N2N Connect Berhad’s Q1 2025 Performance: Navigating Headwinds with Resilient Core Operations
Greetings, fellow investors! Today, we’re diving into the latest unaudited financial results of N2N Connect Berhad for the first quarter ended 31 March 2025. N2N Connect, a key player in Malaysia’s financial technology landscape, provides innovative solutions primarily to the stockbroking industry.
This report presents a mixed yet intriguing picture. While the top-line revenue and reported net profit saw a slight dip compared to the same period last year, a closer look reveals a commendable increase in core profitability and a significant boost in cash generation from operations. These are crucial indicators for any company navigating the current dynamic economic environment. Let’s break down the key figures and what they mean for N2N Connect.
Core Data Highlights: A Closer Look at the Numbers
The first quarter of 2025 saw N2N Connect Berhad report a revenue of RM25.94 million, a decrease of 4.1% from RM27.06 million in the corresponding quarter of 2024. This modest decline was primarily attributed to lower contributions from business and trading solutions, as well as transactional-based fees. However, this was partially offset by higher one-time implementation fees and increased managed service revenue, showcasing a shift in revenue streams.
Q1 2025
Revenue: RM25,944,000
Profit Before Taxation: RM5,424,000
Profit for the Period: RM4,572,000
Profit Attributable to Owners: RM4,639,000
Basic Earnings Per Share: 0.83 sen
Q1 2024
Revenue: RM27,062,000
Profit Before Taxation: RM5,562,000
Profit for the Period: RM4,979,000
Profit Attributable to Owners: RM5,055,000
Basic Earnings Per Share: 0.91 sen
Despite the slight dip in revenue, the company’s profit before taxation decreased by a mere 2.5% to RM5.42 million from RM5.56 million. Profit for the period saw an 8.2% reduction to RM4.57 million, impacting basic earnings per share, which fell from 0.91 sen to 0.83 sen.
A Glimmer of Strength: Core Profit and Cash Flow
While reported profits saw a decline, it’s crucial to look at the ‘core profit’, which excludes non-recurring items and non-cash adjustments like impairment of intangible assets and unrealised foreign exchange gains/losses. For Q1 2025, N2N Connect’s core profit surged by 11.0% to RM3.86 million, up from RM3.48 million in the corresponding quarter last year. This significant improvement was mainly driven by a higher share of associate’s results and lower operating expenses, indicating better operational efficiency.
Furthermore, the company demonstrated impressive cash flow generation. Net cash generated from operating activities more than doubled, increasing by 106.5% to RM2.095 million in Q1 2025, compared to RM1.015 million in Q1 2024. This strong operating cash flow is a positive sign of the company’s ability to generate cash from its primary business activities.
Segmental Performance: A Shifting Landscape
From a geographical perspective, N2N Connect’s revenue composition saw some shifts:
- Malaysia: Revenue from the Malaysian segment increased by 15.9% to RM13.81 million (Q1 2025) from RM11.91 million (Q1 2024), indicating strong domestic performance.
- Regional: Conversely, the Regional segment (comprising Hong Kong SAR China, Singapore, Australia, and Indonesia) experienced a decrease of 19.8% in revenue, falling to RM12.15 million (Q1 2025) from RM15.16 million (Q1 2024). This suggests varying market dynamics across different regions.
Financial Health: Stability and Growth
As at 31 March 2025, N2N Connect’s financial position remains robust. Total assets slightly increased to RM279.45 million from RM277.54 million at the end of December 2024. Equity attributable to owners of the company also saw a healthy increase, rising to RM255.08 million from RM252.26 million. Consequently, the net assets per share improved to 46 sen from 45 sen, reflecting a stronger balance sheet.
Risks and Prospects: Navigating the Future
N2N Connect acknowledges the prevailing global economic uncertainties. The International Monetary Fund (IMF) projects global growth to slow to 2.8% in 2025, influenced by escalating trade tensions. However, Malaysia’s economy is expected to maintain moderate growth between 4% to 5%, aligning with the IMF’s updated forecast of 4.1% for 2025. This domestic resilience, bolstered by foreign direct investments in manufacturing, renewable energy, and technology services, provides a more optimistic backdrop for N2N Connect.
Domestically, while the FBM KLCI has seen a decline of 7.5% since the beginning of 2025, certain sectors on Bursa Malaysia are anticipated to reach new highs, driven by progressive investment policies and solid corporate earnings growth. Against this backdrop, N2N Connect remains “cautiously optimistic for an improved performance for the financial year of 2025.”
The company also highlighted an ongoing material litigation regarding intellectual property rights. While the legal proceedings are complex and ongoing, the Directors are of the opinion that the ultimate outcome is not expected to have a material adverse effect on the Group’s financial position.
Summary and Outlook
Summary and
N2N Connect Berhad’s first quarter of 2025 demonstrates the company’s ability to enhance its core operational efficiency and cash flow generation, even as it navigates a slightly softer revenue environment. The notable increase in core profit and robust operating cash flow are positive indicators of underlying business strength and effective cost management. The shift in revenue mix towards higher one-time implementation and managed service fees also suggests strategic adaptation to market demands.
Looking ahead, the company’s cautious optimism for the full financial year 2025 is grounded in Malaysia’s projected economic resilience, despite global headwinds. The focus on leveraging domestic growth opportunities and optimizing operational performance will be key to achieving their outlook.
Key points for consideration:
- The slight decline in overall revenue and reported net profit for the quarter compared to the previous year’s corresponding period.
- The significant increase in core profit and net cash generated from operating activities, highlighting operational efficiency and strong cash conversion.
- The shift in revenue contribution from regional markets to a stronger domestic performance.
- The ongoing material litigation and the company’s assessment that it is not expected to have a material adverse effect on financial position.
- The cautious but optimistic outlook for the full financial year, supported by Malaysia’s economic growth projections.
Final Thoughts and Your Perspective
N2N Connect Berhad’s Q1 2025 results present a compelling narrative of a company adapting to market dynamics while reinforcing its core financial health. The increase in core profit and operating cash flow, despite a slight revenue dip, suggests strategic management and operational resilience. It will be interesting to observe how these trends evolve in the coming quarters and if the domestic market can continue to offset regional challenges.
Given the global economic headwinds and domestic market dynamics, do you believe N2N Connect can sustain its core profit growth and improve its overall profitability in the coming quarters? Share your thoughts and insights in the comments section below!
