Greetings, fellow Malaysian retail investors! It’s always exciting to dive into the latest financial reports of companies listed on Bursa Malaysia, and today, we’re taking a closer look at **AZAM JAYA BERHAD’s** unaudited interim financial report for the first quarter ended 31 March 2025. As a relatively new listing on the Main Market (since 11 November 2024), this report offers us an initial glimpse into their operational performance post-IPO.
While the headline numbers might show a dip compared to the immediate preceding quarter, it’s crucial to understand the underlying factors and the company’s long-term strategic positioning. Let’s break down the key takeaways and see what this construction player is building for its future.
Q1 FY2025 Performance: A Seasonal Dip, Not a Trend
AZAM JAYA BERHAD, primarily a construction services provider with significant involvement in infrastructure projects in Sabah, reported its first-quarter results. Here’s a snapshot of their performance for the three months ended 31 March 2025:
- Revenue: RM58.64 million
- Gross Profit: RM13.11 million
- Profit Before Tax (PBT): RM2.19 million
- Net Profit: RM0.54 million
- Basic Earnings Per Share: 0.11 sen
It’s important to note that no comparative figures for the same period last year (Q1 FY2024) are presented, as the company was listed on 11 November 2024, and no interim financial report was prepared for that period.
Comparing Quarter-on-Quarter: Understanding the Nuances
When we compare the current quarter’s performance against the immediate preceding quarter (Q4 FY2024), we observe a decline across key financial metrics. However, the company provides a clear explanation for this:
Q1 FY2025
Revenue: RM58.64 million
Gross Profit: RM13.11 million
PBT: RM2.19 million
Q4 FY2024
Revenue: RM67.75 million
Gross Profit: RM16.17 million
PBT: RM3.48 million
The revenue decreased by RM9.11 million, or approximately 13.45%. Consequently, gross profit saw a decline of RM3.06 million (18.92%), and PBT dropped by RM1.29 million (37.09%). The company attributes this quarter-on-quarter dip primarily to a seasonal slowdown in site activity. This period coincided with major public holidays such as Chinese New Year and Hari Raya Aidilfitri, leading to fewer effective working days. This is a common occurrence in the construction sector and not necessarily indicative of a long-term operational issue.
Financial Health and Cash Flow Dynamics
Let’s turn our attention to the balance sheet and cash flow statement to understand the company’s financial position and liquidity.
As at 31 March 2025, AZAM JAYA BERHAD’s total assets stood at RM401.26 million, a slight decrease from RM412.65 million at the end of December 2024. Total equity saw a marginal increase to RM161.66 million, maintaining a net assets per share of RM0.32. This indicates a stable equity base.
From a cash flow perspective, the company utilized RM0.26 million in operating activities, RM2.62 million in investing activities (mainly for property, plant, and equipment), and RM36.02 million in financing activities (related to borrowings and lease liabilities). This resulted in a net decrease in cash and cash equivalents of RM38.90 million, leading to a negative cash and cash equivalents balance of RM24.05 million at quarter-end, primarily due to bank overdrafts. It’s worth noting that trade receivables significantly decreased from RM55.96 million to RM17.45 million, indicating good cash collection. However, contract assets increased from RM119.61 million to RM156.70 million, which represents unbilled revenue for ongoing projects, a positive sign for future revenue recognition.
Strategic Outlook and Project Pipeline
Despite the seasonal challenges, AZAM JAYA BERHAD maintains a cautiously optimistic outlook, supported by a robust order book and strategic initiatives:
- Healthy Order Book: The Group is currently managing nine ongoing construction projects with an unbilled contract value of RM1.42 billion as at 31 March 2025. This provides earnings and cash flow visibility through to March 2028.
- Key Projects Progress: While some projects like the Jalan Lintas Upgrading Project and Jalan UMS Upgrading Project are nearing completion, major infrastructure works under the Pan Borneo Highway (WP12, WP13, WP26) are in their early stages, promising sustained activity.
- Government Initiatives: The Sabah government’s continued prioritization of development allocation under Budget 2025 (RM6.7 billion) and commitment to infrastructure development (RM2.63 billion) are expected to generate a steady pipeline of opportunities for qualified contractors like Azam Jaya.
- Strategic Diversification: The Group is actively pursuing new project opportunities by leveraging its licenses and technical competencies, exploring ventures beyond road construction, and investing in technology and machinery upgrades to drive operational efficiency.
Utilisation of IPO Proceeds
Following its listing on 11 November 2024, Azam Jaya raised approximately RM61.46 million from its Public Issue. As of 31 March 2025, the utilisation of these proceeds is as follows:
| Details of Use of Proceeds | Proposed Utilisation (RM’000) | Actual Utilisation up to 31.03.2025 (RM’000) | Balance Unutilised (RM’000) |
|---|---|---|---|
| Enhance construction capabilities | 8,000 | (4,227) | 3,773 |
| Working capital for construction projects | 28,400 | (20,827) | 7,573 |
| Repayment of bank borrowings | 20,000 | (20,000) | – |
| Estimated listing expenses | 5,064 | (5,064) | – |
| Total | 61,464 | (50,118) | 11,346 |
The company has utilized a significant portion of its IPO proceeds for its stated purposes, including full repayment of bank borrowings and listing expenses, which is a positive sign of fulfilling its commitments.
Summary and Investment Considerations
AZAM JAYA BERHAD’s first quarter of 2025 reflects a period of seasonal adjustment in its operational performance. While the financial figures show a quarter-on-quarter decrease in revenue and profitability, the underlying narrative points to a company with a healthy order book and a clear strategic direction, particularly benefiting from the ongoing infrastructure development focus in Sabah. The utilization of IPO proceeds is largely on track, contributing to a stronger financial footing by reducing borrowings.
However, like any company, there are factors to keep an eye on. Here are some key points for investors to consider:
- Seasonal Fluctuations: The construction sector is often subject to seasonal slowdowns, as seen this quarter. Investors should monitor if these patterns persist and how the company plans to mitigate their impact in future periods.
- Cash Flow Management: The negative cash and cash equivalents balance, largely due to bank overdrafts, warrants attention. While trade receivables collection improved, the overall cash management will be crucial as projects progress.
- Litigation Outcomes: The ongoing material litigation cases, particularly the appeal regarding the PAJ vs Maybank case (with RM4.26 million allowance for expected credit losses) and the multi-instalment settlement with OTA Tunnel Squad Sdn Bhd (RM10.00 million remaining), could have financial implications depending on their final outcomes.
- Effective Tax Rate: The significantly higher effective tax rate of 75.21% compared to the statutory rate of 24.00% due to non-tax-deductible expenses (like interest restriction and depreciation of non-qualifying assets) impacts net profitability. Monitoring improvements in tax efficiency would be beneficial.
- Project Execution: With a substantial unbilled order book, the company’s ability to efficiently execute and complete these projects on schedule and within budget will be paramount to convert the order book into sustained revenue and profit.
Overall, AZAM JAYA BERHAD appears to be navigating its initial quarters as a listed entity with a clear focus on project execution and capitalizing on regional development opportunities. The seasonal dip in performance is understandable, and the strong order book provides a solid foundation for future growth.
What are your thoughts on AZAM JAYA BERHAD’s latest report? Do you believe their strategy of focusing on Sabah’s infrastructure development and exploring diversification will yield strong results in the coming years? Share your insights in the comments below!
