As the sole pawnbroking company listed on Bursa Malaysia, Pappajack Berhad (PPJACK, 0242) recently unveiled an exceptionally strong quarterly performance that surpassed both the previous quarter and the same period of the previous year. This outstanding performance also aligns with the confidence expressed by the founder, Mr. Lim Boon Hua, during PPJACK's 10th-anniversary banquet, regarding the company's future growth prospects.

Revenue Comparison (YoY +89.25%, QoQ +9.77%)

For the second quarter ending on March 31, 2023 (Q2FY2023), the company achieved a revenue of approximately RM27.29 million, marking an impressive growth of about 89.25% from the approximately RM14.42 million reported during the same period of the previous year. This remarkable increase can be attributed to the opening of two new pawnbroking outlets during this quarter, which further expanded the company's revenue streams. Notably, PPJACK currently operates a network of 32 pawnbroking outlets across Malaysia.

Out of the RM27.29 million revenue, around RM18.86 million stemmed from pawnbroking activities and the sale of unredeemed items, indicating a substantial YoY increase of approximately 126.41%. The remaining RM8.43 million were originated from interest income on pawnbroking loans, showing a YoY increase of approximately 38.65%.

Compared to the preceding quarter, the company's revenue saw a modest increase of approximately RM2.43 million or 9.77%.

Net Profit Comparison (YoY +396.03%, QoQ +23.39%)

Driven by the robust revenue generated, PPJACK achieved a substantial YoY net profit surge of about 396.03% to reach RM5.01 million for the quarter, setting a new record high. Additionally, in a QoQ comparison, the company's net profit witnessed an increase of approximately RM0.95 million or 23.39%.

Interestingly, while the business of selling unredeemed items constitutes a major portion of the revenue, the gross profit margin associated with it stands at only around 13.28%. In contrast, the pawnbroking business (interest income on pawnbroking loans) yields a gross profit margin of 76.32% for the company.

It's worth noting that due to increased loan activities, the finance cost rose from around RM0.20 million in the same period of the previous year to approximately RM0.59 million, representing a growth of approximately 192.57%. Despite this, PPJACK remains a net-cash company.

Outlook

PPJACK will persist in its proactive strategy of expanding its network of pawnbroking outlets, which will enhance its market presence and enable the company to serve a broader customer base. This will also lead the company to venture into new geographical markets within Peninsular Malaysia.

In addition to opening new pawnbroking outlets, the management is considering strategic acquisitions of suitable pawnbroking outlets, with the anticipation of substantial income contributions in the upcoming years.

As such, dear readers, what are your thoughts on PPJACK's current Price-to-Earnings (PE) ratio of approximately 49 times?