Based on RHB's analysis, the correlation between the price of gold and amount of pawnbroking loans given in Singapore is relatively strong, at 0.7. A higher gold price, therefore, supports a larger amount of loans given. Between the gold price and value of loan per pledge, the correlation is even stronger, at 0.9.
RHB Bank Singapore analyst Alfie Yeo likes Aspial Lifestyle for its growth prospects. In an Oct 1 non-rated report, Yeo notes that the group has six retail brands: Maxi-Cash, Lee Hwa Jewellery, Goldheart Jewelry, Niessing, BigFundr and Dr.Pajak. Pawnbroking is its largest profit contributor.
Yeo likes the stock for it being a proxy to the rise of gold prices. Its share price has had a good correlation to gold prices (at >0.5 out of 1), at least over the past year. "Hence, we believe it is a relatively good proxy to the gold price uptrend. The stock is trading at a historical P/E of just 9.8x – below that of regional peers – and provides upside to growth, driven by pawnbroking and moneylending loan book growth, as well as better margins from its gold retail segment," says Yeo.
