There’s a new business opportunity offering a net interest margin of more than 42%. And it’s not a Ponzi scheme (we think), and it’s not the mafia (we think?). It’s a chain of pawnshops looking at an IPO.

According to its prospectus to the Hong Kong stock exchange, Oi Wah, which operates 12 pawnshops in Hong Kong, has enjoyed a net interest margin of more than 42% for each of the past three financial years on its pawn loans. That’s pretty spectacular, compared to blue-chip lender Bank of East Asia Ltd., which reported its full-year 2012 results Tuesday, with a NIM of 1.7% in the second-half of the year.

The company mainly provides short-term secured financing including both pawn loans and mortgage loans, according to its prospectus. Pawn loans are collateralized against personal properties such jewelry.

The company says in its prospectus that despite the high level of concentration of banks in Hong Kong, non-bank lenders such as pawnshops are attractive because they enjoy greater flexibility in terms of their loan sizes and types of collateral, as they are not subject to the same restrictions imposed by the Hong Kong Monetary Authority….

Based on its indicative price range of HK$0.75 to HK$0.98, Oi Wah is pitching its shares at 5.6 times to 7.4 times forecast price to earnings, which appears attractive. However, the paradox for its IPO is that the funds raised are intended to further develop its mortgage-loan business, which would see its mouth-watering NIM inevitably take a hit, given the company will then be competing heads-on with traditional lenders including banks.

Pawn Shop Chain Seeks Hong Kong Listing [WSJ Deal Journal blog]

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Comments (8)

  1. Posted by UBS Blogger | February 27, 2013 at 4:38 PM

    Wow Shazar, way to really add some value to that post.

  2. Posted by Guest | February 27, 2013 at 4:40 PM

    Shazer, that headline actually made me crack a smile.
    Get well soon (I'm assuming you're sick in some fashion).

  3. Posted by Burger Flipper | February 27, 2013 at 4:43 PM

    The copy paste king strikes again!

  4. Posted by MattPawnedItOff | February 27, 2013 at 4:45 PM

    Oi Wah are there no charts and graphs in this post?

  5. Posted by asianbankingsensation | February 27, 2013 at 4:49 PM

    ching chong ling long ting tong shazar suck my ding dong

  6. Posted by velvet melvin | February 27, 2013 at 4:52 PM

    Shattered Hopes and Dreams to be Quoted "Every Time I See My Father, Shazar Sr., Who Still Can't Bear to Make Eye Contact with Me"

    There, I fixed it. Your father must be a reader of your blog.

  7. Posted by PermaGuestII | February 27, 2013 at 5:19 PM

    Finally past (100p) I see.

  8. Posted by asianbankingsensation | February 27, 2013 at 5:29 PM

    Takes effort. Unlike what shazar's doing. hope he's not getting paid