Nationgate Holdings Berhad’s Q1 2025: A Deep Dive into Record Revenue and Strategic Shifts
Good morning, fellow Malaysian retail investors! Nationgate Holdings Berhad (NGH), a prominent player in Malaysia’s Electronic Manufacturing Services (EMS) industry, has just released its unaudited interim financial report for the first quarter ended 31 March 2025. This report paints a picture of explosive revenue growth and significant strategic movements, but also highlights areas that warrant closer attention. Let’s break down the key takeaways that could shape NGH’s journey ahead.
The headline? NGH recorded a staggering 1271% surge in revenue for Q1 2025 compared to the same period last year, alongside a robust 156.5% increase in profit attributable to owners. This impressive performance is further underscored by the announcement of a proposed first interim dividend for the current financial year, signaling confidence in future prospects.
Unpacking the Financial Performance: A Quarter of Remarkable Growth
NGH’s Q1 2025 results showcase a period of substantial expansion, primarily driven by a surge in demand from the Data Computing segment. Here’s a closer look at the key financial figures:
Revenue and Profitability Soar Year-on-Year
Comparing the first quarter of 2025 against the corresponding period in 2024 reveals a dramatic uplift across the board:
Q1 2025
- Revenue: RM2,838.2 million
- Gross Profit: RM101.1 million
- Profit Before Tax: RM74.5 million
- Profit After Tax: RM53.6 million
- Profit Attributable to Owners: RM53.9 million
- Basic EPS: 2.37 sen
Q1 2024
- Revenue: RM207.0 million
- Gross Profit: RM34.3 million
- Profit Before Tax: RM22.3 million
- Profit After Tax: RM20.9 million
- Profit Attributable to Owners: RM21.0 million
- Basic EPS: 1.01 sen
As evident, revenue exploded by approximately 1271%, jumping from RM207.0 million to RM2,838.2 million. This phenomenal growth translated directly into profitability, with gross profit surging by 195.0% and profit before tax increasing by a remarkable 233.5%. Profit attributable to owners of the Company also saw a significant 156.5% increase, boosting basic earnings per share by 134.7%.
However, it’s worth noting that despite the impressive top-line growth, the gross profit margin experienced a decrease, particularly within the data computing segment. This was attributed to the significant cost of key components, a factor that investors should keep an eye on as NGH scales its operations.
Quarter-on-Quarter Performance: A Slight Dip After a Strong Run
While the year-on-year figures are outstanding, a look at the immediate preceding quarter (Q4 2024) shows a slight moderation:
Q1 2025
- Revenue: RM2,838.2 million
- Profit Before Tax: RM74.5 million
Q4 2024
- Revenue: RM3,031.6 million
- Profit Before Tax: RM78.9 million
Revenue for Q1 2025 decreased by 6.4% compared to Q4 2024, largely due to a RM202.2 million reduction in revenue from the Data Computing segment. Consequently, profit before tax also saw a 5.6% decrease. This quarter-on-quarter dip was influenced by factors such as realised foreign exchange losses, fixed asset write-offs, and fair value losses on derivative financial instruments, highlighting the dynamic nature of NGH’s operating environment.
Segmental Contributions: Data Computing Leads the Charge
The report details how NGH’s revenue is segmented by customer and geography. The Data Computing segment was undoubtedly the powerhouse, seeing an astronomical increase in revenue from RM48.1 million in Q1 2024 to RM2,659.9 million in Q1 2025. This massive shift signifies a strong strategic focus and success in this high-growth area.
Geographically, Malaysia and Singapore were the primary drivers of this growth, with revenue from Malaysia skyrocketing from RM123.8 million to RM2,194.6 million, and Singapore from RM41.4 million to RM582.9 million. This indicates a significant expansion of domestic and regional operations.
Financial Health: Increased Leverage and Working Capital Needs
A review of the balance sheet reveals significant changes, particularly in working capital and leverage:
| Metric | As at 31 Mar 2025 (RM’000) | As at 31 Dec 2024 (RM’000) | Change (%) |
|---|---|---|---|
| Total Assets | 4,938,049 | 3,737,219 | +32.1% |
| Total Liabilities | 3,939,477 | 2,765,365 | +42.5% |
| Inventories | 2,230,834 | 899,947 | +147.9% |
| Current Borrowings | 1,833,708 | 960,742 | +90.9% |
| Gearing Ratio | 1.88 times | 1.03 times | +82.5% |
The substantial increase in total assets and liabilities, especially inventories and current borrowings, reflects the significant scaling up of operations. While higher inventories can indicate anticipation of future demand, it also ties up capital. The gearing ratio has notably increased from 1.03 times to 1.88 times, suggesting higher financial leverage. This is a crucial metric for investors to monitor, as increased debt can impact financial flexibility.
Cash Flow: Focus on Operational Efficiency
The cash flow statement shows that net cash used in operating activities for Q1 2025 was RM898.6 million, a significant shift from the RM0.5 million generated in the same period last year. This was primarily driven by the substantial increase in inventories. While financing activities generated RM912.2 million, largely from increased borrowings to fund operations and investments, investors should assess the sustainability of this operational cash outflow in the long term.
Risks and Prospects: Navigating the E&E Landscape
The Malaysian E&E industry continues to be a cornerstone of the nation’s economic growth. NGH, as a key player, is well-positioned to benefit from government initiatives like the Supply Chain Resilience Initiative and the New Investment Incentive Framework under Budget 2025. The budget’s focus on talent development and a RM1 billion fund for high-value activities like IC design further bolsters the sector’s outlook.
Despite geopolitical tensions and trade disputes, NGH remains optimistic. The company anticipates notable developments in the EMS industry, driven by:
- Manufacturing Shift: More operations are expected to move out of China, potentially benefiting Malaysian EMS providers like NGH.
- Technological Advancements: Continuous innovation in technology creates new opportunities for EMS providers.
- Digital Transformation: The ongoing global push for digital transformation fuels demand for electronic products.
- Data Center Demand: Increased inquiries from data center providers indicate a growing need for NGH’s services in this critical area.
The Board of Directors is optimistic about the Group’s future prospects, barring any unforeseen circumstances.
Dividends: Returning Value to Shareholders
NGH has demonstrated its commitment to shareholder returns. Following a special single-tier dividend of 1 sen per ordinary share and a final single-tier dividend of 0.25 sen for FY2024, the company has now proposed a first single-tier interim dividend of 0.25 sen per ordinary share for the financial year ending 31 December 2025. This consistent dividend payout is a positive sign for investors.
Summary and
Nationgate Holdings Berhad’s Q1 2025 results are a testament to its significant growth trajectory, particularly within the burgeoning Data Computing segment. The remarkable increase in revenue and profits, coupled with strategic positioning within a supportive E&E industry, paints a promising picture. The company’s commitment to returning value to shareholders through dividends is also a positive highlight.
However, it’s essential for investors to consider the following key points:
- The substantial increase in inventories and borrowings, leading to a higher gearing ratio and negative operating cash flow, indicates increased working capital needs and financial leverage.
- The decreased gross profit margin in the high-growth Data Computing segment due to key component costs requires close monitoring.
- Exposure to realised foreign exchange losses and fair value losses on derivative financial instruments can impact profitability.
- The broader geopolitical tensions and trade disputes continue to pose an underlying risk to global supply chains and demand.
Looking ahead, NGH’s strategy to capitalise on the shift in manufacturing, technological advancements, and the growing demand from data centers positions it for continued expansion. While the financial results are strong, a deeper understanding of the underlying operational dynamics and financial health indicators will be key to assessing its long-term sustainability.
What are your thoughts on Nationgate Holdings Berhad’s latest performance? Do you believe the company can sustain this impressive growth momentum, especially with the increased leverage and working capital demands? Share your views in the comments below!
