Navigating the Headwinds: A Deep Dive into KOBAY TECHNOLOGY BHD’s Q3 FY2025 Performance
Greetings, fellow investors and market watchers! Today, we’re unboxing the latest financial report from KOBAY TECHNOLOGY BHD for its third financial quarter ended 31 March 2025. This report offers a crucial snapshot of the company’s performance, revealing both areas of resilience and segments grappling with market challenges. While the quarter saw a notable decline in profit, the year-to-date figures paint a more nuanced picture of growth. Let’s dive in and see what KOBAY’s latest numbers tell us.
Core Data Highlights: A Mixed Bag for the Quarter
KOBAY TECHNOLOGY BHD faced a challenging third quarter, with both revenue and profit before tax (PBT) experiencing a dip compared to the same period last year and the immediate preceding quarter. However, a broader look at the year-to-date performance shows underlying growth in revenue.
Quarterly Performance Snapshot (Q3 FY2025 vs. Q3 FY2024)
For the quarter, KOBAY reported:
Q3 FY2025
Revenue: RM81.4 million
Profit Before Tax (PBT): RM0.25 million
Basic Earnings Per Share (EPS): 0.22 sen
Q3 FY2024
Revenue: RM87.79 million
Profit Before Tax (PBT): RM7.65 million
Basic Earnings Per Share (EPS): 1.71 sen
This translates to a 7% decrease in revenue and a significant 97% decline in PBT compared to the corresponding quarter of the previous year. The basic earnings per share also saw a sharp drop from 1.71 sen to 0.22 sen.
Year-to-Date Performance (YTD FY2025 vs. YTD FY2024)
Looking at the cumulative performance for the nine months ended 31 March 2025, the picture is somewhat brighter on the top line:
YTD FY2025
Revenue: RM257 million
Profit Before Tax (PBT): RM13.6 million
Basic Earnings Per Share (EPS): 3.18 sen
YTD FY2024
Revenue: RM237.8 million
Profit Before Tax (PBT): RM16.3 million
Basic Earnings Per Share (EPS): 3.15 sen
Year-to-date revenue actually increased by 8%, indicating a positive trend over the longer period. However, PBT for the year-to-date declined by 17%, suggesting margin pressures have been a consistent theme. Interestingly, year-to-date EPS saw a slight improvement, rising from 3.15 sen to 3.18 sen.
Comparison with Preceding Quarter (Q3 FY2025 vs. Q2 FY2025)
When comparing the current quarter to the immediate preceding quarter (Q2 FY2025), KOBAY’s performance also saw a decline:
Q3 FY2025
Revenue: RM81.40 million
Profit Before Tax (PBT): RM0.25 million
Q2 FY2025
Revenue: RM83.09 million
Profit Before Tax (PBT): RM5.10 million
This represents a 2% decrease in revenue and a substantial 95% decline in PBT quarter-on-quarter, highlighting the immediate challenges faced by the group.
Segmental Performance: A Closer Look at the Engines of Growth (and Loss)
KOBAY’s diverse business units showed varied performance during the quarter:
Manufacturing Division
This core segment saw an 8% decline in revenue and a significant 70% drop in PBT compared to the same quarter last year. The primary culprits were a shift towards lower-margin product mixes, subdued demand for higher-margin products, and intensified pricing competition. Quarter-on-quarter, the manufacturing division’s PBT fell by 51% due to similar reasons, including the absence of higher-margin orders fulfilled in the previous quarter.
Property Development
The property division experienced a 10% decline in revenue and a 146% drop in PBT (resulting in a loss) compared to the same quarter last year. Lower sales conversion for the Langkawi project was a key factor. While the affordable housing project contributed some revenue, it wasn’t enough to offset fixed overhead costs. Quarter-on-quarter, revenue improved by 47% and PBT by 44%, but the division remained in a loss-making position for similar reasons.
Pharmaceutical & Healthcare
This division recorded a 9% decline in revenue and a staggering 323% drop in PBT (leading to a loss) compared to the same quarter last year. Strategic price adjustments to maintain market share amidst intense competition, regulatory price pressures, and higher logistics costs compressed margins. Quarter-on-quarter, despite a modest 1% revenue increase, PBT declined by 220% due to lower wholesale product sales and ongoing pricing pressures. Management noted a strategic focus on long-term market positioning over immediate profitability.
Asset and Investment Management
A bright spot in the report, this segment recorded a healthy 10% increase in revenue and a 47% increase in PBT compared to the same quarter last year. This was primarily driven by stronger performance in the hospitality segment, particularly higher occupancy rates in Langkawi. Quarter-on-quarter, revenue grew by 8% and PBT by 39%, largely due to this sustained strength in hospitality.
Geographical Revenue Distribution
| Region | 31.03.2025 (RM’000) | 31.03.2024 (RM’000) |
|---|---|---|
| Malaysia | 202,666 | 203,722 |
| Singapore | 22,652 | 6,810 |
| United States of America | 15,789 | 16,362 |
| Others | 16,237 | 10,909 |
| Total | 257,344 | 237,803 |
Revenue from Singapore saw a significant increase, while Malaysia remained largely stable and the USA saw a slight dip.
Financial Health Check
As of 31 March 2025, KOBAY’s total assets stood at RM617.595 million, up from RM596.624 million a year ago, indicating continued expansion. Total liabilities also increased to RM215.410 million from RM200.123 million. Group borrowings rose to RM131.038 million from RM118.068 million last year, with an increase observed in revolving credit and US Dollar denominated loans. The company’s capital commitments for property, plant, and equipment have notably decreased to RM0.519 million from RM2.463 million, suggesting a reduced immediate capital expenditure pipeline.
The company also noted that its effective tax rate for the current quarter was higher than the statutory rate, mainly because losses from certain subsidiaries could not be offset against taxable profits generated by others. This is a common challenge for diversified groups with varying profitability across their entities.
Risks and Future Prospects: Navigating the Path Ahead
Management remains cautiously optimistic about the group’s future, acknowledging both challenges and opportunities across its diverse segments.
Manufacturing Outlook
Despite the recent decline, the manufacturing division anticipates a gradual improvement in the coming months. Management expects modest sales order increases in FY2025, supported by stable demand in key markets and ongoing efforts to enhance operational efficiency. Strategic initiatives to diversify into the Contract Manufacturing sector and investments in advanced technologies are expected to drive long-term growth and stabilize performance.
Property Development Outlook
The outlook for property development in FY2025 remains positive, buoyed by ongoing infrastructure developments, government initiatives, and a revival in tourism, particularly in Langkawi and Penang Island. The division plans to strategically time new product launches to align with shifting buyer preferences, while also strengthening risk management practices and implementing disciplined cost control measures to preserve profitability.
Pharmaceutical & Healthcare Outlook
Management foresees sustained demand for pharmaceutical and healthcare products, driven by increasing health awareness, a focus on preventive care, and an aging population. However, inflationary pressures and higher living costs could impact consumer spending. To counter this, the division will broaden its product portfolio, explore underpenetrated market segments, and pursue operational efficiencies. The exploration of high-margin niche medical products and enhanced digital marketing strategies are also key to strengthening future earnings potential and brand positioning. The outlook for the remaining quarter of FY2025 is challenging, but the division aims to remain agile.
Overall, KOBAY’s business operations are subject to cyclical effects of the global electronics industries and volatility of real estate markets, which are inherent risks to their diversified portfolio.
No Dividend for the Quarter
It’s important for shareholders to note that the Board of Directors did not recommend any dividend for the financial quarter ended 31 March 2025, consistent with the same period last year.
Summary and Outlook
KOBAY TECHNOLOGY BHD’s Q3 FY2025 report reflects a challenging quarter, particularly in terms of profitability, stemming from a combination of lower-margin product mixes, subdued demand, and intense competition across several key segments. While the year-to-date revenue growth offers a silver lining, the significant drop in quarterly PBT underscores the immediate headwinds. The Asset and Investment Management division, driven by strong hospitality performance, continues to be a standout performer.
Looking ahead, KOBAY is actively implementing strategies to navigate these challenges, including diversifying its manufacturing base, strategically launching property projects, and enhancing its pharmaceutical product portfolio. These initiatives, coupled with a focus on operational efficiency and cost control, are crucial for the group to regain its profit momentum.
Key points to monitor moving forward include:
- The effectiveness of the manufacturing division’s diversification into Contract Manufacturing and its ability to secure higher-margin orders.
- Sales conversion rates for property development projects, particularly the Langkawi project, and the contribution from affordable housing.
- The success of strategic price adjustments and product portfolio expansion in the Pharmaceutical & Healthcare division in mitigating competitive and cost pressures.
- The sustained performance of the hospitality sector within the Asset and Investment Management division.
- The impact of global economic cycles and local market conditions on the group’s diverse business segments.
Final Thoughts
This quarter’s results for KOBAY TECHNOLOGY BHD highlight the complexities of managing a diversified business portfolio in a dynamic market environment. While the immediate quarter’s profit figures are concerning, the year-to-date revenue growth and the strategic measures being undertaken across its divisions suggest a company actively working to adapt and position itself for future stability. It appears to be a period of recalibration, where the focus shifts towards strengthening long-term market positioning over immediate quarterly gains in some segments.
What are your thoughts on KOBAY’s latest performance? Do you believe the company’s strategic initiatives will be enough to overcome the current market challenges and restore strong profit growth in the coming quarters? Share your perspectives in the comments below!
