Core Data Highlights: A Quarter-on-Quarter Snapshot

Given PESTEC’s recent change in financial year-end from 30 September to 31 March, direct year-on-year comparisons for this quarter are not available in the report. Therefore, our analysis will focus on comparing the current quarter’s performance against the immediate preceding quarter (Q4 2024, ended 31 December 2024) to understand the recent trends.

Financial Performance Overview

PESTEC recorded a slight revenue increase of approximately RM3.54 million, or 4%, to RM87.91 million in the current quarter compared to the immediate preceding quarter. This indicates a modest operational uplift.

However, the profitability saw a significant swing. The Group posted a Loss Before Tax of RM33.06 million, a stark contrast to the RM6.91 million profit in the previous quarter. Similarly, Loss After Tax deepened to RM39.48 million. The primary driver for this shift from profit to loss was an unrealized foreign exchange loss of approximately RM5.4 million in the current quarter, as opposed to a substantial RM22.1 million unrealized foreign exchange gain in the immediate preceding quarter. Despite this, the report notes that the gross profit margin of 12% for the quarter met the Group’s expectations from project execution.

Business Unit Contributions

The revenue for the quarter was diversified across PESTEC’s key divisions, reflecting the varying stages of project completion:

• Substation Division: RM40.9 million
• Rail Division: RM17.8 million
• Transmission Line Division: RM21.8 million
• Other Segments: RM7.4 million

Quarter-on-quarter, the Substation division saw a decrease in revenue by 31%, while the Rail, Transmission, and Other segments recorded increases of 123%, 88%, and 28.7% respectively. This indicates a dynamic project portfolio with shifting revenue recognition.

Financial Health Snapshot (as at 31 March 2025 vs 30 September 2023)

Looking at the balance sheet, PESTEC’s total assets stood at RM1.97 billion, down from RM2.50 billion. Total liabilities also decreased to RM1.61 billion from RM2.03 billion, while total equity saw a reduction to RM356.73 million from RM474.51 million. This reduction in liabilities is partly attributable to strategic financial restructuring efforts.

Key balance sheet figures include:

The Net Assets Per Share attributable to owners of the Company significantly declined to 11.15 sen from 34.42 sen, reflecting the period’s losses and capital adjustments.

Cash Flow Movement

For the 18-month period ended 31 March 2025, PESTEC generated RM58.77 million from operating activities, indicating positive cash generation from its core business. Net cash from investing activities was RM12.77 million, while financing activities contributed RM45.06 million, leading to a net increase in cash and cash equivalents of RM116.59 million. The company ended the period with RM120.40 million in cash and cash equivalents.

Strategic Outlook and Potential Challenges

Future Prospects

PESTEC’s report paints an optimistic picture for its future, aligning its strategic positioning with major national and regional infrastructure developments:

• Energy Transition & Grid Upgrades: Tenaga Nasional Bhd (TNB) has more than doubled its budgeted capital expenditure (Capex) to RM42.9 billion to support Malaysia’s energy transition goals. This massive investment in grid upgrades, distributed energy resources, and network reinforcement presents significant opportunities for PESTEC.
• Sarawak’s Power Ambitions: Sarawak aims to significantly increase its power generation capacity to 15 gigawatts (GW) in 10 years, targeting 10 GW by 2030 and 15 GW by 2035, with an eye on expanding electricity exports to ASEAN countries. PESTEC’s presence in East Malaysia positions it well to capitalize on this growth.
• Data Center Boom: The Malaysia Data Center Market is projected to grow from USD4.04 billion in 2024 to USD13.57 billion by 2030, at a compound annual growth rate (CAGR) of 22.38%. This rapid expansion will necessitate substantial electrical infrastructure, a core competency of PESTEC.
• Rail Industry Growth: Malaysia’s rail industry is set for growth, driven by government investment and the push for eco-friendly transportation. PESTEC is strategically positioned as a rail electrification turnkey contractor with in-house design and build capabilities.

The company’s outstanding major tender book currently stands at approximately RM1.5 billion, underscoring its potential for future revenue streams. PESTEC remains optimistic about industry prospects and anticipates a year of recovery as it fulfills current commitments.

Material Litigation and Corporate Restructuring

While the operational outlook is positive, the report also highlights ongoing legal challenges and crucial corporate actions:

• Ongoing Litigations: Several material litigations persist, notably involving Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL) and Siemens Malaysia Sdn Bhd. The case with SPYTL regarding the Gemas-Johor Bahru Electrified Double Track project remains active, with PESTEC pursuing counterclaims and anti-arbitration injunctions. A summary judgment was entered against a subsidiary, Pestech Energy Sdn Bhd (PEN), in the Siemens case, with a corporate guarantee applicable for a portion of the sum for PESTEC International Berhad. These cases introduce an element of uncertainty and potential financial exposure.
• Positive Resolutions: On a positive note, the report indicates settlements have been achieved in cases involving Lion Pacific Sdn Bhd (LPSB) and Shandong Power Equipment Co., Ltd (SPECO), leading to the discontinuance or withdrawal of proceedings.
• Proposed Restricted Issue: PESTEC is undertaking a proposed restricted issue of 231.79 million new ordinary shares to Dhaya Maju Infrastructure (Asia) Sdn Berhad (DMIA) at RM0.12 per share, aiming to raise RM27.81 million. This proposal has received Bursa Securities’ approval and is pending shareholder approval at an EGM on 9 June 2025.
• Proposed Scheme of Arrangement: A significant development is the court’s sanctioning of a pre-packaged scheme of arrangement with financial institution creditors on 28 April 2025. This scheme aims to resolve approximately RM267 million in outstanding debt with a one-off upfront cash payment of RM65 million, funded by proceeds from the restricted issue. This debt restructuring is a critical step towards improving the Group’s financial stability and reducing its debt burden.