Core Financial Highlights: A Shift Towards Profitability

SIAB Holdings Berhad has delivered a notable performance in Q1 2024, especially when compared to the same period last year. Despite a decrease in overall revenue, the Group managed to convert a previous loss into a profit, a testament to improved operational efficiency and cost management.

Q1 2024 vs. Q1 2023: The Turnaround

The most striking aspect of this quarter’s performance is the significant improvement in profitability. Here’s a quick look at the key figures:

As you can see, revenue decreased by approximately 28.7% compared to the same period last year, primarily due to lower construction activities in ongoing projects. However, the pivot from a gross loss of RM0.20 million to a gross profit of RM2.17 million is a significant achievement. This positive shift is reflected all the way down to the bottom line, with the Group moving from a substantial loss in Q1 2023 to a profit in Q1 2024. The previous year’s losses were largely attributed to elevated construction material costs and higher defect rectification costs for completed projects.

Compared to Immediate Preceding Quarter (Q4 2023): Sustaining Momentum

Looking at the immediate preceding quarter (Q4 2023) provides further context:

While Q1 2024 revenue was lower than Q4 2023 (which saw higher revenue recognition due to project completions), the Group’s operational performance improved dramatically. Q4 2023 was plagued by significant losses due to elevated construction material and labour costs, coupled with substantial provisions for liquidated ascertained damages (RM4.23 million) and impairment losses on contract and receivable balances (RM6.29 million). The current quarter’s return to gross profit and overall profitability indicates a successful navigation away from those significant one-off impacts and a focus on improving project margins.

Business Unit Performance: Construction Dominates, ICT Grows

SIAB’s revenue continues to be predominantly driven by its core construction and civil engineering segment within Malaysia. For Q1 2024, this segment contributed RM26.24 million to revenue. The ICT solutions and services segment, though smaller, showed promising growth, increasing its contribution from RM5,000 in Q1 2023 to RM22,000 in Q1 2024.

Financial Health: Balance Sheet and Cash Flow

As of 31 March 2024, SIAB’s total assets stood at RM163.13 million, with total equity attributable to owners at RM43.60 million. Net assets per share were RM0.07, a decrease from RM0.11 a year ago, reflecting the impact of past losses and share issuance. The Group’s total bank borrowings decreased from RM41.32 million to RM27.91 million, indicating efforts to manage debt. Cash flow from operating activities improved significantly, with net cash used decreasing from RM3.52 million in Q1 2023 to RM1.04 million in Q1 2024, suggesting better working capital management.

Risks and Prospects: Navigating the Future Landscape

The operating environment for SIAB Holdings Berhad is dynamic, shaped by both industry trends and the company’s strategic initiatives.

Industry Outlook: Tailwinds from Government Spending

The Malaysian economy is projected to grow by 4.0% to 5.0% in 2024, supported by resilient domestic expenditure and an expected rebound in global trade. Crucially for SIAB, the construction industry in Malaysia is anticipated to expand by 6.8% to RM60.49 billion in 2024. This growth is underpinned by the Malaysian Government’s record development expenditure allocation of RM99.0 million in Budget 2024, the largest ever. Furthermore, the focus on home ownership, with RM2.47 billion allocated for housing projects, bodes well for construction players like SIAB.

Strategic Initiatives: Building the Future

As of 31 March 2024, SIAB’s order book stands at a healthy RM314.48 million, providing revenue visibility for the coming quarters. The management has clearly stated its intention to continue actively participating in tenders for real estate, infrastructure projects, and institutional buildings. Alongside this growth ambition, the company is committed to enhancing cost control strategies and managing operational efficiency, which was evident in the Q1 turnaround.

Corporate Proposals: A Transformative Acquisition

SIAB is currently in the midst of significant corporate proposals that could reshape its future. The proposed acquisition of Taghill Projects Sdn Bhd for RM122.00 million, to be satisfied via cash and new share issuance, is a key strategic move. Taghill’s vendors have provided a cumulative profit guarantee of not less than RM24.00 million for FY2024 and FY2025, which, if realized, could significantly bolster SIAB’s earnings. To fund this, SIAB is undertaking a Proposed Special Issue and a Proposed Rights Issue with Warrants, aiming to raise capital for the cash portion of the acquisition and for working capital. These proposals are progressing, with Bursa Securities having conditionally approved them, and are expected to be completed by the third quarter of 2024.