ValueMax’s Malaysia associate company Well Chip IPO jumps nearly 50%
[KUALA LUMPUR] Johor-based pawnbroker Well Chip Group, an associate company of Singapore Exchange-listed ValueMax Group, made its debut on Bursa Malaysia’s main market stock exchange on Tuesday (Jul 23), with its share price rising nearly 50 per cent from the initial public offering (IPO) of RM1.15 per share. Shares of Well Chip opened at RM1.65, representing a 43.5 per cent increase from its IPO price. At its peak, the stock surged by 52 per cent to RM1.75, resulting in a market capitalisation of more than RM1 billion (S$288 million) for the company. At the market close, it ended 49.6 per cent higher at RM1.72, with 107 million shares changing hands.
This also marks the third pawnbroking company listed on the Bursa Malaysia, after Evergreen Max Cash Capital in September 2023 and Pappajack, which debuted in April 2022.
Singapore-based ValueMax Group, controlled by Yeah Holdings, is the largest shareholder of Well Chip, holding 65.5 per cent of indirect stake through VYN Holdings (50.7 per cent) and VMM Holdings (14.8 per cent).
The public tranche of the IPO was oversubscribed by nearly 13 times. The pawnbroker offered 150 million new shares in its IPO, which represented 25 per cent of its enlarged issued share capital.
Well Chip had raised RM172.5 million from its IPO, which it plans to use as working capital for its 23 existing pawnshops and as initial capital for opening of another seven pawn shops within the next 24 months – five in Johor and two in Melaka.
Pawn king of the south
Established in 2007, Well Chip has a network of 23 pawnshops in Johor, with an estimated market share of 36 per cent, making it the largest pawnbroker in the state.
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In addition to its pawnbroking business, the company is also involved in the retail and trading of jewellery, operating another four retail outlets in Johor.
Analysts are optimistic on Well Chip’s expansion plan and earnings outlook due to rising gold prices and increasing demand for pawnbroking services from underserved markets in Malaysia.
Based on an independent market research report by Protege Associates, the country’s pawnbroking industry is projected to grow at a compound annual growth rate of 11.4 per cent between 2024 and 2028.
The growth is driven by increasing demand for immediate access to funds from underbanked or underserved markets, said Malacca Securities analyst Chiang Fong Kai.
He noted that the positive outlook for gold prices bodes well for Well Chip’s gold trading segment, as the company will be able to sell gold items at a marked-up value.
Currently, 64 per cent of Well Chip’s revenue comes from its retail trading segment, while the remainder is from the pawnbroking business. Profit-wise, earnings from the pawnbroking business accounts for 75 per cent of Well Chip’s gross profit.
RHB Investment Bank analyst Nabil Thoo said the company will benefit from Johor wage earners’ rising income levels, as they are expected to drive the demand for gold as an investment. This is especially so among individuals underserved by conventional financial institutions.
In a report, he noted that Well Chip will also benefit from the expertise of its associate company ValueMax Group, as both parties share the ValueMax Pawnbroking System, which allows for improved operational efficiency, translation processing times, and risk management.
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