On golden pawn

WHEN you need a loan but are not on the radar of the traditional banking system, where do you go? The pawnbrokers.

That is why pawnbroking and gold trading company Well Chip Group Bhd is upbeat about its business prospects.

It says the segment it’s in remains an underserved one for near-term financing.

The rising gold price – a reflection of strong global demand for this precious metal – also bodes well for the company, group CEO Ng Hooi Lang says.

“The group will continue to focus on meeting the needs of our customers by ensuring we are able to meet their financing needs and grow our footprint to increase our geographical coverage,” she tells StarBiz 7.

Since being listed on the Main Market of Bursa Malaysia in July 2024, the company has expanded its operations to now reach 27 pawn shops and five gold retail shops nationwide.

The company is essentially in the money lending business, serving people who are normally ignored by the traditional banking system.

These people or companies pledge their personal assets to obtain loans from Well Chip.

Although the loans appear risky, Well Chip, licensed by the Housing and Local Government Ministry and regulated under the Pawnbrokers Act 1972, has said that its pawn loans have a default rate of around 7%-8%.

For the nine months ended Sept 30, 2025, the company made a net profit of RM61.9mil on sales of RM196.3mil, compared with a net profit of RM34.9mil on revenue of RM166.4mil for the same period a year earlier.

Ng says shareholders can expect the group and management to continue to deliver sustainable growth and profitability.

“During our initial public offering (IPO) in mid-2024, the group had committed to paying out 35% of our net profits as dividends for three financial years from our IPO year,” she says.

Ng says finding the suitable and right locations to open new branches remains one of the key challenges for the Johor Baru-based company.

“The availability of experienced staff and ensuring the group has sufficient cash capital to meet the needs of our customers is also another challenge.

“The group is continually identifying good locations and we provide training for new staff and regularly speak to our banks to ensure our funding needs are adequate,” she adds.

To be sure, a business like Well Chip would require well-trained staff who can minimise issues of unlawful transactions.

Cash capital is another issue as the company is largely dependent on loans to fund its business.

In terms of competition, Ng says all pawnbroking industry players compete with each other.

Getting noticed

“We differentiate ourselves by focusing on our service level and our competitive pawnbroking lending rates,” she adds.

On why gold-related stocks have hardly moved in tandem despite the commodity’s price rising steadily, Ng says the group is not in a position to comment on the share price movements of listed companies.

“Our group has been reporting good financial performance since IPO and we believe the investing community will notice this soon.”

While it was initially not covered by analysts, a couple of research houses have been taking note of Well Chip, starting with Maybank Investment Bank (Maybank IB) which initiated coverage on the company with a “buy” call last February.

In a recent report to clients, the investment bank’s research unit says it has revised upwards its net profit estimates for financial year ended Dec 31, 2025 (FY25) to FY27 by 11%, 8% and 4%, respectively.

The revisions reflect higher contributions from the pawnbroking business, driven by new pawnshops and a higher blended gross profit margin of 49% to 50%, up from 46% to 49% previously.

Well Chip plans to open seven new pawnshops – five in Johor and two in Melaka – by end-FY26. Meanwhile, the group has completed the acquisition of three pawnshops in Perak, it notes.

With this, Well Chip’s second-half 2025 earnings will be lifted by contributions from the four new pawnshops (approximately RM1.5mil per pawnshop), Maybank IB says.

Meanwhile, Kenanga Research believes that pawnbrokers will continue to be sought out as an alternative to conventional loans while being assessable to pockets of underserved communities.

“This coincides with the tightening of system approval rates from personal loans and credit card applications, where monthly averages fell from 41% and 63% in 2013 to 34% and 47% in 2024, respectively.”

It adds that strengthening gold prices bring higher pawn loan values for gold pledges, which are 90% of the group’s collateral.

Gold price touched an-time high of US$5,045 per ounce last Monday in Asia trade, extending its record-breaking rally as investors rushed to buy the commodity, seen as a “safe haven” in light of growing geopolitical and economic uncertainty. However, the price has been on a roller coaster ride since.

At last look, shares in Well Chip were at RM1.56 apiece, valuing the whole group at RM936mil.