Encorp Berhad’s Q1 2025: A Deep Dive into Shifting Fortunes and Future Prospects
Greetings, fellow investors and market enthusiasts! Today, we’re unboxing the latest financial report from Encorp Berhad (Company No. 200001004231), a familiar name in Malaysia’s property and concession landscape. Their first-quarter results for the period ending 31 March 2025 have just landed, and they paint a picture of significant shifts compared to the same period last year. While the headline figures show a dip in performance, a closer look reveals strategic moves and underlying segment dynamics that are crucial for understanding Encorp’s journey ahead.
The core takeaway? Encorp has transitioned from a profitable first quarter last year to a loss-making one this year. However, this isn’t the whole story. Let’s delve into the numbers and explore what’s truly shaping their path.
Core Financial Highlights: A Quarter of Transition
Encorp Berhad’s Q1 2025 saw a notable contraction in its top and bottom lines. Let’s break down the key figures:
Q1 2025
Revenue: RM18.75 million
Profit Before Tax: RM(3.06) million (Loss)
Profit Net of Tax: RM(3.49) million (Loss)
Basic Earnings Per Share: (0.93) sen (Loss)
Q1 2024
Revenue: RM29.62 million
Profit Before Tax: RM9.81 million (Profit)
Profit Net of Tax: RM9.06 million (Profit)
Basic Earnings Per Share: 2.87 sen (Profit)
As evident from the figures, revenue for Q1 2025 declined by approximately 37% from RM29.62 million to RM18.75 million. This significant drop directly impacted the Group’s profitability, leading to a loss before tax of RM3.06 million, a stark contrast to the RM9.81 million profit recorded in the corresponding quarter last year. Similarly, the net profit swung from a positive RM9.06 million to a loss of RM3.49 million, translating into a basic loss per share of 0.93 sen compared to earnings of 2.87 sen previously.
Diving Deeper: Segmental Performance
To truly understand Encorp’s performance, we need to look beyond the consolidated numbers and examine the individual business segments:
Property Development
This segment was the primary driver of the overall revenue decline. In Q1 2025, Property Development generated RM6.1 million in revenue, a substantial 63% decrease from RM16.5 million in Q1 2024. The report attributes this to lower sales contributions from projects like Tilia, Lamanda Chuping Phase 1 RMM, RKS, and Encorp Marina in Q1 2025, compared to the strong sales from Garden Office, Iris, Clover, and Encorp Marina in Q1 2024 (which contributed around RM13.4 million). Consequently, the segment recorded a loss of RM0.7 million, in contrast to a profit before tax of RM15.4 million in Q1 2024, which was boosted by a RM14.0 million reversal provision on CIPAA.
Concessionaire
The concession division also saw a revenue reduction, recording RM8.8 million in Q1 2025, down 21% from RM11.2 million in Q1 2024. This decrease is primarily due to the nature of deferred payment income, which is structured as an annuity under the Privatisation Agreement, with principal and interest repayments scheduled for specific periods. The concession is set to expire in 2028.
Investment Property
On a brighter note, the Investment Property segment demonstrated resilience. Its revenue increased by 17% in Q1 2025, rising from RM1.7 million in Q1 2024. This growth is largely attributed to higher rental rates at Strand Mall, with the average rental pricing improving from RM1.89 per square foot in Q1 2024 to RM2.29 per square foot in Q1 2025. This positive revenue trend helped reduce the segment’s loss before tax from RM3.0 million in Q1 2024 to RM2.6 million in Q1 2025, an improvement of RM0.4 million.
Other Contributions
- Facility Management: This division saw an 8% increase in revenue, from RM0.15 million to RM0.16 million, driven by higher patronage at the mall car park.
- Contract Revenue: Recorded at RM1.6 million, primarily from the replanting stream.
Financial Health and Cash Flow Snapshot
Looking at the balance sheet as of 31 March 2025, total assets stood at RM1,039.89 million, a slight increase from RM1,037.71 million at 31 December 2024. Current assets saw an increase, particularly in “Other investments” and “Cash and cash equivalents”. Total liabilities also increased slightly to RM617.24 million from RM611.24 million.
From a cash flow perspective, Encorp generated RM29.07 million in net cash from operating activities in Q1 2025, a slight decrease from RM29.53 million in Q1 2024. The Group utilized RM22.48 million in investing activities, mainly for placement of investment security, and saw a net cash outflow of RM0.42 million from financing activities. Despite these movements, cash and cash equivalents increased by RM6.18 million during the quarter, ending at RM22.85 million.
Navigating the Future: Prospects and Challenges
Encorp is actively pursuing several strategic initiatives to drive future growth and mitigate risks:
- Stable OPR Environment: Bank Negara Malaysia’s decision to maintain the Overnight Policy Rate (OPR) at 3.00% is expected to support economic stability and strong domestic demand, providing a conducive environment for business.
- Property Development Pipeline: The ongoing Tilia Shah Alam project, featuring 112 two-storey superlink homes, is on track for completion in Q4 2025. Additionally, the Cahaya Kristal project in Kota Kinabalu marks Encorp’s expansion into East Malaysia, targeting a Q3 2026 completion. The joint venture Balau Residences project in Teluk Cempedak, Kuantan, is strategically positioned to benefit from improved transportation networks.
- FELDA Partnership: The successful completion of Lamanda Chuping Phase 1 highlights a fruitful partnership with FELDA, with Phase 2 planning for medium-cost housing set to begin later this year.
- Investment Property Growth: Rising rental occupancy at Strand Mall and Warna Avenue, coupled with Strand Mall’s integration into the SEDA program (emphasizing sustainability and ESG standards), signals positive momentum for this segment.
However, like any business, Encorp faces its share of challenges, particularly in the legal arena:
Summary and
Encorp Berhad’s Q1 2025 results reflect a challenging quarter, primarily due to a significant slowdown in its Property Development segment and a reduction in concession revenue. However, the growth in Investment Property revenue offers a silver lining, showcasing the benefits of diversified income streams. The company’s pipeline of new property projects and strategic partnerships, particularly with FELDA, indicate a forward-looking approach to reignite growth.
While the legal disputes present uncertainties, especially the material litigation with Bumimetro Construction Sdn Bhd where a substantial award was made in Encorp’s subsidiary’s favour but is now subject to an appeal, the company is actively pursuing its claims and defending its position. The outcome of these litigations will certainly be a key factor to watch in the coming quarters.
Overall, Encorp is in a transitional phase, navigating market headwinds while laying the groundwork for future expansion. Investors should keep a close eye on the execution of their new projects and the resolution of ongoing legal matters.
- Property Market Volatility: The significant decline in property development revenue highlights the inherent cyclicality and sensitivity of the property market to economic conditions and consumer sentiment.
- Concession Revenue Dependence: The structured nature of concession payments means revenue can fluctuate based on repayment schedules, impacting short-term top-line figures.
- Material Litigations: Two significant arbitration proceedings (MEDSB vs BCSB and EIDSB vs KIMSB) introduce legal and financial uncertainties. While one case has seen a favorable award for Encorp’s subsidiary, it is currently being challenged in court, and the financial impact of the other is yet to be ascertained.
What’s Next for Encorp?
From my perspective as a blogger analyzing these reports, Encorp Berhad is clearly at a crossroads. The Q1 2025 results underscore the importance of their diversification strategy. The property development segment, while facing headwinds this quarter, has new projects in the pipeline that could turn the tide. The steady performance of their investment properties and the strategic expansion into East Malaysia are positive indicators.
However, the ongoing legal battles, particularly the one where a significant award is being contested, will undoubtedly be a focal point for investors. The resolution of these disputes could have a material impact on the company’s financial standing and future outlook. It’s a reminder that investing isn’t just about the numbers on the financial statements, but also about understanding the broader operational and legal landscape a company operates within.
Do you think Encorp Berhad can regain its growth momentum with its new projects and strategic focus? What are your thoughts on the impact of the ongoing legal challenges? Share your insights and perspectives in the comments below!
