A pawnshop operator that has been providing quick cash to Hongkongers since 1975 plans to raise up to HK$98 million to expand its footprint in the mortgage-loan business, targeting households and troubled small and medium-sized enterprises.
Oi Wah Pawnshop Credit, whose initial public offering is the first of its kind in the city, provides cash in return for valuables such as gold, jewellery, diamonds and the latest electronic gadgets. It charges interest rates of between 3.5 per cent and as much as 41.5 per cent on pawn loans and 15 per cent on mortgage loans.
"The lengthy and complicated credit-approval process at local banks has created opportunities for us," chairman and chief executive Edward Chan told a media briefing yesterday.
The firm posted negative net operating cash flow of HK$20.6 million in November, reverting from a positive cash flow of HK$8 million in February last year, while cash and cash equivalents dropped to HK$6.6 million from HK$9.6 million, reflecting a slowdown in loan receivables, the listing document says.
Chan, 41, who has led the firm since 2000, said it plans to use the capital to finance its mortgage-loan business through its pawnshops, some operating under the name of Kei Wah, in populous areas such as Wan Chai and Sheung Shui. In the latter, mainlanders and cross-border businessmen are major clients, owing to its location near the border.
Oi Wah operates 12 pawnshops from rented premises.
"We offer first mortgage loans on real estate and subordinated loans as well, representing a total book value of HK$70 million at present," Chan said.
He said mortgage loans surged to HK$67 million in November from HK$4 million in February 2010, and pawn loans grew to HK$414 million from HK$361 million over the period.
Although pawnshops should perform better in bad times, Chan said the business can weather both bad and good thanks to steady growth in overall household consumption.
Since it was established 37 years ago, Oi Wah has been providing short-term financing to Hong Kong residents including foreign domestic helpers, college students, and households.
It has a customer base of 39,000, of which 60 per cent are repeat customers.