Greetings, fellow investors and market enthusiasts! Today, we’re diving deep into the latest financial heartbeat of **LOTUS CIRCULAR BERHAD** (formerly known as MESB BERHAD), as revealed in their unaudited quarterly report for the 3rd Financial Period ended 31 March 2025. This report provides a crucial glimpse into the company’s operational strength and strategic direction amidst evolving market conditions.
While the company has demonstrated impressive revenue growth, particularly in the current quarter, the report also highlights a dip in overall profitability, mainly influenced by higher operating costs and shifting dynamics within its core business segments. Despite these challenges, LOTUS CIRCULAR BERHAD is not standing still, with a significant strategic acquisition underway that promises to reshape its future trajectory. Let’s unpack the numbers and understand what this means for the company’s journey ahead.
Financial Performance at a Glance
LOTUS CIRCULAR BERHAD reported a mixed performance for the quarter and the cumulative nine-month period. While revenue saw a healthy increase, profit before tax faced headwinds.
Quarterly Performance (Q3 FY2025 vs. Q3 FY2024)
For the quarter ended 31 March 2025, the Group’s revenue climbed, but profitability saw a decline compared to the same period last year.
Current Quarter (Q3 FY2025)
Revenue: RM70,201,000
Profit Before Tax: RM8,413,000
Net Profit Attributable to Parent: RM3,463,000
Basic Earnings Per Share: 2.40 sen
Corresponding Quarter (Q3 FY2024)
Revenue: RM62,679,000
Profit Before Tax: RM10,957,000
Net Profit Attributable to Parent: RM5,697,000
Basic Earnings Per Share: 3.95 sen
Revenue increased by 12.0%, from RM62.68 million to RM70.20 million. However, profit before taxation saw a decrease from RM10.96 million to RM8.41 million, primarily due to a lower contribution from the Waste Recycling segment.
Cumulative 9-Month Performance (9M FY2025 vs. 9M FY2024)
The trend of increased revenue but decreased profitability extended to the cumulative nine-month period as well.
Current Period (9M FY2025)
Revenue: RM152,822,000
Profit Before Tax: RM10,859,000
Net Profit Attributable to Parent: RM4,646,000
Basic Earnings Per Share: 3.22 sen
Corresponding Period (9M FY2024)
Revenue: RM145,087,000
Profit Before Tax: RM17,289,000
Net Profit Attributable to Parent: RM9,189,000
Basic Earnings Per Share: 6.37 sen
Revenue grew by 5.3% to RM152.82 million, but profit before tax for the nine months declined significantly from RM17.29 million to RM10.86 million. This decline was attributed to lower contributions from both the Retail and Waste Recycling segments.
Comparison with Immediate Preceding Quarter (Q3 FY2025 vs. Q2 FY2025)
On a quarter-on-quarter basis, the current quarter showed a strong rebound, driven by seasonal factors.
Current Quarter (Q3 FY2025)
Revenue: RM70,201,000
Profit Before Tax: RM8,413,000
Preceding Quarter (Q2 FY2025)
Revenue: RM47,300,000
Profit Before Tax: RM2,700,000
The Group’s revenue surged by 48.42% from RM47.30 million in the preceding quarter to RM70.20 million in the current quarter. This robust growth was primarily fueled by festive season sales during Chinese New Year and the shift in Hari Raya Aidilfitri celebration to March 2025. Consequently, profit before taxation recorded a substantial increase, climbing from RM2.70 million to RM8.41 million.
Segmental Performance Breakdown
Understanding the performance of each business unit provides deeper insights into the Group’s overall results.
Retail Segment
The Retail segment saw revenue growth, primarily due to the timing of festive celebrations, but profitability was moderated by higher operating costs.
| Metric | Q3 FY2025 (RM’000) | Q3 FY2024 (RM’000) | Change (%) |
|---|---|---|---|
| Revenue | 53,350 | 49,650 | +7.44% |
| Segment Profit | 8,170 | 7,960 | +2.64% |
For the cumulative nine months, Retail revenue increased by 2.74% to RM113.82 million (9M FY2024: RM110.79 million). However, segment profit declined significantly to RM8.39 million (9M FY2024: RM11.03 million), mainly due to lower mark-ups and higher operating costs.
Waste Recycling Segment
The Waste Recycling segment achieved notable revenue growth, but its profit contribution significantly declined due to specific challenges.
| Metric | Q3 FY2025 (RM’000) | Q3 FY2024 (RM’000) | Change (%) |
|---|---|---|---|
| Revenue | 16,850 | 13,030 | +29.37% |
| Segment Profit | 970 | 3,350 | -71.04% |
Despite a 29.37% increase in revenue, segment profit declined substantially from RM3.35 million to RM0.97 million. This was driven by weaker sales volume in high-margin cleaning services jobs, despite higher sales volumes of paper, plastic, and scrap materials.
For the cumulative nine months, Waste Recycling revenue grew by 13.72% to RM39.0 million (9M FY2024: RM34.30 million). However, segment profit plunged by 45.60% from RM7.25 million to RM3.94 million, again primarily due to weaker sales volume in high-margin cleaning services jobs.
Investment Holding Segment
The Investment Holding segment continued to incur losses, exacerbated by corporate advisory expenses.
| Metric | Q3 FY2025 (RM’000) | Q3 FY2024 (RM’000) |
|---|---|---|
| Segment Loss | 580 | 220 |
The loss increased from RM0.22 million to RM0.58 million for the quarter, and for the nine months, it widened from RM0.67 million to RM1.18 million, mainly due to corporate advisory expenses.
Financial Health: Balance Sheet & Cash Flow
As of 31 March 2025, LOTUS CIRCULAR BERHAD’s financial position remains robust, with a growth in total assets and equity.
As at 31 March 2025
Total Assets: RM196,914,000
Total Equity: RM166,195,000
Net Assets per Share: RM0.84
Cash and Bank Balances: RM56,466,000
As at 30 June 2024
Total Assets: RM179,964,000
Total Equity: RM159,121,000
Net Assets per Share: RM0.81
Cash and Bank Balances: RM61,255,000
Total assets grew from RM179.96 million to RM196.91 million, reflecting an expansion in the company’s resource base. Total equity also increased from RM159.12 million to RM166.20 million, pushing Net Assets per share to RM0.84 from RM0.81.
However, cash and bank balances saw a slight decrease from RM61.26 million to RM56.47 million. The cash flow statement for the 9-month period ended 31 March 2025 shows a net cash used in operating activities of RM6.55 million, a notable shift from the positive RM9.86 million generated in the full financial year ended 30 June 2024. This was largely influenced by significant changes in working capital, particularly an increase in trade receivables and a decrease in trade payables, indicating higher operational needs for cash during this period.
Strategic Direction and Future Prospects
LOTUS CIRCULAR BERHAD is actively pursuing strategic initiatives to enhance its long-term growth and market position.
The Board is focused on expanding its presence in the Waste Recycling segment. A significant development is the conditional share purchase agreement for the proposed acquisition of the entire equity interest in Earthwise Resources Sdn Bhd and Expert Resource Management Sdn Bhd for a total consideration of RM100 million. This will be satisfied via a combination of RM35.01 million cash and the issuance of 156.6 million new ordinary shares at RM0.415 per share. This move is a clear indicator of the Group’s long-term strategy to strengthen its foothold in the Waste Recycling industry, drive revenue growth, and enhance market share.
For the Retail segment, the Board remains committed to optimizing operational efficiency, managing working capital prudently, and streamlining its marketing strategy to ensure long-term sustainability. These efforts are crucial to mitigating the impact of higher operating costs and improving profitability in this segment.
Summary and Outlook
LOTUS CIRCULAR BERHAD’s latest quarterly report presents a nuanced picture. While the Group demonstrated resilience in revenue growth, particularly in the current quarter driven by festive sales, overall profitability was impacted by higher operating costs and challenges within its key segments, especially the Waste Recycling segment’s high-margin services.
The company’s balance sheet remains solid, with growing assets and equity. However, the negative operating cash flow for the nine-month period highlights a need for prudent working capital management going forward. The strategic acquisition in the Waste Recycling sector is a bold move that could significantly alter the company’s future revenue streams and market positioning. This signals a clear intent to diversify and strengthen its core businesses.
Key points to consider for the future include:
- The successful integration and synergy realization from the proposed acquisition in the Waste Recycling segment.
- The effectiveness of strategies to manage operating costs and improve profit margins in the Retail segment.
- The ability to improve sales volumes in high-margin cleaning services within the Waste Recycling segment.
- The management of working capital to generate positive cash flow from operations.
- The impact of corporate advisory expenses on the Investment Holding segment’s profitability in future periods.
The path ahead involves navigating market dynamics while strategically expanding and optimizing existing operations. Investors will be keen to observe how these initiatives translate into sustained profitability and shareholder value.
What are your thoughts on LOTUS CIRCULAR BERHAD’s latest performance and strategic direction? Do you think the proposed acquisition will be a game-changer for the company, or are the challenges in profitability a bigger concern? Share your insights in the comments below!
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