Malaysian retail investors, get ready to dive into the latest financial pulse of EDARAN BERHAD! The company has just released its unaudited results for the third quarter ended 31 March 2025 (3Q FY2025), and while the headlines boast impressive revenue growth and a strong cash flow turnaround, a deeper look reveals some critical nuances, particularly concerning rising finance costs and strategic corporate actions.
This report offers a comprehensive snapshot of Edaran’s performance, highlighting its robust revenue expansion, significant improvements in operational cash flow, and a proactive approach to capital management. It’s a blend of strong growth drivers and areas that warrant closer attention, painting a picture of a company navigating its growth trajectory amidst evolving financial landscapes.
Core Data Highlights: A Tale of Growth and Costs
Edaran Berhad’s latest financial report showcases a compelling narrative of growth, particularly in its top-line performance. However, a closer examination reveals that while revenue and gross profit surged, increased finance costs put a squeeze on the net profit for the quarter. Let’s break down the numbers.
Third Quarter (3Q FY2025) Performance Snapshot
For the individual quarter ended 31 March 2025, Edaran demonstrated significant revenue growth compared to the same period last year, indicating strong business activity. However, higher finance costs impacted the bottom line.
Current Quarter (31/03/2025)
Revenue: RM34,321,000
Profit Before Taxation (PBT): RM2,216,000
Profit After Taxation (PAT): RM966,000
Earnings Per Share (EPS): 1.67 sen
Corresponding Quarter (31/03/2024)
Revenue: RM23,523,000
Profit Before Taxation (PBT): RM1,805,000
Profit After Taxation (PAT): RM1,175,000
Earnings Per Share (EPS): 2.03 sen
Revenue for the quarter saw a substantial increase of approximately 45.9% compared to the corresponding quarter last year. Profit Before Taxation also rose by about 22.8%. However, despite the higher PBT, Profit After Taxation experienced a decrease of roughly 17.8%, largely due to a significant jump in finance costs, which escalated from RM132,000 to RM2,218,000. This substantial increase in finance costs, which can stem from higher interest rates or increased borrowings, effectively offset a portion of the operational gains.
Year-to-Date (9M FY2025) Performance Overview
Looking at the cumulative nine-month period, Edaran’s performance paints a more broadly positive picture, with strong growth across revenue, gross profit, and overall profitability, despite the persistent challenge of finance costs.
Current Year To Date (31/03/2025)
Revenue: RM99,888,000
Profit Before Taxation (PBT): RM5,078,000
Profit After Taxation (PAT): RM2,747,000
Earnings Per Share (EPS): 4.74 sen
Corresponding Year To Date (31/03/2024)
Revenue: RM70,442,000
Profit Before Taxation (PBT): RM3,203,000
Profit After Taxation (PAT): RM1,773,000
Earnings Per Share (EPS): 3.07 sen
For the nine months ended 31 March 2025, Edaran’s revenue soared by an impressive 41.8% to RM99.888 million. This robust top-line growth translated into a 58.5% increase in Profit Before Taxation and a healthy 54.9% rise in Profit After Taxation, demonstrating significant operational leverage over the longer period. Despite finance costs for the nine months reaching RM7.059 million (up from RM601,000), the company’s overall operational efficiency managed to drive substantial cumulative profit growth.
Segmental Performance: IT Leads the Way
Edaran’s performance is predominantly driven by its Information Technology (IT) segment. For the current year-to-date, the IT segment contributed RM103.198 million in revenue and a strong RM15.997 million in profit. In contrast, the Telecommunications and Lifestyles segments reported losses, while the “Others” segment contributed a smaller profit. This highlights the critical reliance on the IT business for the Group’s overall profitability.
Financial Health and Cash Flow Turnaround
Beyond the income statement, Edaran’s balance sheet and cash flow statement reveal significant shifts in its financial health. As at 31 March 2025, the company’s total assets stood at RM197.301 million, with total equity at RM31.593 million, showing a slight increase from RM30.583 million as of 30 June 2024.
A notable improvement is seen in the company’s liquidity. Trade receivables decreased significantly from RM44.612 million to RM18.838 million, indicating more efficient collection of payments. Concurrently, deposits with licensed banks surged from RM2.088 million to RM32.511 million, drastically boosting the company’s cash reserves and overall liquidity position.
The cash flow statement presents a remarkable turnaround. Net cash generated from operating activities swung from a deficit of RM6.685 million in the corresponding period last year to a strong positive of RM41.340 million for the nine months ended 31 March 2025. This significant improvement in operational cash generation is a testament to the company’s ability to convert its revenue growth into tangible cash, strengthening its financial foundation despite higher finance costs impacting reported profits.
Risks, Prospects, and Strategic Moves
Management’s outlook for Edaran Berhad remains positive, with expectations for the Group’s financial performance to remain strong in the subsequent quarters. This optimism likely stems from the robust revenue pipeline and the dominant performance of its IT segment.
However, several factors warrant ongoing monitoring. The most prominent is the escalating finance costs. While the company’s operational cash flow is healthy, the increasing burden of interest payments could continue to pressure net profitability if not effectively managed. The reliance on the IT segment also presents a concentration risk; any slowdown in this sector could significantly impact overall performance.
From a strategic perspective, Edaran is undertaking a significant corporate action: a proposed reduction of its issued share capital of up to RM52 million. This Proposed Capital Reduction, approved by shareholders on 26 March 2025 and awaiting confirmation from the Companies Commission of Malaysia, is a strategic move that could optimize the company’s capital structure, potentially leading to a more efficient use of capital or preparing for future corporate developments.
Regarding shareholder returns, Edaran paid an interim single-tier dividend of 3.0 sen per ordinary share, amounting to RM1.737 million, on 7 February 2025 for the financial year ending 30 June 2025. This demonstrates a commitment to returning value to shareholders.
Summary and
Edaran Berhad’s latest quarterly report paints a picture of a company with strong top-line momentum and a significant turnaround in operational cash flow. The Information Technology segment continues to be the powerhouse, driving substantial revenue and profit growth. This robust operational performance is a key positive takeaway from the report, indicating healthy underlying business activities.
However, the sharp increase in finance costs is a notable concern that has impacted the net profit for the quarter, even as pre-tax profit improved. This highlights the importance of monitoring the company’s debt management and interest rate exposure. The proposed capital reduction is a strategic move that could reshape the company’s financial structure, and its implications on future earnings and shareholder value will be worth observing.
Key points to consider from this report include:
- Robust Revenue Growth: Significant increases in both quarterly and year-to-date revenue indicate strong demand and market penetration, particularly in the IT segment.
- Impressive Cash Flow Generation: The massive positive swing in cash generated from operating activities is a crucial sign of financial health and operational efficiency.
- Rising Finance Costs: While PBT is up, the surge in finance costs is a key factor impacting net profit, warranting close attention to the company’s borrowing costs and debt levels.
- Segment Concentration: The heavy reliance on the IT segment means its performance will continue to be the primary determinant of the Group’s overall financial health.
- Strategic Capital Restructuring: The ongoing capital reduction proposal is a significant corporate action that could influence the company’s future financial flexibility and shareholder returns.
In conclusion, Edaran Berhad appears to be demonstrating resilience and strategic foresight. While the growth in revenue and cash flow is commendable, the challenge of managing finance costs will be key to unlocking further net profit expansion. The strategic capital reduction also suggests a proactive management team looking to optimize the company’s structure for future endeavors.
What are your thoughts on Edaran’s strategy to manage its finance costs and leverage its dominant IT segment for sustained growth? Do you think the capital reduction will pave the way for exciting new developments? Share your views in the comments section below!
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