Greetings, fellow investors! Today, we’re diving into the latest financial performance of HARVEST MIRACLE CAPITAL BHD (HM Capital) for the quarter ended 31 March 2025. This report reveals a company in an exciting phase of growth and strategic diversification, marked by a significant surge in revenue and a strong return to profitability. Let’s unpack the numbers and see what’s driving HM Capital’s journey.
Core Data Highlights
Overall Financial Snapshot: Q1 2025 vs. Q1 2024
Quarter Ended 31 March 2025
Revenue: RM39.64 million
Profit Before Tax: RM6.06 million
Profit After Tax: RM5.82 million
Basic Earnings Per Share: 0.54 sen
Quarter Ended 31 March 2024
Revenue: RM24.94 million
Profit Before Tax: (RM2.89 million) (Loss)
Profit After Tax: (RM3.13 million) (Loss)
Basic Earnings Per Share: (0.21 sen)
Revenue surged by an impressive 58.9%, or RM14.7 million, compared to the corresponding quarter of the previous financial year. This significant growth propelled the company from a loss-making position to a profit before tax of RM6.06 million, representing a remarkable 309.6% turnaround. A key contributor to this profit was a fair value gain of RM5.4 million from investments in quoted shares.
Year-to-Date Performance
Looking at the year-to-date figures, HM Capital’s performance remains robust. Revenue for the twelve months ended 31 March 2025 stood at RM129.44 million, up 43.0% from RM90.54 million in the previous year. Profit after tax for the period also saw a significant increase, reaching RM7.80 million, a 339.2% improvement compared to RM1.78 million previously.
Segmental Deep Dive: What’s Driving the Growth?
HM Capital operates across diverse business segments, and their individual performances paint a clearer picture:
- IT & ICT Division: This division reported revenue of RM22.09 million, an increase of RM3.8 million compared to the corresponding quarter last year. More impressively, it turned around from a loss to a profit before tax of RM1.12 million, primarily due to higher sales margins. Compared to the immediate preceding quarter, revenue was comparable, but the significant improvement in sales margins was key to its profitability turnaround.
- Moneylending Business Division: While revenue from moneylending interest income declined due to the absence of new loan disbursements, the division still reported a profit of RM5.23 million. This was largely driven by the RM5.4 million fair value gain from quoted share investments, though partially offset by an impairment loss of RM0.4 million on trade receivables.
- Plantation Division: Engaged in trading Fresh Fruit Bunch (FFB), this division saw revenue improve due to a 335 metric ton higher FFB output and a better average selling price of RM211 per metric ton compared to the previous year. Its profit before tax increased in line with this revenue growth. However, compared to the immediate preceding quarter, FFB output declined by 203 metric tons, impacting its bottom line.
- Manufacturing Division: Specializing in clay bricks and burnt clay products, this division recorded a revenue increase of RM2.4 million compared to the corresponding period last year. Despite the revenue growth, it reported a loss before tax of RM0.39 million, mainly due to legal fees and stamp duty incurred for borrowings related to its manufacturing plant expansion.
- Trading Division: A newly established division in January 2025 focusing on building materials, it made a strong debut by contributing RM9.19 million in revenue within a short period. Similar to the Manufacturing Division, it reported a minor loss before tax, attributed to initial legal fees and stamp duty.
Financial Health: Balance Sheet and Cash Flow
HM Capital’s balance sheet shows a robust increase in assets and equity, primarily bolstered by strategic financing activities. Total assets grew to RM477.49 million as at 31 March 2025, up from RM340.44 million a year ago. This was mirrored by a substantial increase in total equity to RM417.88 million, largely attributed to the proceeds from a rights issue.
The company’s cash and cash equivalents also saw a healthy increase, reaching RM91.31 million at the end of the period, compared to RM24.57 million previously. This was significantly boosted by net cash from financing activities, which surged to RM120.90 million for the year-to-date, reflecting the successful rights issue that raised RM98.43 million.
However, it’s worth noting that total borrowings have also increased, with current borrowings at RM5.91 million and non-current borrowings at RM25.74 million, reflecting the company’s expansion and investment activities.
Risk and Prospect Analysis
While the latest report showcases impressive growth, especially in revenue, it’s crucial for investors to consider the underlying dynamics. The significant profit before tax for the quarter was heavily influenced by a fair value gain from quoted share investments. This highlights a reliance on non-operational gains, which may not be sustainable in the long term.
The company’s strategic diversification into new areas like the Trading Division and the expansion of the Manufacturing Division are positive steps towards building more resilient revenue streams. However, these new ventures come with initial costs, as seen in the legal fees and stamp duty impacting their profitability in this quarter.
Furthermore, the Antara Project, a significant investment in serviced apartments, is currently 85% complete. The successful completion and monetization of this project will be vital for the Property Investment Division’s future contribution. The substantial increase in borrowings also warrants attention, as effective management of this debt will be crucial for the company’s financial health moving forward.
Management’s commitment to active diversification is a positive sign, indicating an awareness of market challenges and a proactive approach to growth. The recent rights issue has provided a strong capital base to support these initiatives.
Summary and
HM Capital’s Q1 2025 report paints a picture of a company undergoing significant transformation. The substantial revenue growth and return to overall profitability are commendable, driven by contributions from existing divisions and the promising launch of the new Trading Division. The strategic injection of capital from the rights issue has bolstered the company’s financial position, providing the necessary resources for its diversification and expansion plans.
However, the reliance on fair value gains for a significant portion of the quarter’s profit, along with initial losses in new or expanding segments due to one-off costs, suggests that operational profitability across all segments is still a work in progress. The completion and success of large projects like Antara and the effective integration of new businesses will be key determinants of future performance.
Key points to monitor:
- The sustainability of profit growth, particularly the balance between operational earnings and fair value adjustments.
- The successful execution and profitability of new ventures, such as the Trading Division and the expanded Manufacturing Division.
- The progress and monetization of the Antara Project, which represents a significant capital commitment.
- The management of increased borrowings and their impact on the company’s financial leverage.
Overall, HM Capital is actively positioning itself for future growth amidst a challenging economic environment. Their diversification strategy, backed by a stronger capital base, will be crucial in navigating the market ahead.
From a professional standpoint, HM Capital appears to be making calculated moves to expand its footprint and diversify its revenue streams. The significant capital raised through the rights issue provides a solid foundation for these initiatives. While the immediate quarter’s profit was notably boosted by fair value gains, the underlying operational improvements in divisions like IT & ICT and the promising start of the Trading Division are encouraging. The challenge will be to translate these strategic shifts into consistent, broad-based operational profitability.
What are your thoughts on HM Capital’s strategy of diversification, especially with the new Trading Division? Do you think the company can maintain this growth momentum and successfully integrate its new ventures in the coming years?
Share your views in the comments section below!
