Last December, Aspial Lifestyle entered into a partnership agreement with Malaysia-based pawnbroking company Ion World to expand its presence in Malaysia. Aspial will acquire a 65% stake in Maxion Holdings, an investment vehicle that comprises Ion World’s pawnbroking business.

Maxion owns and operates Ion World’s three Dr.Pajak drive-through pawnshops in Johor. Aspial Lifestyle will inject its five Maxi-Cash pawnshops across several states in Malaysia into the JV company. The Maxi-Cash pawnshops in Malaysia will all be rebranded and operate under the Dr.Pajak brand.

The Edge Singapore recently visited three Dr.Pajak drive-through pawnshops in Johor, including its first outlet at Taman Daya which opened in December 2017. It has been awarded the Malaysia Book of Records for being the first drive-through pawnshop in the country.

Tan Wang Chang, director of Ion World, explains that this idea was born not just as a way for the brand to stay competitive but also as a more comfortable way for people to approach pawnshops. About four doors down the Dr.Pajak outlet in Taman Daya is competitor MoneyMax with their version of a drive-through pawnshop, which was launched earlier this year.

Says Tan: “Many people see pawnshops as a scary place for those desperate for money. We wanted to change this mindset and provide a professional service with a modern touch.”

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“With a drive-through counter, customers don’t need to find parking. We also have several CCTVs around the area so that customers can enjoy the convenience without compromising security,” adds Tan, explaining that come rain or shine, customers can complete their pawning needs in the comfort of their cars.

Tan and Aspial Lifestyle CEO Kean Ng also explain that the pawnbroking business is competitive in Malaysia, with interest rates going as low as 1% and rival pawnshops opening close to one another.

“We can try and stay creative to maintain our competitive edge but like this drive-through concept, we aren’t able to patent it,” says Tan, who claims they were the first to come up with the drive-through concept. “So we end up seeing others also doing the same thing. The competition will get fiercer but we will have to continue innovating or else it will not take very long for our competition to catch up.”

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While new players can increase their market share by offering competitively lower rates, Tan says a price war will ultimately harm the industry. “No one will gain or benefit when (pawn) interest rates are so low, and the borrowing cost (bank interest rates) are so high,” says Ng, emphasising that it is important to keep the pawnbroking interest at a healthy level and to try to offset the bank borrowing costs by growing its loan book.

In July 2022, Aspial announced its plans to consolidate its jewellery businesses under Maxi-Cash Financial Services Corporation. The enlarged entity was renamed Aspial Lifestyle as its consumer business would be significantly expanded. In addition to its existing pawnbroking, money lending, and retail and trading of pre-owned jewellery and branded merchandise businesses, Aspial Lifestyle will also own and operate the Lee Hwa and Goldheart jewellery brands.

In a media release on the consolidation exercise, Aspial CEO Koh Wee Seng says this strategic exercise will enable the Aspial Group to consolidate resources and leverage on economies of scale and other synergistic benefits and bring three “leading, renowned” retail brands — Maxi-Cash, Lee Hwa and Goldheart — under one entity. “It will transform the group’s retail business into a consumer lifestyle powerhouse and unlock a new stage of growth,” says Koh.

Ng was heading the Maxi-Cash business before the merger. Before Maxi-Cash, he was a senior director for the jewellery business at Aspial-Lee Hwa Jewellery.

“The culture at Maxi-Cash, Lee Hwa and Goldheart was somewhat similar as they are all under the Aspial Group umbrella. The amalgamation was smooth and drove a lot of synergies between all parties,” says Ng in an interview with The Edge Singapore.

“This amalgamation means increasing our bargaining power with our suppliers and merging certain backend functions to create synergies. But we still keep some functions separate to maintain brand differentiation.”

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Ng says that the gold market is currently “doing well” and has “healthy worldwide demand”. However, he does not expect big growth from the gold business as it is coming down from a peak. “There will still be some growth nevertheless, but just not as big as what we previously reported,” says Ng, who says the group is staying cautious and not actively seeking expansion in the gold business.

“We will still expand when the opportunity presents itself. We opened two new stores in the last 12 months. However, we will focus on the opportunity for higher sales and we are not focused on actively expanding. We want to maintain the business for now as we are not feeling super buoyant on the economy.”

Meanwhile, Goldheart on May 24 discovered that its e-commerce website was compromised due to illegal access. Amid its growing popularity, the brand has been a target of cyberattacks, which saw the personal information of about 42,000 customers being compromised.

The group later announced it had taken immediate steps to mitigate further illegal access by suspending its website, securing its systems and working with cybersecurity experts.

Ng says: “Preliminary findings suggest that personal data was compromised due to illegal and suspicious activities from an external party who has targeted Goldheart’s e-commerce website. We believe that we have taken reasonable and appropriate security measures to protect and adequately safeguard the personal data of our customers and will continue to do so. We are currently working closely with the authorities in this matter.”

Meaningful contribution

Although Maxion only has three pawnshops under its portfolio, it is expected to contribute meaningfully to Aspial Lifestyle’s overall earnings.

In FY2022 ended September 2022, Maxion’s net profit stands at RM4.6 million ($1.4 million). On the other hand, Aspial Lifestyle’s overall earnings for FY2022 ended December 2022 was $16 million, an increase of 11% y-o-y from FY2021.

“The pawnbroking business continues to see healthy growth as economic activity increases demand for short-term loans. With the acquisition of Maxion in Malaysia, the group expects our Malaysia pawnbroking operations to contribute positively to the group’s results in FY2023,” says Aspial Lifestyle in its FY2022 results report.

In FY2022, Aspial Lifestyle also saw a 41% y-o-y growth in revenue to $319.0 million. It declared an interim dividend of 0.4 cents per share, lower than the 0.6 cents per share in the previous year.

“Despite keen competition in Johor, the three Dr.Pajak stores have stood their ground and can keep their interest rates of 2% while still getting high-quality loans. Our loan book continues to grow despite keen competition with other pawnshops within the vicinity offering lower interest rates of 1%,” says Ng, adding that Dr.Pajak’s competitive edge, apart from its revolutionary drive-through counters, is in the intangibles like customer service and support.

In a May 23 unrated report by SAC Capital, analysts Lee Zheng Yew and Matthias Chan also note that Maxion’s management wants to create awareness that pawnshops are not only for short-term microfinancing but also as an alternative safe deposit box.

“From channel checks, the conventional way people store luxury goods is in safe deposits via banks or other services. However, securing a slot is not an easy and long process, and the customer needs to purchase insurance for the list of goods inside. Should some clients want to store their luxury goods safely and securely, a pawnshop could be the place,” say the analysts, noting that the pawnshops’ vaults are designed to be very secure.

“Dr.Pajak’s model doesn’t only cater to the B40 segment in the market but also those who do not need the short-term credit financing,” say the analysts. The B40 segment in Malaysia refers to the lower 40% income group in Malaysia, with a household income of less than RM4,850 a month.

Eventually, Maxion intends to grow its store count in Malaysia from the current eight (three Dr.Pajak and five Maxi-Cash) to at least 15 by the end of next year.

While Maxion carries out its aggressive expansion plans in Malaysia, Ng reveals there are plans for Maxion to seek a listing on Bursa Malaysia. However, there is no concrete timeline for this event but Ng says it is a goal for Maxion to work towards and will depend on the progress and outcome of its expansion plans.

Aspial Lifestyle banks on multi-pronged strategy, sees strong growth in Malaysia pawnshop JV

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