Pappajack Would See 17 Outlets Contributing to Bottomline From This Year

Pappajack Bhd en route to listing on 1st April 2022 would see 17 matured outlets contributing to its top and bottom lines from this year onwards, its managing director and chief executive officer Lim Boon Hwa said.

He told Business Today in an email interview that the first 8 outlets up to the end of 2018 are at a mature stage and are contributing positively to its top and bottom lines while the 9 outlets opened in 2019 are entering the mature stage and have started contributing to its financial performance.

However, Lim said that the 8 newly set up outlets opened in 2020 (infant stage) are still suffering losses mainly attributable to the initial operating costs and the gestation period required for these outlets to generate profit. “Usually, our new outlets will take around 2 years to start contributing profits,” he said

Lim said that based on the above, he said that the potential results can be imagined once the remaining outlets achieved matured operations status.

On its plans after listing, the managing director said that Pappajack’s immediate plan is to open 3 new outlets within 3 months and 2 more outlets within 6 months from the listing date of 1 April 2022.

“We will open more outlets in next 3 years as part of our expansion plan. And we have no plan to venture outside the pawnbroking business as the pawnbroking industry is large enough for us to grow further and to capture more market share, Lim said.

Pappajack Bhd which is set to go for a listing on the ACE Market of Bursa Malaysia, has garnered an overall oversubscription rate of 21.73 times for 33.4 million public issue shares made available for application by the Malaysian public.

A total of 7,125 applications for 759 million public issue shares with a value of RM227.75 million were received from the Malaysian public.

“For the Bumiputera portion, a total of 2,243 applications for 116,687,800 public issue shares were received, which represents an oversubscription rate of 5.99 times,” it told the stock exchange. “For the public portion, a total of 4,882 applications for 642 million shares were received, which represented an oversubscription rate of 37.47 times.”

It said the 6.68 million public issue shares made available for application by eligible persons have been fully subscribed.

The first licensed pawnbroking company to be listed on the ACE Market come April 1, 2022, it is planning to raise RM50.10 million from its initial public offering (IPO) at 30 sen per share.

On its business strategy, Lim said that its recorded revenue comprises of two elements. Interest income from pawn loans and sale of unredeemed or bid pledges adding that Interest income has a higher margin around 62%-70% (for the past 3 years ended 2018 – 2020 and 9 months ended 30 Sept 22) as they do not have any cost of funds now given that there are no borrowings to fund our pawn loans. “The main costs associated with the interest income are outlet rentals, salaries, and utilities expenses,” he said.

He said that the sale of unredeemed or bid pledges is not the focus of our business but it’s a consequence activity when pledges are not redeemed by our customers. “The margin for sale of unredeemed or bid pledges is very much dependent on the gold prices as and when we sell the unredeemed pledges or bid pledges during our cash recovery process, “Lim said.

On the advantages of customers coming to its outlets to obtain loans over and above going to banks, Lim said that banks provide credit lending based on the credit profile of their customers be it secured or unsecured lending whereas in the pawnbroking business practices “asset lending” where lending is based on pledges/assets (i.e. gold, gold jewellery, and luxury watches) that customers provide.

“The amount that we lend per transaction is much lower compared with the bank loans which cater for the need of customers who seek micro-loans. Our average transaction per pawn ticket is around RM2,000 to RM3,000. Furthermore, our processing time is usually less than an hour whereas banks usually take longer time and quick access to cash is our advantage over the banks,” he said

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