CME Group Berhad: A Turnaround Story with Eye-Opening Gains (and Lingering Challenges)
Hello fellow investors and market enthusiasts! Today, we’re diving deep into the latest quarterly report from CME Group Berhad, a name that has certainly captured attention with its recent performance. While the headlines might shout about impressive profit growth, a closer look reveals a story of strategic gains alongside persistent operational challenges and significant legal hurdles. Let’s unpack the numbers and see what’s truly driving CME’s trajectory.
Core Financial Highlights: A Quarter of Remarkable Recovery
CME Group Berhad has delivered a stellar performance for the quarter ended 31 March 2025, marking a significant turnaround from the previous year. The figures speak volumes, showcasing a substantial leap in profitability, largely attributed to strategic asset revaluations.
Quarterly Performance (Q2 2025 vs. Q2 2024)
Current Quarter (31 March 2025)
Revenue: RM12.14 million
Profit Before Tax: RM7.19 million
Profit After Tax: RM7.19 million
Basic Earnings Per Share: 0.654 sen
Preceding Corresponding Quarter (31 March 2024)
Revenue: RM11.86 million
Loss Before Tax: (RM1.26 million)
Loss After Tax: (RM1.26 million)
Basic Loss Per Share: (0.121 sen)
For the current quarter, revenue saw a modest increase of 2.4% to RM12.14 million. However, the real eye-opener is the swing from a loss before tax of RM1.26 million in the previous corresponding quarter to a remarkable profit before tax of RM7.19 million. This astounding 671.5% improvement in profitability is primarily due to a significant gain on revaluation of investment properties amounting to RM5.08 million within the Investment Holding segment.
Year-to-Date Performance (6 Months Ended 31 March 2025 vs. 31 March 2024)
Current Year-to-Date (31 March 2025)
Revenue: RM21.74 million
Profit Before Tax: RM7.76 million
Profit After Tax: RM7.76 million
Basic Earnings Per Share: 0.706 sen
Preceding Corresponding Period (31 March 2024)
Revenue: RM15.66 million
Loss Before Tax: (RM0.62 million)
Loss After Tax: (RM0.62 million)
Basic Loss Per Share: (0.060 sen)
Looking at the cumulative six-month period, CME Group Berhad’s revenue surged by 38.8% to RM21.74 million. The profit before tax for the period stands at RM7.76 million, a monumental turnaround from a loss of RM0.62 million in the prior year, marking a 1344.07% increase. This sustained profitability highlights the impact of the revaluation gains and improved operational performance.
Quarter-on-Quarter Growth (Q2 2025 vs. Q1 2025)
Compared to the immediate preceding quarter (Q1 2025 ended 31 December 2024), the current quarter also shows robust growth:
| Indicator | 3 Months Ended 31 March 2025 (RM’000) | 3 Months Ended 31 December 2024 (RM’000) | Variance (%) |
|---|---|---|---|
| Revenue | 12,143 | 9,594 | 26.6 |
| Profit Before Tax | 7,190 | 573 | 1,154.8 |
Revenue increased by 26.6%, and profit before tax saw an impressive 1154.8% jump, underscoring the positive momentum driven by the revaluation gains in the current quarter.
Business Unit Performance: Manufacturing Leads the Way
The report highlights that the Manufacturing segment remains the core revenue driver for CME Group Berhad. For the six months ended 31 March 2025, manufacturing contributed RM19.35 million, accounting for a substantial 89.01% of the total revenue. This indicates the company’s reliance on its specialized motor vehicles division for top-line growth.
Financial Health: A Closer Look at the Balance Sheet
As of 31 March 2025, CME Group Berhad’s total assets stood at RM108.91 million, slightly down from RM111.19 million at 30 September 2024. Total equity, however, saw a healthy increase to RM54.77 million from RM47.24 million, primarily due to the conversion of ICULS (Irredeemable Convertible Unsecured Loan Stocks) into share capital. This conversion has also improved the Net Assets Per Share to RM0.050 from RM0.049.
Current liabilities decreased to RM51.76 million from RM60.33 million, while current assets also saw a reduction to RM28.72 million from RM35.08 million. This still reflects a situation where current liabilities exceed current assets, a point we will delve into further under risks.
Total borrowings decreased slightly to RM32.03 million from RM35.85 million in the preceding year, indicating some debt management efforts.
Risks and Future Prospects: Navigating a Complex Landscape
While the recent profit figures are encouraging, CME Group Berhad faces a multifaceted set of challenges and opportunities. The company’s future hinges on its ability to navigate these complexities.
Material Uncertainty Related to Going Concern
A significant point highlighted in the report is the “Material Uncertainty Related to Going Concern” (MUGC). As of 30 September 2024, the Group reported accumulated losses of RM76.58 million, and its current liabilities exceeded current assets by RM25.25 million. This indicates a potential challenge to the company’s ability to continue operations in the normal course of business. The company acknowledges its reliance on continuous financial support from substantial shareholders, the ability to generate positive future cash flows, and sufficient banking credit facilities.
Company’s Mitigating Strategies:
CME Group Berhad has outlined several measures to address the MUGC and strengthen its financial position:
- Operational Efficiency: Strengthening the production team, streamlining functions, and modernizing facilities within the manufacturing group.
- Cost Management: Constantly reviewing material procurement pricing and closely monitoring project progress to maintain profitability.
- Market Expansion: Exploring new product ranges, identifying potential business opportunities, and actively participating in project tendering.
- Financial Support: Obtaining financial support and banking facilities for existing and upcoming projects, and raising share capital through fundraising exercises and ICULS conversion.
Industry Outlook and External Challenges:
The company acknowledges that the global and Malaysian economic outlook remains challenging, influenced by ongoing trade war tensions. Volatility in the Ringgit and pressure on operating costs continue to pose significant challenges. Despite this, the Group remains vigilant and committed to effective cost management and improving production efficiency.
Material Litigation: A Web of Legal Battles
CME Group Berhad is embroiled in several complex material litigations, which could have significant implications. These include:
- Bellajade Sdn Bhd: A long-standing dispute concerning a tenancy agreement, with claims and counterclaims totaling millions of Ringgit. The case has seen multiple appeals and reviews, including a winding-up petition against CME, which is currently stayed.
- Gemgreen Resources Sdn Bhd: Another winding-up petition against CME for an outstanding sum of RM1.58 million, also currently stayed.
- Desa Tiasa Sdn Bhd: An application to place CME under judicial management for an outstanding sum of RM2.04 million. This application has stayed other legal proceedings, including the winding-up petitions, but is itself subject to ongoing appeals and interventions.
The resolution of these legal battles will be crucial for CME Group Berhad’s stability and future operations. The ongoing nature of these cases introduces a layer of uncertainty and potential financial strain.
Summary and
CME Group Berhad’s latest quarterly report paints a picture of a company achieving a significant profit turnaround, largely fueled by a one-off gain from investment property revaluation. The underlying operational performance, particularly from the Manufacturing segment, continues to be the backbone of its revenue. The conversion of ICULS has strengthened the equity base, which is a positive sign.
However, the company operates under a “Material Uncertainty Related to Going Concern” due to accumulated losses and a current liabilities deficit. While management has outlined clear strategies to address these issues, including operational improvements, cost control, market expansion, and securing financial support, the path ahead is not without obstacles.
The extensive and complex material litigation cases represent a substantial ongoing risk. The outcomes of these legal proceedings could significantly impact the company’s financial health and operational continuity. Investors should closely monitor the developments in these areas.
Overall, CME Group Berhad is demonstrating a concerted effort to improve its financial standing and operational efficiency in a challenging economic climate. The strategic revaluation gain has provided a much-needed boost, but the company’s long-term sustainability will depend on its ability to consistently generate positive cash flows from its core businesses and successfully navigate its legal challenges.
Key risk points to consider include:
- The “Material Uncertainty Related to Going Concern” due to accumulated losses and current liabilities exceeding current assets.
- The outcome and financial implications of the ongoing material litigation cases (Bellajade, Gemgreen, Desa Tiasa).
- The ability to sustain profitability from core operations without reliance on one-off gains.
- Exposure to global and Malaysian economic uncertainties, Ringgit volatility, and rising operating costs.
What are your thoughts on CME Group Berhad’s recent performance? Do you believe their strategies are robust enough to overcome the significant challenges, especially the material uncertainty related to going concern and the ongoing legal battles? Share your insights in the comments below!
