A MEMBER OF THE TA GROUP
RESULTS UPDATE
Monday, August 25, 2025
FBMKLCI: 1,597.47
Sector: Technology
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Elsoft Research Berhad
Still Awaiting Meaningful Contribution from the Medical Segment
TP: RM0.34 (+13.3%)
Last Traded: RM0.30
BUY (ESG: ★★★)
Chan Mun Chun
Tel: +603-2167 9731
mcchan@ta.com.my
www.taonline.com.my
Review
- Excluding a net exceptional gain amounting to RM1.3mn, Elsoft’s IHFY25 reported a core net loss of RM0.9mn. The results fell short of our full-year earnings estimates of RM7.8mn. The variance was primarily attributed to slower-than-expected deliveries in the medical device segment.
- YoY, the group recorded a core net loss of RM0.9mn in IHFY25 as compared with a core profit of RM2.1mn, while revenue was 59.6% lower at RM3.4mn. The weaker earnings performance was mainly due to lower demand for automated test equipment.
- QoQ, the group managed to narrow the core net loss to RM0.4mn from RM0.6mn, despite revenue declining 11.1% to RM1.6mn. The improvement in bottom line was largely driven by lower cost of sales and higher contributions from its associate company. Meanwhile, the weaker revenue reflected lower demand for automated test equipment.
- Its balance sheet remains solid with zero debt and a net cash position of RM78.3mn or 11.3sen/share as at end-2QFY25.
Outlook
- The semiconductor segment, particularly within the automotive, general lighting, and smart device markets, is expected to remain subdued due to soft demand and cautious consumer spending. However, management expects earnings to improve in 2H2025, underpinned by increased deliveries from the medical device segment.
Impact
- Given the weaker-than-expected results, earnings forecasts for FY25/FY26/FY27 are cut by 38.4%/7.3%/6.8%, respectively, after factoring in lower sales for medical device segment.
Valuation & Recommendation
- After revising the earnings forecasts, we tweaked the target price lower from RM0.36 to RM0.34, based on 23x CY26 earnings. Maintain a Buy call on the stock.
- Key risks include weaker-than-expected demand for automated test equipment and medical devices, as well as geopolitical tensions that may weigh on economic growth and disrupt supply chains.
Share Information
Major Shareholders (%)
Forecast Revision
| FY25 | FY26 | |
|---|---|---|
| Forecast Revision (%) | (38.4) | (7.3) |
| Net profit (RMmn) | 4.8 | 10.2 |
| Consensus | ||
| TA’s / Consensus (%) | ||
| Previous Rating | Buy (Maintained) | |
| Consensus Target Price | ||
Financial Indicators
| FY25 | FY26 | |
|---|---|---|
| Net gearing (x) | Net Cash | Net Cash |
| CFPS (sen) | 1.1 | 1.2 |
| P/CFPS (x) | 26.8 | 25.2 |
| ROAA (%) | 4.4 | 9.0 |
| ROAE (%) | 4.8 | 10.6 |
| NTA/Share (RM) | 0.1 | 0.1 |
| Price/ NTA (x) | 2.1 | 2.2 |
Scorecard
| % of FY | ||
|---|---|---|
| vs. TA | (11.8) | Below |
| vs. Consensus |
Share Performance (%)
Source: Bloomberg
Table 1: Earnings Summary (RMmn)
| FYE Dec | FY23 | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|---|
| Revenue | 16.1 | 13.9 | 12.4 | 22.6 | 24.2 |
| EBITDA | 7.1 | 3.8 | 5.3 | 10.9 | 11.6 |
| EBITDA margin (%) | 44.2 | 27.1 | 42.8 | 48.4 | 48.1 |
| EBIT | 6.4 | 3.0 | 4.6 | 10.2 | 10.9 |
| PBT | 7.8 | 2.8 | 5.0 | 10.7 | 11.5 |
| Taxation | (0.8) | (0.6) | (0.3) | (0.5) | (0.6) |
| PAT | 7.0 | 2.2 | 4.8 | 10.2 | 10.9 |
| Core PAT | 6.5 | 3.0 | 4.8 | 10.2 | 10.9 |
| Core EPS (sen) | 0.9 | 0.4 | 0.7 | 1.5 | 1.6 |
| Core EPS growth (%) | (44.2) | (54.0) | 60.4 | 112.5 | 7.4 |
| PER (x) | 32.1 | 69.7 | 43.5 | 20.4 | 19.0 |
| DPS (sen) | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 |
| Dividend yield (%) | 6.7 | 6.7 | 6.7 | 6.7 | 6.7 |
Table 2: 2QFY25 Results Analysis (RMmn)
| FYE Dec (RMmn) | 2QFY24 | 1QFY25 | 2QFY25 | QoQ (%) | YoY (%) | 6MFY24 | 6MFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 3.8 | 1.8 | 1.6 | (11.1) | (58.2) | 8.4 | 3.4 | (59.6) |
| EBITDA | 1.1 | (0.3) | (0.2) | (24.3) | (118.9) | 2.5 | (0.5) | (119.1) |
| Dep. & amortisation | (0.2) | (0.2) | (0.2) | (1.1) | (23.7) | (0.5) | (0.4) | (23.1) |
| EBIT | 0.9 | (0.5) | (0.4) | (15.1) | (144.5) | 2.0 | (0.8) | (141.0) |
| Finance cost | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | – |
| Finance income | 0.1 | 0.0 | 0.0 | (7.4) | (56.1) | 0.1 | 0.1 | (55.6) |
| Associate | 0.4 | 0.1 | 0.1 | 117.6 | (65.0) | 0.2 | 0.2 | (8.9) |
| EI | 0.4 | 0.6 | 0.7 | 5.3 | 78.5 | 0.9 | 1.3 | 39.4 |
| PBT | 1.7 | 0.3 | 0.4 | 66.8 | (73.8) | 3.3 | 0.7 | (78.4) |
| Tax | (0.1) | (0.2) | (0.2) | (25.0) | 4.2 | (0.3) | (0.4) | 3.9 |
| MI | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm |
| PAT | 1.6 | 0.1 | 0.3 | 336.8 | (81.0) | 3.0 | 0.4 | (87.7) |
| Core PAT | 1.2 | (0.6) | (0.4) | (35.3) | (130.1) | 2.1 | (0.9) | (144.6) |
| Core EPS (sen) | 0.2 | (0.1) | (0.1) | (35.3) | (130.1) | 0.3 | (0.1) | (144.6) |
| DPS (sen) | 0.0 | 0.0 | 0.0 | nm | nm | 0.0 | 0.0 | nm |
Profitability ratio (%)
| pp | pp | pp | ||||||
|---|---|---|---|---|---|---|---|---|
| EBITDA margin | 28.5 | (15.1) | (12.9) | 2.2 | (41.4) | 29.7 | (14.1) | (43.7) |
| EBIT margin | 22.4 | (25.0) | (23.9) | 1.1 | (46.4) | 24.2 | (24.5) | (48.7) |
| PBT margin | 44.6 | 14.9 | 27.9 | 13.0 | (16.6) | 39.3 | 21.0 | (18.3) |
| Tax rate | 8.4 | 74.6 | 33.6 | (41.1) | 25.1 | 10.2 | 49.0 | 38.8 |
| Core PAT margin | 31.2 | (30.9) | (22.5) | 8.4 | (53.7) | 24.4 | (26.9) | (51.3) |
Source: Bloomberg, TA Securities
Source: Bloomberg, TA Securities
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
| Scoring | Environmental | Social | Governance | Average |
|---|---|---|---|---|
| ★★ | ★★★★ | ★★★ | ||
| Remark | Elsoft is committed towards improving environmental impact. However, there is room for it to improve on disclosure of progress with environmental initiatives across key metrics including energy consumption, greenhouse gas emissions, and water and waste management. | Elsoft is committed to uphold and protect employees’ rights (including foreign labour). Greater transparency on measures to monitor and assess employee satisfaction would bode well for its social score. Undertakes CSR initiatives. | Greater transparency on ESG initiatives and progress would bode well for Elsoft’s governance score. Balanced board representation (43% independent). However, board gender diversity is a weakness (29% females). There is also room for improvement for engagement with stakeholders including analysts and investors. |
ESG Rating Definitions
★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions.
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions.
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions.
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient.
★ (<20%): Minimal or no integration of ESG factors in operations and management.
ESG Rating Impact on Target Price
★★★★★ +5% premium to target price
★★★★ +3% premium to target price
★★★ No changes to target price
★★ -3% discount to target price
★ -5% discount to target price
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Monday, August 25, 2025, the analyst, Chan Mun Chun, who prepared this report, has interest in the following securities covered in this report:
(a) nil
Kaladher Govindan – Head of Research
TA SECURITIES HOLDINGS BERHAD 197301001467 (14948-M)
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