TONG HERR RESOURCES BERHAD: A Deep Dive into Q1 2025 Performance – Growth Amidst Shifting Sands?
Greetings, fellow Malaysian retail investors! Today, we’re unboxing the latest quarterly report from TONG HERR RESOURCES BERHAD for the period ended 31 March 2025. This report offers a fascinating glimpse into the company’s financial health, showcasing impressive top-line and bottom-line growth. However, as with any financial report, a deeper look reveals areas that warrant closer attention, particularly concerning cash flow dynamics.
Let’s delve into the numbers to understand what’s driving TONG HERR’s performance and what it might mean for its future trajectory.
Core Data Highlights: Strong Top-Line Growth and Profitability Surge
TONG HERR RESOURCES BERHAD delivered a robust performance in the first quarter of 2025, demonstrating significant growth across key profitability metrics. This signals healthy demand for its products and effective cost management in certain areas.
Revenue Growth
The company’s revenue saw a commendable increase, reflecting positive market reception or expanded operations.
Q1 2025 Revenue:
RM153,750,000
Q1 2024 Revenue:
RM130,845,000
This represents a substantial 17.51% increase compared to the same period last year, a strong indicator of business expansion.
Gross Profit and Profit Before Tax
The growth in revenue translated directly into a significant boost in gross profit and pre-tax earnings, showcasing improved operational efficiency.
Q1 2025 Gross Profit:
RM11,945,000
Q1 2024 Gross Profit:
RM8,026,000
Gross Profit soared by 48.83%. Similarly, Profit Before Tax jumped from RM5,997,000 in Q1 2024 to RM7,873,000 in Q1 2025, marking a solid 31.28% increase.
Net Profit and Earnings Per Share (EPS)
The most impressive highlight for shareholders is the significant surge in net profit attributable to owners and the resulting earnings per share.
Q1 2025 Net Profit (Attributable to Owners):
RM6,007,000
Q1 2024 Net Profit (Attributable to Owners):
RM2,840,000
Net profit attributable to owners of the company more than doubled, increasing by an astounding 111.51%. This translated directly to Basic Earnings Per Share (EPS) of 3.91 sen for Q1 2025, a significant leap from 1.85 sen in Q1 2024, representing a 111.35% improvement.
Financial Health Check: Balance Sheet and Cash Flow Dynamics
While the profit and loss statement painted a rosy picture, a glance at the balance sheet and cash flow statement provides a more comprehensive view of the company’s financial health.
A Closer Look at the Balance Sheet
As of 31 March 2025, TONG HERR’s balance sheet shows a stable financial position with slight increases in total assets and equity compared to 31 December 2024.
Total Assets (31 Mar 2025):
RM690,312,000
Total Assets (31 Dec 2024):
RM684,354,000
Total Equity (31 Mar 2025):
RM598,579,000
Total Equity (31 Dec 2024):
RM592,246,000
Net assets per share also saw a slight increase from 350 sen to 353 sen. A notable change within current assets was an increase in inventories to RM337,031,000 from RM327,612,000, suggesting either anticipation of future sales or a slower inventory turnover. Receivables also increased. On the liabilities side, current loans and borrowings saw a significant jump to RM65,785,000 from RM41,177,000.
Decoding the Cash Flow Statement
The cash flow statement reveals a critical shift in the company’s liquidity generation. While profitability improved, operating cash flow turned negative.
Q1 2025 Net Cash (Used In) Operating Activities:
(RM20,836,000)
Q1 2024 Net Cash Generated From Operating Activities:
RM14,068,000
This substantial swing from a positive RM14,068,000 to a negative RM20,836,000 is primarily attributed to significant changes in working capital, specifically an increase in inventories and receivables, coupled with a decrease in payables. This means that despite strong sales, more cash is being tied up in operations.
Investing activities show an increase in capital expenditure, with RM7,130,000 spent on acquiring property, plant, and equipment, up from RM3,288,000 in the prior year. This indicates ongoing investments in expanding or upgrading operational capacity.
To compensate for the negative operating cash flow and increased investments, the company relied on financing activities, primarily through a net increase in short-term loans and borrowings of RM24,910,000. This explains the rise in current borrowings on the balance sheet.
Navigating Challenges and Future Prospects
TONG HERR’s Q1 2025 report presents a mixed bag. The impressive revenue and profit growth clearly demonstrate strong operational performance and market demand for its offerings. This suggests that the company’s core business is thriving and capable of generating substantial earnings.
However, the negative operating cash flow is a point to monitor. While it could be a temporary situation due to strategic inventory buildup in anticipation of future sales or a timing difference in collections/payments, a prolonged negative trend could impact liquidity and increase reliance on external financing. The increase in borrowings, while enabling investment and covering cash shortfalls, also leads to higher finance costs, which could impact future profitability if not managed effectively.
Looking ahead, the continued investment in property, plant, and equipment signals TONG HERR’s commitment to growth and potentially increasing production capacity or efficiency. The company’s ability to maintain its sales momentum while effectively managing its working capital and debt levels will be crucial. Investors will be keen to see if the robust earnings growth can translate into positive operating cash flow in subsequent quarters, reducing the reliance on debt to fund operations.
Summary and Outlook
In summary, TONG HERR RESOURCES BERHAD delivered an outstanding Q1 2025 from a profitability standpoint, with significant double-digit growth in revenue, gross profit, net profit, and EPS. This highlights the strength of its underlying business and market position.
However, the quarter also revealed a notable shift in cash flow dynamics, with operating activities consuming cash rather than generating it. This was offset by increased borrowings, which funded both operations and capital expenditures aimed at future growth. Key points to consider include:
- Strong revenue and profit growth indicating healthy demand and operational efficiency.
- Significant increase in earnings per share, reflecting enhanced shareholder value from current operations.
- A shift to negative operating cash flow, primarily due to working capital changes, which warrants close monitoring.
- Increased reliance on borrowings to fund operations and investments, leading to higher finance costs.
- Continued investment in fixed assets, suggesting long-term growth ambitions.
The coming quarters will be critical to observe how TONG HERR manages its working capital and if its strong earnings can translate into positive cash flow from operations. This balance between profitability and liquidity will be key to sustainable growth.
What are your thoughts on TONG HERR’s latest performance? Do you believe the company can sustain its impressive profit growth while improving its cash flow position in the upcoming quarters? Share your insights in the comments section below!
