ValueMax looks to the well-heeled for growth
IN THE bustling heartland of Bedok North, where pawnshops are aplenty, the owner of a valuable piece of art sits in a modestly sized office on the first floor of Singapore's oldest pawnbroker, ValueMax Group.
He is wrapped up in a lengthy discussion with ValueMax founder and chief executive Yeah Hiang Nam, possibly over the value of the painting in his possession which he plans to pledge for cash.
People like him - Singapore's high net worth individuals - make up a small portion of ValueMax's clients, but where they fall short in volume, they make up in sheer value.
ValueMax's clients range from those who pawn millions of dollars worth of gemstones and designer watches worth thousands of dollars to a tiny pair of $10 gold-stud earrings. All share a common goal - to pocket some quick, hassle-free cash for the short term.
"Some people discover that they haven't brought enough money with them to get supplies next door, so they walk into our shop and pawn the items they are wearing for cash," says ValueMax executive director and Mr Yeah's daughter, Ms Yeah Lee Ching, in an interview with The Business Times.
Therein lies the draw of pawnshops - in just 10 minutes, you can get cash in hand. If the pawn loan exceeds $200, the need for a purchase receipt or guarantor may hold you up just a tad longer.
It's the wealthy - Singapore has one of the highest number of super rich in the world - whom ValueMax is now targeting to grow its business, which chalked up $350 million in sales last year.
To plump up its pledge book, the pawnbroker is looking at opening a flagship store in the Central Business District later in the year. It promises more privacy, better service and possibly, more swank, to draw in the moneyed lot.
"It's not true that pawnbrokers are a poor man's bank. Many of our clients have valuable assets like gold or Rolex watches. They are asset rich but cash poor," she says.
One thing that could work in favour of pawnbrokers such as ValueMax is the decision by the Monetary Authority of Singapore in June last year to cap total borrowing at 60 per cent of qualifying income, or what is referred to as the total debt servicing ratio.
The measure, aimed at reining in rising household debt, has made it tough for the asset-blessed but unemployed to borrow from banks, says an analyst. Pawning their assets for some big bucks could be an option.
Ms Yeah feels that ValueMax, which has 17 outlets here, has a trump card: Its experienced team of 17 chief appraisers - the most important link in the business as they set the value a pledged asset can fetch.
"If someone is very sick, they don't go to a GP (general practitioner) - they see a specialist. So, if you have a family heirloom, you'd choose a specialist like a chief appraiser. We can confidently value the asset as opposed to doing so conservatively," she says.
It helps, too, that ValueMax is listed. "Being a listed entity instils more confidence among customers," says the analyst.
The Singapore Exchange has seen a pawn rush in recent years. In mid-2012, Singapore's largest pawnbroking chain with 31 stores, Maxi-Cash, made its entry on Catalist, followed by MoneyMax - also on Catalist - last September. A month later, ValueMax made its debut on the mainboard.
The direction of gold prices has a heavy weighting on pawnbrokers' bottom line. For ValueMax, about 80 per cent of its business involves gold, be it the retail and trading of pre-owned jewellery or the pawnbroking business itself.
The group's outing in financial year 2013 attests to that - revenue slipped 31 per cent from a year ago due to the decline in gold prices. Net profit fell 35 per cent to $9.4 million.
Competition is hotting up, with more players wanting a slice of the pawn pie; the number of pawnshops has nearly doubled over five years to over 200 last year. That could partly explain ValueMax's next step - to expand abroad even while it grows its business here.
In fact, it is the only chain in Singapore which has a presence outside. Through its associates, it has five outlets in Malaysia's southern state of Johor and is planning to add at least three more to the vault in that region. More stores could also be in the offing.
The group is seeking acquisitions abroad as well, perhaps even farther afield. Such opportunities, she says, could even crop up here, where it is opening three new stores over the first half.
According to Ms Yeah, Taiwan has one pawnshop for every 20,000 people, versus some 27,000 in Singapore. That could mean only one thing. "There's still a lot of room to grow," she adds.