Addressing Cash Flow and Financing Challenges Amid Business Expansion
ValueMax Group, a mainboard-listed company, reported a substantial increase in its loans and borrowings to S$610.5 million for the 2022 financial year. This marks a rise of S$167.9 million compared to the previous year and drew queries from the Singapore Exchange Securities Trading (SGX-ST).
The increase was reported alongside a 16.8% decline in earnings for the second half of 2022, which fell to S$19.2 million from S$23.1 million in 2021. Addressing SGX-ST’s concerns on 15 March, ValueMax clarified that the additional loans were primarily used to finance its growing pawnbroking and moneylending segments.
Growth in Business Segments Drives Borrowing
The company highlighted significant growth in its loan books for these businesses during FY2022, reflected in the rise of segment assets by S$45.6 million for pawnbroking and S$146.5 million for moneylending. This expansion necessitated higher working capital, leading to a net cash outflow from operating activities of S$163.4 million, despite a net profit position for the year.
ValueMax explained that its interest income from loans increases trade receivables as the business grows, resulting in temporary cash outflows. However, it pointed out that cash flow from operations before working capital adjustments rose to S$74.2 million in FY2022, compared to S$62.4 million the previous year.
Managing Payment Obligations and Cash Reserves
With cash and cash equivalents standing at S$6.3 million, ValueMax assured SGX-ST of its ability to meet significant payment obligations in the next 12 months. The company cited access to banking facilities, including a S$100 million unsecured commercial paper facility and a S$300 million multicurrency medium-term note programme.
ValueMax stated that it maintains only sufficient cash reserves to manage daily needs, aiming to minimise financing costs.
Stock Performance
ValueMax’s stock price remained steady at S$0.345 as of Wednesday. The group’s strategy reflects a focus on balancing expansion in its key business segments with prudent financial management to ensure long-term stability.
