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Singapore Investment


 Can the allure of  PPJACK 0242 PAPPAJACK BERHAD’s pawnbroking business continue to push the counter higher?

The pawn broking business may be a fragmented one in Malaysia, which has over 700 licence holders currently.

But Pappajack Bhd, which debuted on the ACE Market in April last year, is the first and only licensed pawnbroking group on the local bourse.

It has done well to garner investors interest.

Pappajack Bhd touched its year high of RM1.10 on July 6 before closing 8.5% higher  at 96 sen on active trade.

Over the past year, the counter almost doubled in value, trading way above its net assets per share of 27 sen.

This is amazing for a company which is raking a net profit of RM10 million on the back of RM70 million revenue in FY22, is now valued at RM733 million.

Investors who managed to get the shares at its IPO price of 39 sen would be laughing to the bank already.

What is so attractive about this pawnbroker?

The main unique thing about Pappajack is probably being the only listed company in Malaysia, allowing investors to be part of the pawnbroking business.

Pappajack, which has a market share of about 4%, does well during tough times as people need cash to survive.

It also does well during good times as owners of MSMEs, for example, need cash to grow their businesses.

Pappajack also sees a pickup in its business whenever there is a hike in interest rates and government aid or EPF withdrawals spent.

On a flip side, its revenue droped during times when borrowers received cash aid such as the Bantuan Prihatin Nasional from the government as well as the special one-off Employees Provident Fund (EPF) withdrawals, which boosted the market with cash flow.

About 61% of the company’s revenue is generated from sales of unredeemed or bid pledges while the rest from pawnbroking interest charges.

In terms of segment gross profit, pawnbroking interest charges contribute 93.4% while the balance came from sales of unredeemed or bid pledges.

Pappajack’s pawn shops, most of which are situated next to banks for visibility and accessibility, accept gold and luxury watches as pledges, offering up to 90% and 80% of the spot value for the respective items.

WIth the funds raised during its IPO exercise, the company is looking to expand its presence.

Pappajack now has 30 pawnbroking outlets in the country.

While investors are hoping for the counter to surge further, one has to take caution that the share price might drop and profit taking activities are expected to take place.

For many of us, pawnbroking is a very traditional business and has not seen much evolution in terms of the business model.

It has to keep expanding in order to show growth.

After all, it is not often that one walks into a pawn shop to pledge their gold or watches as one may only own a limited number of gold items or valuable watches.

This is certainly challenging for a business like Pappajack to secure recurring income and to keep growing unless it continues to set up new outlets.   



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