Core Data Highlights: Soaring Revenue and Profitability

Farlim Group has demonstrated exceptional financial performance this quarter, reversing previous losses with robust growth across its key metrics. The figures speak for themselves, showcasing a strong recovery and strategic wins.

Overall Group Performance: A Remarkable Comeback

The Group’s financial performance for the current quarter (2Q2025) and the cumulative period (first half of 2025) presents a stark and positive contrast to the previous year. This significant shift from loss to profit is largely attributed to the successful sale of a leasehold housing scheme in Gopeng, Perak, by a wholly-owned subsidiary, alongside progress billings from ongoing projects.

Comparison: Current Quarter vs. Preceding Year Corresponding Quarter

In 2Q2025, revenue skyrocketed by an astonishing 2,708.57% to RM36.71 million, compared to RM1.31 million in 2Q2024. This massive leap propelled the Group from a Loss Before Tax of RM6.54 million to a Profit Before Tax of RM5.97 million, marking a 191.33% improvement. Similarly, Profit After Tax saw a dramatic reversal, from a RM6.55 million loss to a RM3.34 million profit, an increase of 151.02%. Basic Earnings Per Share turned positive to 2.07 sen, a significant rebound from the (4.28) sen loss.

Comparison: Current Year-to-Date vs. Preceding Year Corresponding Period

For the first six months of 2025, cumulative revenue surged by 1,027.78% to RM39.26 million from RM3.48 million in the same period last year. Profit Before Tax also swung into the black at RM4.71 million, a remarkable 155.55% improvement from the RM8.47 million loss. Cumulative Basic EPS stands at 1.24 sen, compared to a (5.54) sen loss previously.

Comparison: Current Quarter vs. Immediate Preceding Quarter

Quarter-on-quarter, the performance is equally impressive. Revenue for 2Q2025 jumped by 1,339.53% from RM2.55 million in 1Q2025, and the Profit Before Tax of RM5.97 million represents a 571.35% increase from the RM1.27 million loss in the immediate preceding quarter. This highlights the concentrated impact of recent strategic activities.

Segmental Analysis: Where the Growth Is Coming From

Property Segment: The Growth Engine

The property segment continues to be the primary driver of Farlim Group’s robust performance. The successful sale of a leasehold housing scheme in Gopeng, Perak, was a key contributor, alongside ongoing progress billings from projects in Taman Impiana Bidor (Perak), Bandar Baru Ayer Itam (Penang), and Kajang (Selangor).

The property segment’s revenue surged by 2,808.72% in 2Q2025, from RM1.23 million to RM35.69 million. This segment also turned around significantly, moving from a RM6.50 million loss to a RM6.00 million profit before tax, an improvement of 192.35%.

Trading Segment: Steady, Albeit Modest

The trading segment, primarily involved in the supply of building materials, showed modest growth in the current quarter.

Revenue increased by 48.48% to RM0.10 million in 2Q2025. This segment also returned to a small profit of RM0.003 million from a previous loss, reflecting stability in its operations.

Investment & Others: Diversified Income Streams

This segment saw a substantial increase in revenue, largely due to rental income from a newly acquired subsidiary and healthy investing income from cash management funds.

Revenue surged by an impressive 6,471.43% to RM0.92 million in 2Q2025, driven by new rental income. For the cumulative period, Profit Before Tax for this segment increased by 47.17% to RM0.23 million.

Strengthening the Balance Sheet: A Closer Look at Farlim’s Financial Health

Farlim Group’s financial position has significantly improved, reflecting the positive operational performance and strategic asset management.

Total Assets grew by 15.08% to RM164.71 million as of 30 June 2025, compared to RM143.12 million at the end of 2024. This increase is partly attributable to the reclassification and increase in investment properties. The “Non Current Assets Held For Sale” category, which stood at RM25.57 million at the end of 2024, has been fully disposed of, likely related to the Gopeng land sale, demonstrating effective asset monetization. Total Equity also saw a healthy increase of 6.81% to RM125.49 million, pushing Net Assets Per Share up to RM0.78.

The Group’s borrowings have increased, with new long-term and short-term bank borrowings amounting to RM3.72 million and RM0.44 million respectively. This suggests potential financing for new investments or working capital needs following recent acquisitions and disposals.

Cash Flow: Funding Future Growth

The cash flow statement reveals a robust generation of cash from operating activities, providing a strong foundation for future investments despite substantial cash outflows in investing activities.

Crucially, Net Cash From Operating Activities dramatically turned around to a positive RM29.86 million for the first half of 2025, compared to a net cash outflow of RM5.07 million in the prior year. This indicates strong operational efficiency and revenue conversion. However, Net Cash Used In Investing Activities saw a significant outflow of RM29.72 million, primarily due to an investment in a subsidiary company and redemption/investment in short-term investments. This outflow is largely offset by the robust operating cash flow, demonstrating the Group’s ability to fund its strategic growth initiatives internally.

Navigating Headwinds and Charting Future Growth

Farlim Group remains cautiously optimistic about the Malaysian property market, balancing opportunities with emerging challenges and outlining clear strategies for sustained growth.

Market Outlook and Strategic Positioning

The Malaysian residential property market is showing signs of gradual improvement, particularly in high-economic activity zones like Batu Kawan in Penang, and selected areas in Selangor and Johor. The recent reduction of the Overnight Policy Rate (OPR) by Bank Negara Malaysia to 2.75% is expected to create a more conducive environment for property development, potentially boosting the Company’s planned residential projects like Taman Impiana Bidor in Perak, and new project launches.

Furthermore, the successful disposal of the leasehold housing scheme in Gopeng, Perak, for RM33.0 million, generated a significant gross profit of RM9.83 million. This substantial capital injection not only improved the Group’s financial position but also provides crucial funds for acquiring new strategic landbanks and exploring potential joint venture projects, ensuring long-term pipeline sustainability.

Emerging Challenges: The Shadow of SST

However, the horizon is not without clouds. The implementation of a 6% Sales and Service Tax (“SST”) on certain construction materials and services, effective from 1 July 2025, poses a potential challenge. This new tax could lead to increased home prices, compress profit margins for developers, and potentially cause a market slowdown. Farlim Group acknowledges that this will necessitate a review of project timelines and pricing for both ongoing and future developments.

Strategies for Resilience and Growth

In response to these dynamics, Farlim Group is adopting a cautious but proactive stance. Key strategies include:

• Staggered Launches: Rolling out new phases of affordable residential properties in its Taman Impiana Bidor Perak township to maintain long-term sustainability and adapt to market absorption rates.
• Landbank Expansion: Actively sourcing new landbank opportunities in Selangor, Perak, and Penang, through outright acquisitions and/or joint ventures, to replenish its development pipeline.
• Operational Excellence: Continuous efforts to evaluate business plans, improve management effectiveness and efficiency, and optimize resource allocation.
• Financial Prudence: Taking appropriate measures to conserve financial resources, scale down expenses where necessary, and maximize value creation for stakeholders.

Key Corporate Developments

The Group has also been active on the corporate front:

• Acquisition: On 14 May 2025, Farlim completed the acquisition of an additional 25% equity interest in Entity Consolidated Sdn. Bhd. for RM4.6 million, expanding its investment portfolio.
• Disposal Completion: The significant sale of the Gopeng Land was fully completed on 11 June 2025, with proceeds earmarked for new landbanks and working capital, demonstrating strategic asset management. Out of the RM33 million proceeds, RM0.68 million has been used for disposal-related expenses, with the remaining RM32.32 million set aside for future landbank acquisitions within 36 months.

Litigation Update

The Group is currently involved in several material litigations. It’s important for investors to be aware of these potential liabilities:

• Ayer Itam Properties Sdn Bhd vs. Farlim Group: The Company has appealed against the Penang High Court’s ruling favouring AIPSB in a claim for alleged overpayment related to land sales. A provision of RM10 million has been made for the judgment sum and interest, and a stay of execution has been granted pending the appeal hearing. The appeal hearing date is now pending via e-review.
• Farlim Group vs. SBG Land Sdn Bhd, et al.: The Company had sued several defendants for breach of undertakings related to the relocation of TNB high-tension cables on land in Kampar, Perak. While the Ipoh High Court awarded special damages of RM0.26 million, other claims were not allowed. The Company had appealed this decision, but a settlement proposal for RM0.50 million has now been accepted by the defendants, and documentation is being finalized to discontinue proceedings. This development is positive as it moves towards resolving a protracted legal dispute.
• Bandar Subang Sdn Bhd vs. Norazila Kushairi & Kamaruddin Mohamed Bakhari: Bandar Subang Sdn Bhd (a wholly-owned subsidiary) faced a winding-up petition. A settlement has been reached with the plaintiff, involving a redemption sum payment to a financier and an additional settlement amount of RM0.12 million to the plaintiff, with written consent provided to resolve the matter. This also indicates progress in resolving a key litigation item.