HO WAH GENTING BERHAD: Navigating Challenges in Q1 2025
Greetings, fellow investors! Today, we’re diving into the latest financial report from HO WAH GENTING BERHAD for the first quarter ended 31 March 2025. This report offers a candid look at the company’s performance, highlighting both the persistent challenges it faces and the strategic moves it’s making to adapt. While the numbers reflect a tough quarter, particularly with a significant increase in losses, it’s crucial to understand the underlying factors and the company’s forward-looking strategies. Let’s break down the key takeaways.
Key Highlight: The Group recorded a substantial increase in losses before taxation, moving from a profit in the comparative quarter to a significant loss, primarily driven by lower demand in its core segment and increased costs in its investment division. The company also announced a new private placement proposal after its previous notes issue was not passed.
Q1 2025 Financial Performance: A Closer Look
HO WAH GENTING BERHAD’s first quarter results for 2025 reveal a period of contraction, marked by a decline in revenue and a notable increase in net losses. Let’s compare the key figures against the same period last year:
Q1 2025 (RM’000)
Revenue: 53,761
Loss Before Taxation: (1,462)
Loss After Taxation: (1,885)
Loss Attributable to Owners: (1,836)
Basic Loss Per Share (sen): (0.92)
Q1 2024 (RM’000)
Revenue: 57,475
Profit Before Taxation: 370
Loss After Taxation: (210)
Loss Attributable to Owners: (210)
Basic Loss Per Share (sen): (0.10)
The Group’s revenue decreased by 6.5% to RM53.76 million from RM57.48 million in the corresponding quarter last year. This decline was predominantly due to lower demand from existing customers in its Moulded Power Supply Cord Sets Division, which accounts for approximately 99.53% of total revenue. Furthermore, the strengthening of the Malaysian Ringgit against the US Dollar also contributed to the lower reported revenue in Ringgit terms.
A significant shift occurred in profitability, with the Group reporting a loss before taxation of RM1.46 million, a stark contrast to the profit of RM0.37 million in the first quarter of 2024. This substantial reversal, representing a 495.1% decrease, can be attributed to several factors across its business segments:
- Moulded Power Supply Cord Sets Division: Despite being the main revenue driver, this division saw a lower profit before taxation of RM1.52 million (compared to RM2.17 million in Q1 2024). The report highlights a lower profit margin earned, alongside higher average copper prices impacting costs.
- Healthcare and Wellness Division: This segment, which resumed operations following the acquisition of a 55% stake in Advanced Apotheke Sdn Bhd (AASB) on March 5, 2025, recorded a higher loss before taxation of RM0.13 million (from RM0.01 million in Q1 2024).
- Investment Division: This division, comprising the company and its investment/inactive subsidiaries, reported a significantly higher loss before taxation of RM2.95 million (compared to RM1.79 million in Q1 2024). This was largely due to increased consultancy fees and higher finance costs.
Financial Health: Balance Sheet and Cash Flow
Looking at the balance sheet as of 31 March 2025, there are notable movements:
| Item | 31 March 2025 (RM’000) | 31 December 2024 (RM’000) | Change (RM’000) | Percentage Change (%) |
|---|---|---|---|---|
| Non-current assets | 40,127 | 39,805 | 322 | 0.8 |
| Current assets | 121,971 | 100,624 | 21,347 | 21.2 |
| Current liabilities | (68,103) | (44,173) | 23,930 | 54.2 |
| Non-current liabilities | (11,963) | (12,025) | (62) | (0.5) |
| Total equity | (82,032) | (84,231) | (2,129) | (2.5) |
Current assets saw a significant increase of 21.2%, primarily driven by a rise in inventories and other receivables. However, current liabilities surged by 54.2%, mainly due to increased trade payables, short-term loans, and trade financing borrowings, indicating higher operational leverage and short-term debt. Total equity decreased by 2.5%, reflecting the comprehensive loss for the period.
Cash flow from operating activities remained negative, with a net cash outflow of RM14.47 million, a substantial increase from RM5.16 million in the prior year. This highlights the working capital intensity of the business, particularly with increased inventories. The Group relied on financing activities, drawing down RM17.06 million, primarily from trade financing facilities and short-term loans, to manage its liquidity.
Risks and Prospects: Navigating a Challenging Landscape
The Board of Directors acknowledges the challenging environment ahead, particularly for its Moulded Power Supply Cord Sets Division. Several headwinds are identified:
- High Working Capital Requirements: The nature of the business demands significant capital for operations.
- Intense Competition: The US market, a key region for the Group, is highly competitive.
- Rising Costs: Inflationary pressures in Indonesia, including compulsory annual wage increments, rising material and component costs, and high copper prices, are squeezing margins.
- Increased Logistics Costs: Higher shipping and freight charges add to operational expenses.
Beyond internal and industry-specific challenges, the global economic outlook remains uncertain, with potential impacts from USA tariff rates, recession fears in the USA, and escalating geopolitical tensions. These external factors could further dampen demand and disrupt supply chains.
To counter these unfavorable conditions, the Moulded Power Supply Cord Sets Division plans to focus on lean manufacturing processes to enhance operational productivity, improve efficiencies, and ensure better product quality, aiming to bolster its competitive edge and attract more customers.
The Group explicitly states that it anticipates another challenging operating and financial performance for the financial year ending 31 December 2025. Nevertheless, the Board remains committed to exploring viable, synergistic, and profitable business ventures to improve the Group’s overall performance in the long run. The recent acquisition of a 55% stake in Advanced Apotheke Sdn Bhd (AASB) for its Healthcare and Wellness Division, despite currently incurring losses, signifies a strategic move to diversify revenue streams.
Corporate Developments: A Mixed Bag
The company also saw significant corporate activity during the quarter. The proposed issuance of Redeemable Convertible Notes with an aggregate principal amount of up to RM60.00 million was not passed at the Extraordinary General Meeting held on April 8, 2025. This outcome means the company will need to seek alternative financing. Subsequently, on April 22, 2025, the company proposed a private placement of up to 20,554,700 new ordinary shares, representing 10% of its issued shares, with a listing application submitted to Bursa Malaysia Securities Berhad on May 5, 2025. This private placement will be crucial for the company’s funding needs and future strategic initiatives.
Summary and
HO WAH GENTING BERHAD’s Q1 2025 report paints a picture of a company grappling with a challenging operating environment. While revenue saw a modest decline, the significant increase in losses before taxation underscores the pressures from rising costs and lower margins in its core business, compounded by higher expenses in its investment division. The company’s strategic acquisition in the healthcare sector and its focus on operational efficiencies are positive steps, but the immediate outlook remains cautious, as indicated by the Board itself.
Key risk points to consider from this report include:
- Sustained Profitability Challenges: The core Moulded Power Supply Cord Sets Division is facing demand issues and rising input costs, impacting its profitability.
- Higher Operating Expenses: Increased consultancy fees and finance costs in the Investment Division are contributing to the overall losses.
- Working Capital Management: The substantial increase in current liabilities and reliance on short-term financing indicate potential liquidity pressures.
- Economic Headwinds: Broader global economic uncertainties and geopolitical tensions could further impact demand and operational costs.
- Financing Needs: The failure of the Proposed Notes Issue highlights the ongoing need for funding, making the success of the Proposed Private Placement critical.
The company’s efforts to streamline operations and diversify into healthcare are commendable, but these initiatives will require time to yield substantial positive results. Investors should closely monitor the execution of these strategies and the effectiveness of cost control measures in the face of persistent market challenges.
As we look ahead, HO WAH GENTING BERHAD is clearly at a pivotal juncture, navigating a complex economic landscape while trying to build new pillars of growth. Do you think the company’s strategies, particularly in lean manufacturing and healthcare diversification, will be enough to turn the tide in the coming quarters? Share your thoughts in the comments below!
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