The rise in gold prices has significantly benefited companies in the pawnbroking industry, and Pappajack Berhad (PPJACK, 0242) is no exception. Higher gold prices have not only increased the collateral value of pawned items but also boosted revenue from the sale of unredeemed pledges. Against this backdrop, PPJACK's financial performance in the first quarter was exceptionally strong, with record-breaking revenue. Without further ado, let's delve into PPJACK's latest financial results.

Revenue Comparison (YoY +20.64%, QoQ +7.96%)

For the first quarter ending March 31, the company's revenue was approximately RM29.98 million, representing a 20.64% increase from around RM24.85 million in the same period last year. Although management did not provide a detailed explanation for this growth, it can be inferred that the increase in revenue is related to the company's expansion. According to the quarterly report, PPJACK operates a total of 40 pawnbroking outlets, an increase from 32 outlets in the same period last year.

Of the RM29.98 million in revenue, approximately RM19.47 million came from pawnbroking and the sale of unredeemed items, an increase of about 16.66% year-over-year. The remaining RM10.51 million was generated from pawn loan interest, which saw a year-over-year increase of approximately 28.64%.

In terms of gross margin, pawn loan interest contributed approximately 77.28% this quarter, while pawnbroking and the sale of unredeemed items contributed around 14.02%. Therefore, the pawn loan interest business can be considered a key factor in enhancing the company's profitability.

Additionally, compared to the previous quarter, the company's revenue also grew by approximately RM2.21 million or 7.96%.

Net Profit Comparison (YoY +29.06%, QoQ +4.17%)

Driven by the company's overall strong business revenue, PPJACK achieved a net profit of approximately RM5.24 million, a year-over-year increase of about 29.06%.

Similarly, compared to the previous quarter, the company's net profit also increased by approximately RM0.21 million or 4.17%.

On the other hand, it is noteworthy that due to the increase in loans and rising interest rates, the company’s finance cost increased by approximately 18.71% year-on-year to RM0.59 million. Nevertheless, PPJACK remains a net cash company, holding approximately RM53.17 million in cash this quarter, with loan amounts totaling about RM38.26 million.

Additionally, the company announced the distribution of a first interim dividend of RM0.0050 per share this quarter, with the ex-dividend date set for June 10 and payment to shareholders on June 21, 2024.

Outlook

To expand its market share and serve a broader customer base, PPJACK will continue to actively expand its existing network of pawnbroking outlets. Thereby, the company will enter new markets within Peninsular Malaysia.

Moreover, PPJACK has proposed transferring from the ACE Market to the Main Market. Management has indicated that this transfer is expected to be completed in the third quarter of this year, between July and September.

So, dear readers, what are your thoughts on PPJACK, which currently has a price-to-earnings ratio of approximately 36.77 times?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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