IPO Series – Pawnbroker Services, Retail and Trading of Jewellery and Gold Providers

Source: $WELLCHIP(5325.MY)$ IPO prospectus
-As of FY2023, the group relies on two major customers which contributed the group’s revenue more than 20%, which are Pavilion Wee Bullion Sdn. Bhd (28.3%) and TTT Bullion (M) Sdn. Bhd. (21.7%) Respectively.

Source: $WELLCHIP(5325.MY)$ IPO prospectus
-Based on the financial data from FY2020 to FY2023, the group revenue has increased from RM121.840M to RM203.675M, or 67.16% of increment, however, the PAT only shows 4.86% of increment which further translates into a lower PAT margin in FY2023.

Source: $WELLCHIP(5325.MY)$ IPO prospectus
-Based on the forecast by Protégé Associates, it is estimated that the pawnbroking Industry in Malaysia will be having a growth rate of more than 10% from 2024 to 2027, and will drop to 9% in 2028.

Personal Opinion
-The group plans to set up another 7 new pawnshops, where 2 pawnshops in Melaka and 5 pawnshops in Johor, which can further enhance the business geography in other states other than Johor.
-Due to the business nature, the group is subjected to gold price volatility, and thus estimating to have a greater share price fluctuations if the geopolitical tensions increase.
-Furthermore, the group business nature requires a larger amount of cash capital for pawn loans and to defray for other operating expenses.
-As compared to other listed pawnbroker company like $PPJACK(0242.MY)$ and $EMCC(0286.MY)$ (PE Ratio), Well Chip is having a lower PE ratio as compared to the aforementioned companies.

Would you apply for this IPO? Share your thoughts in the comments section below

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The details of the IPO prospectus can be accessed through https://www.klsescreener.com/v2/announcements/view/7200215

By: Jshen Ng