Greetings, fellow Malaysian retail investors!
Today, we’re diving into the latest financial performance of Naim Holdings Berhad for the first quarter ended 31 March 2025. This report offers a crucial glimpse into the company’s operational health and strategic direction amidst a dynamic economic landscape. While the headline figures might raise an eyebrow, a deeper look reveals areas of resilience and strategic adjustments.
The Group reported a notable decline in overall revenue and a shift to a net loss for the period. However, it’s not all gloom and doom. We’ll explore the underlying factors, including segment-specific performances and the impact of its key associate, Dayang Enterprise Holdings Bhd. (DEHB). So, let’s unpack these numbers and see what they mean for the company’s path forward.
Q1 2025 Financial Snapshot: A Mixed Bag
Naim Holdings Berhad’s first quarter of 2025 saw a significant contraction in its top line, leading to a net loss. This was primarily attributed to lower sales and slower work progress across its core construction projects.
Q1 2025
Revenue: RM42.3 million
Gross Profit: RM3.3 million
Loss Before Tax: RM(2.0) million
Loss for the Period: RM(3.3) million
Loss Per Share: (0.61) sen
Q1 2024
Revenue: RM80.9 million
Gross Profit: RM3.9 million
Profit Before Tax: RM3.9 million
Profit for the Period: RM2.9 million
Earnings Per Share: 0.60 sen
Comparing the current quarter to the same period last year, revenue plunged by approximately 47.8%, from RM80.9 million to RM42.3 million. This substantial decrease was the primary driver for the Group swinging from a pre-tax profit of RM3.9 million in Q1 2024 to a pre-tax loss of RM2.0 million in Q1 2025. Consequently, the company recorded a loss for the period of RM3.3 million, compared to a profit of RM2.9 million in the prior year’s corresponding quarter, translating to a loss per share of 0.61 sen from an earnings per share of 0.60 sen.
The shift to a net loss is explained by two key factors: a lower contribution from the Group’s core business operations (though segment losses improved) and a significantly reduced share of profit from its major associate, Dayang Enterprise Holdings Bhd. (DEHB).
Segmental Performance: A Closer Look
Property Development
The Property Development segment showed some positive signs. Revenue for the quarter increased to RM12.2 million from RM8.9 million in the same period last year. More encouragingly, the segment’s loss narrowed considerably to RM1.3 million, an improvement from a loss of RM3.1 million previously. This improvement was largely due to higher work progress on existing projects. However, new property sales secured during the period were lower at RM9.6 million, compared to RM14.9 million in the corresponding period of 2024.
It’s important to note the stark difference when comparing this quarter to the immediate preceding quarter (Q4 2024). In Q4 2024, the segment reported a substantial revenue of RM243.3 million and a profit of RM184.1 million. This was primarily due to a one-off land sale transaction of RM223.4 million, which significantly skewed the previous quarter’s figures. Excluding this exceptional item, the Q1 2025 performance reflects a more normalised operational pace.
Construction
The Construction segment faced significant headwinds, with revenue declining substantially to RM21.9 million from RM64.8 million in the same period last year. This was mainly due to lower work progress from existing ongoing projects. Despite the revenue drop, the segment managed to reduce its loss to RM0.9 million, an improvement from RM1.1 million previously. This indicates some success in controlling fixed overhead costs.
Compared to the immediate preceding quarter (Q4 2024), construction revenue also decreased from RM46.6 million. However, the segment’s loss was lower than the RM3.3 million recorded in Q4 2024, mainly due to lower interest costs and fixed overheads incurred.
Other Segments
The ‘Others’ segment, which includes trading, property investment, hotel operations, and quarry activities, reported an improvement in revenue to RM8.1 million from RM7.3 million in the corresponding period last year. Its segment loss also improved to RM1.7 million from RM2.1 million, mainly driven by better occupancies and rates from its hotel and accommodation operations.
However, when compared to the immediate preceding quarter (Q4 2024), this segment’s revenue declined from RM10.9 million, and its loss widened from RM0.9 million. This was primarily due to lower quarry sales and lower hotel occupancies during the current period, leading to the continued incurrence of fixed overheads and interest expenses.
Major Associate: Dayang Enterprise Holdings Bhd. (DEHB)
Naim Holdings Berhad’s share of profit from its major associate, DEHB, significantly decreased to RM3.0 million in Q1 2025, down from RM7.0 million in the same period last year. This decline was primarily attributed to lower work orders/contracts, reduced vessel chartering rates, and lower vessel utilisation rates for DEHB. Despite this, DEHB still holds an estimated call-out contract value of about RM5.1 billion, which provides a long-term outlook for its contributions.
Financial Health: Balance Sheet and Cash Flow
Naim Holdings Berhad maintains a relatively stable financial position. As at 31 March 2025, cash and cash equivalents stood at RM365.8 million, a slight decrease from RM369.1 million at the end of December 2024. The Group’s total loans and borrowings also saw a reduction, from RM99.2 million to RM92.4 million, reflecting prudent debt management.
From a cash flow perspective, the company showed an improved net cash used in operating activities, at RM13.4 million compared to RM14.0 million in the previous corresponding period, indicating more efficient working capital management. Crucially, net cash from investing activities surged to RM18.3 million from RM10.0 million, largely bolstered by dividends received from an associate (RM19.6 million). This strong investing cash flow helped offset the operational cash outflow.
Summary and Outlook
Naim Holdings Berhad’s Q1 2025 results present a mixed picture. While the Group experienced a significant revenue decline and swung into a net loss, it’s important to differentiate between the one-off impact of a major land sale in the previous quarter and the underlying operational performance. The core business segments, particularly Property Development and Construction, showed improvements in reducing their segment losses, indicating better cost management despite lower activity levels.
The company’s financial health remains sound with a healthy cash balance and reduced borrowings. The strong cash flow from investing activities, driven by associate dividends, is a positive highlight. However, the reduced contribution from its key associate, DEHB, is a point to monitor, reflecting the challenges in the oil and gas services sector.
Looking ahead, Naim Holdings Berhad is implementing clear strategies to navigate the challenging market:
- **Property Development:** Focusing on understanding and meeting customer needs, cautious product launches, and continuous sales and marketing initiatives to clear existing inventory while introducing new projects competitively.
- **Construction:** Closely monitoring ongoing projects to ensure timely completion and achieve expected returns, which is crucial given the lower work progress reported.
- **Other Segments:** Gradual asset enhancement initiatives for retail, commercial, and hospitality assets to improve yields, alongside efforts to enhance productivity, operational efficiency, and prudent debt management.
- **Overall:** The company is mindful of the softer property market and rising costs of materials and financing, adopting a cautious yet proactive approach.
In my professional view, Naim Holdings Berhad is facing a period of adjustment. The Q1 2025 results, while showing a net loss, also highlight the company’s efforts in cost control and efficient cash management within its core segments. The stability of its balance sheet and the strong cash inflow from investing activities provide a buffer against current market headwinds. The key to future performance will be the successful execution of its strategies, particularly in securing new projects for its construction arm and the recovery of its property development and other business segments in a gradually improving market.
What are your thoughts on Naim Holdings Berhad’s strategy for navigating the current market conditions? Do you believe their focus on operational efficiency and cautious expansion will yield positive results in the coming quarters? Share your views in the comments below!
