THE UNDERVALUED: MAXI-CASH

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Technicals

Looking at the Daily Chart of Maxi-cash a bullish rectangle has formed. Bullish rectangles are easier to identify than some other patterns such as pennants, the price rises in a strong uptrend and then starts to consolidate between temporary support and resistance levels.

It continues to move sideways, bouncing between these two parallel lines and forming a box-like shape that gives the pattern its name. The price then breaks out above the upper resistance level and continues its uptrend.

How to trade the Bullish triangle (Method 1)

1. As soon as a candlestick has closed above the rectangle's upper parallel line (the resistance level), enter your trade with a long (buy) order. Entry

2. Place your stop loss just underneath the rectangle's lower parallel line (the support level). Stop Loss

3. Measure the height of the rectangle and then place your profit target the same distance above the top of its upper parallel line. Take Profit

How to trade the Bullish triangle (Method 2)

1. As with method 1, wait for a candlestick to close above the upper parallel line, breaking the rectangle's resistance. Then, wait for the price to retest the upper line – this broken resistance level now turns into a support – and place your buy order. Entry

2. Place your stop loss just underneath the rectangle's upper parallel line (the old resistance level that has now turned into a support) Stop Loss

3. As with method 1, measure the height of the rectangle and then place your profit target the same distance above the top of its upper parallel line. Take Profit

Fundamentals

Maxi-Cash (5UF.SI) is a leading pawnbroker to consumers in Singapore. The company was incorporated in Singapore on 10 April 2008 as a private limited Currently, the company operates as a subsidiary of Aspial Corporation Limited, an entity listed on the Official List of the Singapore Exchange Securities Trading Limited. On 13 April 2012, Maxi Cash went public through an IPO, offering financial services in the form of pawnbroking and the retail and trading of pre-owned jewellery and watches through pawnshops and retail outlets.

In its latest financial report ending on 30 June 2020, earnings per share jumped a whopping 80%, from $0.00054 to $0.00097. Revenue have also been steadily increasing from year 2015 to year 2020, from $121.05 million in year 2015 to $218.48 million in year 2020.

On 29 December 2020, Maxi Cash announced a share buyback of 626,900 shares, costing them $106,605, or about 0.06% of the available shares in the market. This is not new as Maxi Cash have been buying back its shares since year 2017. One golden rule of thumb is when companies feel that their stock price is undervalued, they will buy back shares in the market. The opposite is also true, when companies feel that their share price is overvalued, they will issue new shares. This is evident in the P/E ratio of Maxi-Cash, which is only at 9.07 at the time of writing.

One important thing to note is the dividend yield of Maxi-Cash. At a current dividend yield of 13.31% and a forward yield of 14.71%, Maxi-Cash's current valuation seems severely undervalued. This yield easily beats out more than 95% of all the listed companies in the SGX. However, it is also noteworthy that Maxi-Cash is not a blue chip and thus might shun away many investors. However, we believe that Maxi-Cash will continue to generate solid profit margins and increasing its revenues. In our opinion, the benefits outweighs the risk of buying into a small cap.

Conclusion: Based on the Technicals and Fundamentals we are bullish on Maxi-Cash.