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TechStore Berhad: Navigating Its First Quarter as a Publicly Listed Entity
Greetings, fellow investors! Today, we’re diving into the inaugural quarterly financial report from TechStore Berhad for the period ended 31 March 2025 (1QFY25). Having recently made its debut on the ACE Market of Bursa Malaysia on 18 February 2025, this report offers our first glimpse into the company’s performance as a publicly traded entity. While the numbers reflect a quarter marked by unique circumstances, TechStore’s management maintains a confident stance, buoyed by a robust project pipeline and a positive industry outlook. Let’s break down the key takeaways and see what’s truly shaping their journey forward.
Financial Performance: A First Look
As this is TechStore’s second interim financial report following its listing, it’s important to note that there are no comparative figures for the preceding corresponding quarter (Q1 FY24). This means our analysis will primarily focus on the current quarter’s standalone performance and a comparison with the immediate preceding quarter (Q4 FY24).
For 1QFY25, TechStore recorded a turnover of RM14.0 million. The profit after tax (PAT) for the quarter stood at RM1.0 million. It’s worth noting that this PAT figure includes RM0.9 million in one-off listing expenses. Excluding these non-recurring costs, the PAT would have been approximately RM1.9 million, painting a clearer picture of operational profitability.
Quarter-on-Quarter Snapshot (1QFY25 vs. 4QFY24)
Comparing the current quarter with the immediate preceding quarter (Q4 FY24) provides valuable context, revealing some shifts in performance:
1QFY25
Revenue: RM14.013 million
Profit Before Taxation (PBT): RM2.001 million
4QFY24
Revenue: RM23.549 million
PBT: RM4.321 million
TechStore’s revenue saw a decrease of RM9.5 million, or 40.5%, compared to the immediate preceding quarter. Similarly, PBT declined by RM2.3 million, or 53.7%. This reduction was primarily attributed to slower progress in the “Design and Implementation Services” segment, specifically impacting major projects such as the Light Rail Transit 3 (LRT3) Automatic Fare Collection (AFC) Project and the Human Resources Management Information System (HRMIS) Project.
Business Unit Performance
The report highlights that the maintenance and support services segment was the primary revenue driver, contributing a significant 85.2% of the top line. This includes services related to Intelligence Supervisory Control and Data Acquisition (SCADA) systems, Internet of Things (IoT) modules, and the supply of cameras and network video recorders. This strong contribution from recurring services provides a stable base for the company’s operations.
A Glimpse into the Future: Order Books and Tender Pipeline
Despite the quarter-on-quarter dip, TechStore’s future appears to be well-supported by a healthy pipeline of projects:
- Order Book: As of 31 March 2025, the company boasted an order book of RM109.1 million. This substantial figure offers good earnings visibility, encompassing enterprise IT services for Malaysian government agencies and major infrastructure projects like LRT3 and the RTS Link.
- New Contract Win: Further strengthening its portfolio, TechStore secured an additional RM15.9 million ICT maintenance contract from Kementerian Dalam Negeri Malaysia (KDN) on 8 May 2025.
- Tender Book: The Group’s tender book remains robust at RM772.0 million as of 30 April 2025, indicating strong potential for future project acquisitions, particularly larger-scale transportation projects in Penang and Johor.
Strengthening Financial Health Post-IPO
The recent Initial Public Offering (IPO) on 18 February 2025 injected fresh funds of RM25.0 million into TechStore. This has significantly bolstered the company’s financial position:
Total Assets increased from RM100.480 million (as at 31 Dec 2024) to RM117.238 million (as at 31 March 2025).
Total Equity saw a substantial jump from RM38.360 million to RM62.751 million, primarily due to the IPO proceeds.
Cash and bank balances surged from RM9.312 million to a healthy RM32.957 million, providing ample liquidity.
Net assets per ordinary share improved from 10.2 sen to 12.6 sen, reflecting the larger share capital and retained profits post-IPO.
Of the RM25.0 million raised from the IPO, RM4.1 million has already been utilized, with RM3.5 million allocated for listing expenses and RM0.6 million for bank borrowings repayment. The remaining RM20.9 million is earmarked for working capital, recruitment, capital expenditure, and further debt repayment, signaling strategic investments for growth.
Risks and Future Prospects: Navigating the Landscape
Industry Tailwinds
The Malaysian enterprise IT services industry is on a growth trajectory, with market size projected to expand from RM22.9 billion in 2024 to RM28.8 billion by 2028. This growth is fueled by the nation’s accelerating digital transformation, especially within the public and infrastructure sectors. TechStore’s involvement in critical national projects like LRT3 and the RTS Link positions it well to capitalize on this trend. The company’s focus on customised, localised solutions and its strong market presence are key competitive advantages.
Potential Headwinds
While the outlook is positive, the report also sheds light on areas requiring close attention. The effective tax rate for the quarter was notably high at 48.0%, significantly exceeding the statutory rate of 24%. This was mainly due to non-deductible expenses, including IPO costs, depreciation, amortization, and impairment for slow-moving stocks. Managing these non-deductible expenses and optimizing the tax structure will be crucial for improving bottom-line profitability.
Summary and Investment Considerations
TechStore Berhad’s first quarter as a listed entity presents a mixed but ultimately promising picture. While the quarter saw a revenue and profit dip compared to the immediate preceding quarter due to project phasing and one-off listing expenses, the underlying fundamentals appear strong. The company’s robust order book and tender pipeline provide significant earnings visibility, and its strategic positioning within Malaysia’s growing digital transformation landscape bodes well for future growth.
However, investors should be mindful of the following key points:
- The absence of prior year comparable quarterly figures makes trend analysis challenging for now, necessitating focus on sequential quarter performance and forward-looking indicators.
- The impact of one-off listing expenses on current quarter profitability. While non-recurring, it skews the reported PAT.
- The high effective tax rate due to non-deductible expenses, which could continue to affect net profit margins in the near term.
- The dependency on the progress of large-scale infrastructure projects, as evidenced by the impact of slower progress on LRT3 and HRMIS in the current quarter.
Despite these challenges, TechStore’s management is actively pursuing new, larger-scale projects and strengthening its domain expertise through strategic collaborations. The significant cash injection from the IPO also provides a strong financial foundation for future initiatives.
Final Thoughts
TechStore Berhad has stepped into the public market with a quarter that reflects both the costs of its new status and the strategic investments in its future. The strong order book and tender pipeline are clear indicators of potential growth, aligning with Malaysia’s broader digital transformation agenda. For Malaysian retail investors, it’s a company with a clear domestic focus and involvement in critical national infrastructure projects, offering a unique exposure to the enterprise IT services sector.
Do you think TechStore Berhad can maintain its momentum and successfully convert its robust tender book into significant revenue streams in the coming quarters? Share your thoughts in the comments below!
