In the small industrial town of Bandar Baru Uda, Johor Bahru, a stretch of colourful low-rise shop houses along Skudai highway is packed with rows of pawnshops. The sign pajak gadai (pawn shop) is plastered on nearly every storefront in a font so large that it's hard to miss while driving past on the highway.
It’s well known among locals as the place to visit to trade their valuables for a quick cash turnaround. Unfortunately, it is for that exact reason the activity is all that riskier: they become easy targets for thieves when they exit pawn shops with large amounts of cash.
This momentary exposure, identified by pawnbrokers MoneyMax Financial Services Group 5WJ , would be solved with a drive-through pawnshop, an idea the company piloted in the last quarter of 2022. Lim Chun Seng, group general manager of MoneyMax, readily says the idea was borrowed. “The true inspiration behind it was from McDonald’s,” says Lim in an interview with The Edge Singapore.
Customers could remain in the safety and privacy of their vehicles — whether car or motorbike — and drive up to a window where the transaction would take place behind a 25mm wide acrylic bulletproof transparent panel, all within the MoneyMax drive-through pawn shop compound.
The compound, which resembled a drive-through car wash, is built out of concrete and furnished with an electronic barrier system at the exit to prevent vehicles from driving off suddenly.
Lim, who turns 30 this year, says that MoneyMax has opened five drive-through pawn shops in Johor Bahru. The company intends to open 11 more pawn shops nationwide this year, of which seven will be drive-through outlets. This will bring the total number of pawn shops they own in Malaysia to 52 - a rather rapid growth considering MoneyMax entered the market only in 2014.
Aggressive expansion in Malaysia
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When asked if the decision to focus on Malaysia’s expansion resulted from slow growth in Singapore, where MoneyMax started operating in 2008, Lim maintained that it was a matter of diversification for the company. “The Malaysian market presents a new proposition to us,” says Lim. “One, it gives us access to quite a fair bit more potential customers than we see in Singapore.”
MoneyMax’s revenue for its Singapore and Malaysia operations in FY2022 which ended in December 2022, are $232.3 million and $21.2 million, respectively. While the difference can be partly attributed to currency differences, Lim agrees that there’s potential for the market in Malaysia to be bigger for the company.
He explains that the operating expense in Malaysia is lower than in Singapore, citing storefront rentals as an example. “In terms of the returns, for every dollar that we put inside here (Malaysia), we may be slightly more profitable,” says Lim.
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For the most recent FY2022 ended Dec 31 2022, MoneyMax reported earnings of $22.1 million, up 11.3% over the preceding FY2021. Revenue in the same period was up 27.2% to $253.5 million, thanks to a higher volume of pawnbroking, retail and trading of gold and luxury items and secured lending.
The company’s shares, typically thinly traded, last changed hands at 20 cents on March 29, translating into a historical price-earnings ratio of 4 times and giving the company a market value of just over $88 million. As of Dec 31 2022, its net asset value was 29.67 cents, up from 25.64 cents as of Dec 31 2021. Over the past 12 months, MoneyMax's share price has held steady at 20 cents, although there was a brief spike to as high as 25 cents in January this year.
A quick new way of raising capital
Naturally, for any company to fund an expansion, there’s a need for additional funds. As a company listed on SGX’s Catalist, MoneyMax could have tapped the public markets for additional funding by issuing new shares. Yet, the group chose to raise funds via a $12.5 million commercial paper offered at 5.4% a year with a 3-month tenure via a private market exchange ADDX. “I particularly like(d) (that) ADDX allows us to get access to capital from a separate pool of investors that we may not necessarily have the required outreach to,” explains Lim.
ADDX provides accredited investors — with an annual income of over $300,000 or net financial assets of over $1 million — access to alternative assets that have long been limited to institutional investors or ultrahigh net worth individuals.
These alternative assets traditionally have a minimum ticket size starting at as much as $1 million. But ADDX reduces this to $10,000 or less, allowing access to a larger pool of individual and corporate investors.
This financing method also helps investors look at a business in greater detail. “They would have seen the track record that we have over the past 10 years, how the company’s profit has been growing more or less year on year, how the revenue had increased quite a fair bit from when we first listed,” says Lim.
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He believes this transparency translates to the success of raising capital on the platform.
“Honestly, we were quite surprised and pleased with it,” says Lim. “Because a portion of time when we were raising coincided with Chinese New Year, typically when markets close. Despite this, we still managed to raise quite a fair bit.”
Moving forward, MoneyMax intends to raise capital in two more tranches with ADDX. Lim shares that the next round will be raised on a longer tenure, with the maximum period of a full calendar year. Lim says funds raised in the upcoming round will be similarly split across various aspects of the business, including the building of new drive-through pawn shops.
Blood runs thicker than gold
Lim candidly shared that the “genius idea” to borrow from McDonald’s drive-through concept to set up something similar for the pawnshops came from his father, Lim Yong Guan, the group CEO and co-founder of MoneyMax.
The Lims have a history of merging family and business. Lim Yong Guan co-founded SK Jewellery Group with his siblings Daniel Lim Yong Sheng and Mary Lim Liang Eng, the executive director, CEO, executive director, and group chief operating officer, respectively.
SK Jewellery was listed at 30 cents back in 2015, but in 2020, the siblings privatised the company at 15 cents, citing the desire to have “greater control and management flexibility to respond to changing market conditions and optimise the use of the company's resources.” The buyout offer back then valued the company at $84 million.
Like the generation before him, Lim Chun Seng and his sister Lim Mei Ying are part of the family business. Lim recalls finishing up his final semester in law school overseas when his father proposed that he join the business. “He allowed me to start (a new) business by myself,” he says. “We were very aligned in our thinking that I should not work under him and that we should try something new.”
Lim could not pass on this guarantee of freedom and opportunity to pioneer something ground up. Together with his sister, they launched the car financing arm of MoneyMax in 2019, which accounts for nearly 25% of profits today.
When asked if this was part of a “natural succession”, Lim said he was confident that his results could speak for themselves.
“It’s fair to have the assumption that we were just parachuted in (to the business),” he says. “But it’s a matter of us being able to show with... the results that we can generate from whatever business units we have under us.”
Lim shares that the drive-through pawn shop expansion is just an aspect of his plans for MoneyMax. His focus for the future is to bring more professionals in to run the business together with the family to free up space for building new additional business products. “The difference between family businesses and (other) businesses is the unity of the family,” he says.
Citing the business transformations that SK Jewellery and MoneyMax had gone through during various economic crises, he says that could not have occurred if the family had not united. “It’s tough to transform, and I think having a united family makes it much easier for us,” says Lim.
Clarification note:
The headline has been amended to reflect that MoneyMax's drive-through concept is not the first in Malaysia as originally suggested. Ion World has already introduced something similar back in Dec 2017.
