Greetings, fellow investors! Today, we’re diving into the latest financial report from HARTANAH KENYALANG BERHAD (HKB) for its second quarter ended 30 April 2025. This report is particularly noteworthy as it’s HKB’s inaugural interim financial report since its recent acquisition and ahead of its listing on the ACE Market of Bursa Malaysia Securities Berhad.
As this is the first interim report, we won’t have the usual year-on-year comparisons, which is important to keep in mind. However, we can still glean valuable insights into the company’s current performance, financial health, and future trajectory. Let’s unpack the numbers and see what HKB has been building!
Core Data Highlights: Navigating the Numbers
HKB operates primarily in building and infrastructure construction services, focusing on projects within East Malaysia. This quarter gives us a first look at their operational rhythm post-acquisition.
Quarterly Performance: A Closer Look at Q2 FY2025
Comparing the current quarter (Q2 ended 30 April 2025) with the immediate preceding quarter (Q1 ended 31 January 2025) reveals a shift in performance, primarily due to project cycles.
Current Quarter (Q2 2025)
Revenue: RM30.1 million
Profit Before Tax: RM2.0 million
Immediate Preceding Quarter (Q1 2025)
Revenue: RM44.8 million
Profit Before Tax: RM2.6 million
As you can see, revenue for the current quarter stood at RM30.1 million, a decrease of RM14.7 million or 32.8% from the RM44.8 million recorded in the immediate preceding quarter. This reduction is attributed to lower revenue from projects nearing completion, specifically the Sekolah Daif: Tambay Project (completed in April 2025), Yayasan International School Sibu Project, and Sekolah Daif: Tebedu Project.
Consequently, profit before tax also saw a decline of RM0.6 million or 23.8%, settling at RM2.0 million for the current quarter. This was mainly due to lower gross profit, although partially offset by reduced administrative expenses.
Cumulative Performance (Six Months Ended 30 April 2025)
For the cumulative six-month period, HKB reported a total revenue of RM74.9 million and a profit before tax of RM4.6 million. The net profit attributable to owners of the Company for this period was RM3.2 million, translating to basic earnings per share of 0.65 sen.
Revenue by Business Segment
HKB’s revenue streams are clearly defined, with building construction services being the dominant contributor:
| Segment | Q2 2025 Revenue (RM’000) | Q2 2025 Contribution (%) | Cumulative Q2 2025 Revenue (RM’000) | Cumulative Q2 2025 Contribution (%) |
|---|---|---|---|---|
| Building Construction Services | 21,646 | 72% | 53,744 | 72% |
| Infrastructure Construction Services | 8,443 | 28% | 21,118 | 28% |
| Total Revenue | 30,089 | 100% | 74,862 | 100% |
The building construction segment’s revenue primarily stemmed from projects like the State Archive Project, Yayasan International School Sibu Project, Yayasan International School Kuching Project, Sekolah Daif Tambay Project, and Sekolah Daif Tebedu Project.
Financial Health: A Snapshot of the Balance Sheet
As at 30 April 2025, HKB’s financial position shows growth in assets and equity compared to 31 October 2024 (the last audited financial year-end).
As at 30 April 2025
Total Assets: RM97.9 million
Total Equity: RM28.2 million
Net Assets Per Share: RM0.0566
Cash and Bank Balances: RM14.8 million
Contract Assets: RM50.7 million
As at 31 October 2024
Total Assets: RM90.0 million
Total Equity: RM25.0 million
Net Assets Per Share: RM0.0501
Cash and Bank Balances: RM7.3 million
Contract Assets: RM35.3 million
Total assets increased to RM97.9 million from RM90.0 million, while total equity grew to RM28.2 million from RM25.0 million, reflecting an improved net assets per share. Notably, cash and bank balances saw a significant increase, and contract assets (representing work performed but not yet billed) also grew substantially, indicating ongoing project progress.
Cash Flow: Fueling Operations and Growth
For the six months ended 30 April 2025, HKB generated a healthy RM9.2 million in net cash from operating activities. This is a positive sign, indicating the company’s core operations are generating sufficient cash. Investing activities resulted in a net outflow of RM5.5 million, primarily due to additions of pledged fixed deposits and purchase of property, plant, and equipment. Financing activities also saw a net outflow of RM0.4 million, which included a dividend payment of RM4.0 million (declared prior to the acquisition for the previous financial year) and repayments of various borrowings, partially offset by drawdown of trade financing.
Risks and Prospects: Building for the Future
HKB’s future prospects appear optimistic, especially given the context of its recent IPO and its strategic focus. The Group’s operations are primarily in East Malaysia, particularly Sarawak, which is experiencing significant development. The board of directors remains optimistic about the Group’s future, barring unforeseen circumstances.
Key strategies outlined by HKB include:
- Further growing its building and infrastructure construction activities in Sarawak.
- Securing design and build projects from prospective clients.
The company believes its competitive strengths and business strategies align well with the positive outlook for the construction industry in Sarawak. The IPO, which took place on 9 June 2025 (after this reporting period), raised gross proceeds of approximately RM19.34 million. These funds are earmarked for crucial areas:
- RM3.0 million (15.5%) for the purchase of machinery and IT-related hardware and software, expected within 24 months.
- RM10.5 million (54.2%) for project working capital, to be utilized within 18 months.
- RM2.1 million (10.9%) for repayment of borrowings, within six months.
- RM3.8 million (19.4%) to defray fees and expenses related to the listing, within two months.
This strategic allocation of IPO proceeds is expected to bolster HKB’s operational capacity, financial stability, and ability to undertake larger projects, positioning them for sustained growth in the dynamic Sarawak construction landscape.
Summary and Investment Recommendations
HARTANAH KENYALANG BERHAD’s second-quarter report provides a foundational look at its performance as a newly listed entity. While the immediate quarter showed a sequential dip in revenue and profit due to the natural cycle of project completions, the overall six-month performance, coupled with a healthy cash flow from operations, suggests a stable operational base.
The company’s strategic focus on the burgeoning construction sector in Sarawak, combined with the fresh capital injection from its recent IPO, paints a promising picture for its future endeavors. The utilization of IPO proceeds for machinery, working capital, and debt repayment is a clear sign of prudent financial management aimed at strengthening its competitive edge and capacity for growth.
Key points to consider moving forward:
- Project Pipeline: The ability to secure new and larger design-and-build projects will be crucial for maintaining and accelerating revenue growth, especially as current projects complete.
- Operational Efficiency: Monitoring administrative and operating expenses will be important to ensure profitability, particularly given the slight dip in gross profit this quarter.
- IPO Proceeds Utilization: Tracking the effective deployment of IPO funds will be key to realizing the anticipated benefits in terms of operational efficiency and expanded project capacity.
The construction industry, while cyclical, is poised for significant activity in East Malaysia. HKB’s positioning and strategic plans suggest it is well-placed to capitalize on these opportunities.
What are your thoughts on HARTANAH KENYALANG BERHAD’s first interim report? Do you believe their focus on Sarawak’s construction boom and the strategic use of IPO funds will lead to sustained growth in the coming years? Share your insights in the comments below!
