Core Financial Highlights: A Path Towards Recovery?

Farlim Group’s first quarter results present a mixed but overall improving picture. The group managed to significantly reduce its losses compared to the same period last year, a positive sign amidst a challenging operating environment.

Overall Group Performance

The Group’s revenue saw a healthy increase of 17.30%, climbing to RM2.550 million from RM2.174 million in the prior year’s corresponding quarter. More impressively, the Loss Before Tax (LBT) experienced a significant reduction of 34.39%, narrowing to RM1.267 million from RM1.931 million. This improvement in LBT was primarily driven by the nominal margin generated from the company’s affordable housing projects in Bidor, Perak, indicating better cost management or sales mix.

Similarly, the Loss Attributable to Ordinary Equity Holders of the Parent also saw a substantial decrease of 34.18%, reflecting the overall improvement in the Group’s bottom line. Basic Loss Per Ordinary Share improved from 1.27 sen to 0.83 sen.

Segmental Breakdown: Where the Numbers Come From

• Property Segment

  The core property segment remained the main revenue driver, contributing RM2.514 million, a 20.34% increase from Q1 2024. This was primarily fueled by sales and progress billings from ongoing housing projects in Taman Impiana Bidor, Perak, and Bandar Baru Ayer Itam (BBAI), Penang, along with the sale of completed units in Taman Impiana Bidor. Despite the revenue growth, the segment recorded a Loss Before Tax of RM1.543 million, albeit an improvement of 27.59% compared to the previous year. The report attributes this loss to a subdued property market leading to slower sales and low profit margins from affordable housing projects.

• Trading Segment

  The trading segment, which involves the supply of building materials, saw its revenue decrease by 57.65% to RM0.036 million. However, despite the lower revenue, the segment’s Profit Before Tax increased by 66.67% to an insignificant RM0.010 million, indicating a better margin on the reduced sales volume.

• Investment & Others Segment

  This segment performed robustly, registering a Profit Before Tax of RM0.266 million, a significant increase of 37.11%. This positive contribution was mainly from investing income, particularly from a cash management fund and the share of profit from an associate company.

Financial Position and Cash Flow

As of 31 March 2025, Farlim Group’s total assets stood at RM141.994 million, a slight decrease from RM143.120 million at the end of 2024. Total equity also saw a minor dip to RM116.207 million from RM117.482 million. Net Assets Per Share decreased marginally from RM0.77 to RM0.76.

From a cash flow perspective, the Group’s net cash used in operating activities improved, decreasing to RM1.684 million from RM2.817 million in the previous corresponding period, indicating better operational cash management. However, net cash used in investing activities increased, largely due to a significant redemption/(investment) in short-term investments, resulting in an overall net decrease in cash and cash equivalents for the quarter.

Strategic Outlook and Navigating Challenges

Farlim Group’s future prospects appear to be tied to strategic landbank management and a cautious approach to the residential property market. The economic outlook for the residential property market is showing gradual improvement in key areas like Batu Kawan in Penang, Selangor, and Johor. A stable Overnight Policy Rate (OPR) of 3% is seen as a conducive environment for the company’s planned residential developments.

Key Strategic Initiatives

• Gopeng Land Sale: A significant development is the approved sale of a leasehold housing scheme in Gopeng, Perak, for RM33.0 million. This transaction is expected to generate an estimated profit of RM10.74 million, which will be recognized in the current financial year (FY2025). This sale is crucial as it aims to improve the Group’s financial position, enable the acquisition of new strategic landbanks, provide working capital, and facilitate other profitable joint venture projects. The completion is anticipated in the second quarter of 2025.
• Landbank Sourcing: The Group is actively seeking new landbank opportunities in Selangor, Perak, and Penang, both through outright acquisitions and joint ventures, to bolster its future development pipeline.
• Operational Efficiency: Ongoing efforts are focused on evaluating business plans, improving management effectiveness and efficiency, conserving financial resources, scaling down expenses, and reallocating resources to maximize value creation.

Material Litigations

The report also details several material litigations that Farlim Group is involved in. While some have seen recent developments, the company has made provisions where necessary to mitigate potential financial impact.

• An appeal is pending regarding a High Court ruling for an RM8.45 million claim against the company, for which a provision has been made.
• In a separate suit, the company was awarded special damages of RM255,634.53, though not all claims were allowed, and an appeal is ongoing.
• A winding-up petition against a subsidiary related to a property dispute is being addressed, with discussions for a redemption sum to resolve the impasse. The company states this will not have a material financial impact due to existing provisions.
• A dispute with a Hindu Temple regarding development land has reportedly been resolved through a settlement agreement, which should set aside all outstanding litigation related to this matter.