and trade of gold and luxury goods, and secured lending.

Its expansion in Malaysia has yielded some positive results. Net profit for FY2022 grew 11.3 per cent to S$22.1 million, on the back of a 27.2 per cent growth in its revenue to S$253.5 million.

MoneyMax’s share price has also somewhat recovered from the lows of 2020, when it fell to S$0.106, to close at S$0.20 on Friday (Jun 24). It trades at about four times earnings.

The company is facing some headwinds, though. In its pawnbroking segment, profit fell to S$9.95 million – down from S$11.5 million the year before.

Peter Lim said rising costs have had an impact. MoneyMax’s cost of funds has doubled, while overhead costs went up by about 20 per cent to 30 per cent.

At the same time, the company has left the interest rate it charges customers unchanged, with monthly rates as low as 1 per cent. The average pawn loan size ranges between S$500 and S$1,000.

While there is a need to maintain its spread, “we have to balance that with the interests of our customers as well”, said Lim Chun Seng. He declined to share specific figures on the spread.

To cope with rising costs, MoneyMax is investing in digitalisation that could bring efficiency gains. This means acquiring more tech talent, such as data analysts, while other companies are laying workers off.

“It’s been a tough year, but we are still looking to hire… Data analysis is something we are looking to build as a core competency,” said the younger Lim, adding that this could enhance supply management and inventory tracking.

Meanwhile, the company is also optimistic on retail sales. Gold prices have been on the rise for the past six months, with some seeing it as a good asset to hold in the inflationary environment. Demand for luxury handbags and watches is also high, with the return of affluent South-east Asian and Chinese tourists to Singapore.

Auto financing, which MoneyMax started to offer in 2018, could also grow into a core pillar of the business, said Lim Chun Seng. MoneyMax’s offerings range from financing for the renewal of Certificates of Entitlement, to inventory financing for the car dealers it works with.

Next generation

Pawnbroking may seem a rather old-school business for a young entrepreneur such as Lim Chun Seng, who trained as a lawyer. After all, fintech models such as Buy Now, Pay Later are more hyped up these days.

The scion nevertheless sees the age-old trade remaining relevant, given how it serves people from “all walks of life” – from hawkers to entrepreneurs.

Several of MoneyMax’s new ventures, such as the auto financing business and the Malaysia strategy, have been helmed by Lim Chun Seng. This is part of the test for him to prove his capability to the family, said Peter Lim.

“We really need to rely on the younger generation; let (them) lead the new batch of staff, also very young. They are ambitious, they are hard-working,” he added. “Let them go and try to explore opportunities, but they have to prove that they (can) meet the target.”