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IWCity’s Q1 2025: A Deep Dive into Revenue Challenges and Future Prospects
Greetings, fellow investors! Today, we’re taking a closer look at Iskandar Waterfront City Berhad (IWCity)’s latest unaudited condensed consolidated financial statements for the first quarter ended 31 March 2025 (Q1 2025). This report offers a crucial snapshot of the company’s performance, revealing significant revenue shifts but also outlining strategic moves and optimistic prospects for the future, particularly within the dynamic Iskandar Malaysia region.
While the headline figures might initially raise eyebrows, a deeper dive into the report reveals the underlying factors and the company’s forward-looking strategies. Let’s unpack the numbers and see what’s truly shaping IWCity’s journey.
Core Data Highlights: Navigating the Financial Landscape
Overall Financial Performance: A Challenging Quarter Compared to Last Year
IWCity experienced a notable decline in its top-line performance for Q1 2025 when compared to the same period last year. Revenue saw a substantial drop, and the company shifted from a profit to a loss before tax. This was primarily driven by reduced sales from completed property projects.
Q1 2025 (RM’000)
Revenue: 7,300
Loss Before Tax: (3,641)
(Loss)/Earnings Per Share (sen): (0.40)
Q1 2024 (RM’000)
Revenue: 38,210
Profit Before Tax: 517
(Loss)/Earnings Per Share (sen): 0.05
The Group’s revenue for Q1 2025 plummeted by RM30.91 million, or 80.90%, to RM7.30 million compared to Q1 2024. Consequently, the company recorded a loss before tax of RM3.64 million, a significant swing from the RM0.52 million profit in the corresponding quarter last year.
Segmental Performance: Mixed Signals
The performance of IWCity’s core business segments tells a more nuanced story:
Property Development
This segment remains the primary revenue driver, contributing RM7.23 million in Q1 2025. However, this is a sharp decline of RM31.04 million compared to the RM38.27 million recorded in Q1 2024. The current quarter’s revenue was largely derived from the ongoing progress of the Danga Sutera Semi-Detached Phase 3 development project, indicating a reliance on active projects rather than sales from completed units.
Construction
The construction sector showed a positive turnaround, recording revenue of RM69,000 for Q1 2025. This contrasts sharply with the negative revenue of RM56,000 reported in Q1 2024, which was attributed to the finalization of accounts for an older construction project. This segment, while smaller in contribution, indicates stabilization after prior adjustments.
Comparing to the Immediate Preceding Quarter (Q1 2025 vs Q4 2024)
It’s also insightful to compare the current quarter’s performance against the immediate preceding quarter (Q4 2024). This comparison offers a clearer picture of recent trends and operational improvements.
Q1 2025 (RM’000)
Revenue: 7,300
Loss Before Tax: (3,641)
Q4 2024 (RM’000)
Revenue: 7,121
Loss Before Tax: (18,744)
While revenue remained relatively stable, with a slight 2.51% increase from RM7.12 million in Q4 2024 to RM7.30 million in Q1 2025, the loss before tax significantly improved. The RM3.64 million loss in Q1 2025 represents an 80.58% reduction in loss compared to the RM18.74 million loss in Q4 2024. This improvement is largely due to the absence of substantial downward revisions from the finalization of construction projects that had impacted the previous quarter.
Financial Health: Gearing and Cash Flow
Looking at the balance sheet, IWCity’s gearing ratio saw a slight increase from 38.60% as at 31 December 2024 to 38.74% as at 31 March 2025. This marginal rise is mainly attributed to a decrease in cash and bank balances, arising from the repayment of payables. Net assets per share remained stable at RM0.78.
Cash flow from operating activities turned negative, recording a net cash outflow of RM6.37 million in Q1 2025, compared to an inflow of RM23.81 million in Q1 2024. This highlights the impact of lower revenue and operational dynamics on the company’s liquidity in the short term.
Risks and Prospects: The Road Ahead
Despite the challenging quarter, IWCity’s report paints an optimistic picture for its future, especially within the context of the Johor Bahru property market. The company is strategically positioned to leverage several key drivers:
- Iskandar Malaysia Growth: The property market in Johor Bahru, particularly within Iskandar Malaysia, is expected to continue growing, supported by robust infrastructure developments and strong government support.
- Infrastructure Boost: Key projects like the Gemas-Johor Bahru Electrified Double-Track Rail Project (Gemas-JB EDTP) and the Johor Bahru-Singapore Rapid Transit System (RTS) Link are anticipated to significantly enhance connectivity and economic momentum.
- Strategic Initiatives: Initiatives such as the Johor-Singapore Special Economic Zone (JS-SEZ) and the Forest City Special Financial Zone (SFZ) are poised to strengthen regional integration and stimulate demand across various property types.
- Investor Interest: Increased interest from local and foreign investors, especially from Singapore, continues to drive demand, with Johor’s comparatively lower property prices making it an attractive investment and homeownership destination.
- Leveraging Land Bank: IWCity plans to capitalize on its strategically located land bank, with ongoing progress on Danga Sutera Semi-Detached Phase 3 and upcoming project launches expected to drive revenue. The company is also exploring affordable housing initiatives.
Barring unforeseen circumstances, IWCity anticipates achieving steady revenue growth in FY2025, underpinned by new project launches and sustained demand in Iskandar Malaysia. The Group expresses confidence in its ability to create long-term value through innovation, sustainability, and strategic execution.
However, it’s prudent for investors to also consider the potential risks and ongoing developments highlighted in the report:
- Cyclical Nature of Business: The Group’s business operations are cyclical and dependent on Malaysia’s economic conditions, which can introduce volatility.
- Material Litigation: The company is involved in significant legal cases, including a claim from Tenaga Nasional Berhad for RM76.56 million and an unpaid income tax claim from the Inland Revenue Board of Malaysia for RM10.83 million. While the IRB case is largely provided for, these litigations introduce uncertainty.
- Corporate Proposals: Several corporate proposals are ongoing, including a potential merger with Iskandar Waterfront Holdings Sdn Bhd (IWH), a proposed private placement, debt settlement via share issuance, and capital reduction. While these are aimed at regularizing the company’s financial condition, they involve complex processes and potential dilution for existing shareholders.
Summary and Investment Considerations
IWCity’s Q1 2025 report presents a mixed bag. While the company recorded a substantial decline in revenue and a shift to a loss compared to the same period last year, it showed significant improvement in reducing its loss when compared to the immediate preceding quarter. This indicates that some of the major adjustments and challenges from the previous quarter might be subsiding.
The long-term outlook for IWCity appears positive, driven by the strong fundamentals and strategic developments within the Iskandar Malaysia region. The company’s focus on its existing land bank and upcoming launches, coupled with the supportive macro environment in Johor, positions it for potential recovery and growth. However, investors should be mindful of the current operational challenges, the ongoing litigations, and the significant corporate restructuring proposals that are still in play.
Key risk points to monitor include:
- The successful resolution and financial impact of ongoing material litigations.
- The successful execution and implications of the proposed corporate exercises, including the merger proposal and financial regularization plans.
- The pace of recovery in the property market and the company’s ability to drive sales from new and existing projects.
- Management of cash flow, especially given the negative operating cash flow in the current quarter.
Final Thoughts: What’s Next for IWCity?
IWCity is clearly navigating a transformative period. While the Q1 2025 results highlight immediate challenges, the strategic emphasis on leveraging the vibrant growth of Iskandar Malaysia and its infrastructure development provides a compelling narrative for its future. The company’s ability to execute its upcoming project launches and manage its financial regularization plans will be crucial in determining its trajectory.
As retail investors in Malaysia, it’s vital to stay informed about these developments. Do you think IWCity’s strategic land bank and the robust growth in Iskandar Malaysia will be enough to propel the company back to profitability and sustained growth? Share your thoughts and insights in the comments below!
