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Tex Cycle’s Q2 2025 Results: Profit Soars, But What’s Powering the Growth?
Tex Cycle Technology (M) Berhad, a key player in Malaysia’s environmental services and sustainable waste management sector, has just released its financial results for the second quarter ended June 30, 2025. The headline figures are impressive, showing a significant jump in profitability that is sure to catch the attention of investors.
The company reported a remarkable 21% year-on-year increase in pre-tax profit, reaching RM3.4 million for the quarter. But is this growth story as straightforward as it seems? Let’s dive deeper into the numbers to understand the full picture.
Core Data Highlights: A Tale of Two Stories
At first glance, Tex Cycle’s performance appears robust. Revenue saw a modest increase, but the real story is in the profit figures, which were significantly boosted by non-operational factors.
Q2 2025 (Current Quarter)
- Revenue: RM 8.63 million
- Pre-Tax Profit: RM 3.41 million
- Net Profit (Attributable to Owners): RM 3.02 million
- Earnings Per Share (EPS): 1.15 sen
Q2 2024 (Comparative Quarter)
- Revenue: RM 8.26 million
- Pre-Tax Profit: RM 2.81 million
- Net Profit (Attributable to Owners): RM 2.51 million
- Earnings Per Share (EPS): 0.99 sen
While revenue grew by a steady 5% year-on-year, pre-tax profit surged by 21%. The report clarifies that this impressive profit jump was “majorly due to the gain on investment in quoted shares in the current quarter.” This is a critical distinction, as it indicates that investment activities, rather than core operational improvements, were the primary driver of profitability this quarter.
When compared to the immediate preceding quarter (Q1 2025), revenue saw a slight dip of 3%. However, pre-tax profit increased by a substantial 33%, once again attributed mainly to gains from investments in quoted securities.
A Closer Look at Business Segments
The group’s diversification strategy is evident in the varied performance across its business divisions. While the core business faced headwinds, other segments stepped up to contribute positively.
| Business Division | Q2 2025 Revenue (RM million) | Performance vs. Q2 2024 | Reason |
|---|---|---|---|
| Recycling and Recovery | 5.30 | ▼ Decreased by 24% | Lower sales demand |
| Trading | 1.22 | ▲ Increased Significantly | Increase in sales demand |
| Renewable Energy | 1.92 | ▲ Increased by 47% | Higher solar generation |
The data reveals a concerning 24% decline in the cornerstone Recycling and Recovery division. However, this was offset by strong growth in the Trading and Renewable Energy segments, with the latter’s revenue increasing by RM0.6 million due to better performance from its solar projects. This highlights a strategic shift, where new ventures are becoming increasingly important to the Group’s top line.
Examining the Financial Health
A look at the balance sheet reveals a company in the midst of expansion. As of June 30, 2025, total borrowings increased to RM38.8 million from RM31.2 million at the end of 2024. Concurrently, cash and bank balances decreased from RM21.1 million to RM7.2 million. This suggests the company is leveraging its balance sheet and deploying capital, likely towards its various expansion projects and acquisitions.
Perhaps the most critical indicator to watch is the cash flow. For the first six months of 2025, Tex Cycle reported a negative net cash flow from operating activities of RM6.4 million. In simple terms, this means the company’s core day-to-day operations used more cash than they generated during the period, a situation funded by drawing down new loans.
Risk and Prospect Analysis: Navigating Challenges and Seizing Opportunities
Tex Cycle is actively navigating a challenging economic landscape while pursuing an ambitious growth agenda. The management is optimistic, citing strong government support for the green economy.
Future Prospects & Opportunities:
- Strategic Acquisitions: The Group recently completed the acquisition of Meridian World Sdn Bhd and is proposing to acquire a majority stake in Safety & Environmental Laboratory Sdn Bhd, expanding its service offerings and market reach.
- Renewable Energy Growth: The biomass gasification power plant has successfully completed its Initial Operation Date (IOD) test, positioning it to contribute to earnings upon achieving its Feed-in Tariff Commencement Date (FiTCD).
- Strategic Collaborations: A new partnership with Barium Selat Technologies aims to expand business opportunities in waste management and tap into the upstream oil and gas sector.
- Main Market Transfer: The proposed transfer from the ACE Market to the Main Market of Bursa Malaysia is expected to be completed by the first half of 2026, potentially increasing the company’s profile and investor base.
Potential Risks:
- Core Business Performance: The continued decline in the recycling division is a primary concern that needs to be addressed.
- Cash Flow Management: The negative operating cash flow and increased reliance on debt to fund activities are significant risks that require careful monitoring.
- Execution Risk: The success of the company’s numerous projects and acquisitions depends on seamless integration and effective execution.
Summary and Outlook
Tex Cycle’s second-quarter results present a mixed but fascinating picture. The headline profit growth is impressive, but it’s largely propped up by investment gains, which can be volatile. This masks underlying softness in its traditional core business of recycling. However, the company is not standing still. Its aggressive strategy of diversification into renewable energy and expansion through strategic acquisitions shows a clear intent to build new, sustainable revenue streams for the future. The journey ahead involves balancing the challenges in its legacy business with the execution risks of its new ventures.
Key points for investors to consider:
- Decline in the Core Business: The 24% revenue drop in the Recycling and Recovery division is a significant headwind.
- Profit Quality: The current profitability is heavily reliant on non-recurring investment gains rather than operational improvements.
- Negative Operating Cash Flow: The company is currently burning cash in its day-to-day operations, a trend that is not sustainable in the long term without successful new revenue streams.
- Growth Through Leverage: Expansion is being funded by taking on more debt, which increases financial risk.
Final Thoughts
From my professional viewpoint, Tex Cycle is a company in a crucial phase of transition. While the eye-catching profit growth is noteworthy, a deeper analysis reveals the challenges it faces. The decline in the core recycling business is a concern, but the proactive steps to diversify into renewable energy and grow via acquisitions could lay the foundation for a stronger, more resilient company. The key for investors will be to monitor whether these new ventures can successfully scale up to offset the current weaknesses and, most importantly, start generating positive operating cash flow in the coming quarters.
What are your thoughts on Tex Cycle’s strategy? Do you believe their diversification efforts will pave the way for long-term sustainable growth? Share your views in the comments below!
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