Greetings, fellow investors and market enthusiasts! Today, we’re diving into the latest financial performance of ZECON BERHAD, a name that often sparks conversation among Malaysian retail investors. The company has just released its unaudited financial report for the first financial quarter ended 31 March 2025, and there are some intriguing takeaways that warrant our attention.
While the report reveals a mixed bag of results, with a significant surge in profit attributable to the owners of the parent, it also highlights the company’s continued reliance on its key concession business and ongoing challenges. So, let’s peel back the layers and explore what these numbers truly mean for Zecon Berhad’s trajectory.
Financial Performance: A Closer Look at the Numbers
Zecon Berhad’s first quarter of 2025 shows a notable increase in revenue and gross profit compared to the same period last year. This growth is primarily driven by its service concession segment. However, it’s important to understand the nuances behind these figures.
Revenue Performance
Current Quarter (31 March 2025)
Revenue: RM15,090,000
Same Period Last Year (31 March 2024)
Revenue: RM13,895,000
The company recorded an 8.6% increase in revenue, reaching RM15.09 million for the quarter. This indicates a positive top-line growth, primarily supported by its core operations.
Gross Profit and Operational Efficiency
Current Quarter (31 March 2025)
Gross Profit: RM11,277,000
Same Period Last Year (31 March 2024)
Gross Profit: RM8,709,000
Gross profit saw an impressive 29.5% jump to RM11.28 million. This suggests improved efficiency in managing its cost of sales. Similarly, profit from operations rose by 24.6% to RM20.87 million, reflecting better operational leverage.
Profit Before and After Taxation
Current Quarter (31 March 2025)
Profit Before Taxation: RM7,071,000
Profit After Taxation: RM2,360,000
Same Period Last Year (31 March 2024)
Profit Before Taxation: RM4,516,000
Profit After Taxation: RM3,094,000
Profit before taxation soared by 56.6% to RM7.07 million. However, profit after taxation saw a decrease of 23.7% to RM2.36 million. The report attributes the profit after tax to an “additional claim related to the linen,” indicating a one-off boost to profitability.
Profit Attributable to Owners of the Parent and Earnings per Share
Current Quarter (31 March 2025)
Profit Attributable to Owners of the Parent: RM928,000
Basic Earnings per Share: 0.63 sen
Diluted Earnings per Share: 0.58 sen
Same Period Last Year (31 March 2024)
Profit Attributable to Owners of the Parent: RM111,000
Basic Earnings per Share: 0.08 sen
Diluted Earnings per Share: 0.08 sen
Despite the dip in overall profit after tax, the profit attributable to the owners of the parent saw an astounding 735.9% increase, reaching RM928,000. This translates to a significant improvement in basic earnings per share from 0.08 sen to 0.63 sen. This divergence suggests a favorable shift in how profit is distributed within the group, potentially due to changes in non-controlling interests.
Segmental Performance: The HPKK Lifeline
The report clearly states that the Hospital Pakar Kanak Kanak UKM (HPKK) operation, which falls under the Service Concession segment, remains the primary engine of Zecon Berhad’s financial performance, contributing a substantial 99% of the total revenue. This highlights a significant concentration risk, as the company is heavily reliant on this single concession agreement. The construction segment, notably, had no contribution from the Pan Borneo Highway project during this quarter.
Financial Health and Future Outlook
Beyond the income statement, it’s crucial to assess Zecon Berhad’s financial position. As of 31 March 2025, total assets stood at RM1.659 billion, slightly up from RM1.657 billion at the end of December 2024. Total equity also saw a modest increase to RM444.12 million from RM441.64 million, indicating a stable, albeit slow, growth in shareholder value.
The company’s non-current liabilities, primarily borrowings, remain substantial at RM906.31 million, reflecting a significant debt burden. While cash and cash equivalents increased to RM5.29 million from RM3.64 million at the beginning of the period, the overall cash position is still relatively modest given the scale of its operations and liabilities.
Risks and Prospects: Navigating the Landscape
Zecon Berhad acknowledges its continued reliance on the steady revenue stream from the HPKK concession. This stable income is a bedrock for the company, but future growth hinges on diversification and new initiatives.
The company is actively pursuing new avenues, notably prioritizing the Kota Petra Green Technology Park (KPGTP), which is anchored by a 300MW Agrivoltaics Solar Farm. This aligns with Sarawak’s Post Covid-19 Development Strategy 2030, signaling a strategic pivot towards renewable energy and sustainable development. Additionally, the timely completion of the 2MW HPKK rooftop solar project underscores its commitment to green initiatives.
However, potential investors should also be aware of the company’s contingent liabilities and ongoing legal proceedings. Zecon Berhad has corporate guarantees amounting to RM804.57 million for credit facilities granted to subsidiaries, and potential legal claims of RM788,701. Furthermore, two material arbitrations are ongoing:
- Arbitration with PT Wijaya Karya (Persero) Tbk (WIKA): The Court of Appeal recently ruled in Wika’s favour on 5 May 2025, setting aside the High Court’s judgment that was in Zecon’s favour. This development could have implications for Zecon.
- Arbitration with JKR/Government of Malaysia (GOM): Zecon Berhad has filed a claim amounting to RM207.22 million against JKR/GOM. This arbitration is still ongoing, with final written submissions and oral clarifications scheduled for later in 2025. The outcome of this significant claim could materially impact Zecon’s financial position.
These legal challenges represent potential financial risks that could affect future performance and cash flow. It’s crucial for the company to manage these effectively.
Summary and
Zecon Berhad’s first quarter of 2025 presents a picture of a company with improving operational efficiency, as evidenced by its strong gross profit and profit from operations growth. The significant increase in profit attributable to the owners of the parent and earnings per share is a positive highlight, suggesting a better return for shareholders from the company’s core activities.
The company’s strategic focus on the Kota Petra Green Technology Park and the HPKK rooftop solar project indicates a forward-looking approach, aligning with broader economic development strategies and a shift towards sustainable projects. The steady revenue from the HPKK concession provides a foundational stability.
However, investors should remain mindful of the company’s high reliance on a single concession and the ongoing material litigations, particularly the recent Court of Appeal decision regarding WIKA and the substantial claim against JKR/GOM. These factors introduce a degree of uncertainty that warrants close monitoring.
In conclusion, while Zecon Berhad shows promising signs of operational improvement and strategic direction, the external legal environment and concentration risk are key areas to watch. The company’s ability to navigate these challenges while executing its new green technology initiatives will be critical in shaping its future performance.
It’s important to remember that this analysis is purely for informational purposes and should not be construed as any form of investment advice or recommendation to buy or sell Zecon Berhad shares. Always conduct your own thorough due diligence and consult with a qualified financial advisor before making any investment decisions.
What are your thoughts on Zecon Berhad’s latest quarterly report? Do you believe their pivot towards green technology will be a game-changer, or do the ongoing legal challenges present too great a hurdle? Share your insights in the comments section below!
