Greetings, fellow investors and market watchers!
Today, we’re diving into the latest financial pulse check for SOLAR DISTRICT COOLING GROUP BERHAD (SDCG), a company that recently made its debut on the ACE Market of Bursa Securities. Their unaudited interim financial report for the Second Quarter ended 30 June 2025 has just been released, and it paints a picture of a company navigating growth opportunities alongside some notable challenges.
While the quarter saw an encouraging uptick in revenue, the bottom line experienced a contraction compared to the same period last year. This report gives us a crucial glimpse into SDCG’s strategic moves, particularly its focus on Building Management Systems (BMS) and its new foray into solar PV, against the backdrop of an evolving market. Let’s break down the numbers and what they mean for this promising Malaysian player.
SDCG’s Financial Snapshot: A Quarter of Mixed Results
The second quarter of 2025 presented a nuanced performance for SDCG. While the company recorded a revenue increase, its profitability saw a decline due to various operational factors.
Individual Quarter Performance (Q2 2025 vs. Q2 2024)
Current Year Quarter (30/6/2025)
Revenue: RM4.93 million
Gross Profit: RM2.59 million
Profit Before Tax: RM0.51 million
Profit After Tax: RM0.42 million
Earnings Per Share: 0.10 sen
Preceding Year Quarter (30/6/2024)
Revenue: RM4.64 million
Gross Profit: RM2.71 million
Profit Before Tax: RM1.30 million
Profit After Tax: RM1.00 million
Earnings Per Share: 0.33 sen
In the current quarter, SDCG’s revenue grew by 6.3% to RM4.93 million from RM4.64 million in the same quarter last year. This increase was primarily driven by robust performance in the Building Management Systems (BMS) segment.
However, this top-line growth did not translate into higher profitability. Gross profit declined by 4.1%, and the gross profit margin also saw a reduction from 58.32% to 52.58%. More significantly, profit before taxation (PBT) decreased by a substantial 60.5% to RM0.51 million, with profit after taxation (PAT) following suit with a 58.0% drop to RM0.42 million. This naturally led to a lower earnings per share of 0.10 sen, down from 0.33 sen previously.
The decline in profitability was attributed to several factors: the recognition of impairment losses on trade receivables, an unrealised foreign exchange loss due to the weakening of US currency cash held, and an increase in administrative expenses, primarily driven by higher staff costs to improve employee benefits and retain skilled personnel.
Year-to-Date Performance (6 Months Ended 30 June 2025 vs. 2024)
Looking at the cumulative performance for the first half of 2025, the trend shows a similar pattern:
Current Year-to-Date (30/6/2025)
Revenue: RM9.71 million
Gross Profit: RM4.95 million
Profit Before Tax: RM1.38 million
Profit After Tax: RM1.10 million
Earnings Per Share: 0.26 sen
Preceding Year-to-Date (30/6/2024)
Revenue: RM10.67 million
Gross Profit: RM5.99 million
Profit Before Tax: RM3.17 million
Profit After Tax: RM2.46 million
Earnings Per Share: 0.81 sen
For the six months ended June 2025, SDCG’s revenue decreased by 9.0% to RM9.71 million compared to RM10.67 million in the previous year’s corresponding period. Gross profit for the year-to-date also saw a significant drop of 17.4%. Consequently, PBT and PAT decreased by 56.6% and 55.5% respectively, resulting in basic earnings per share of 0.26 sen.
Driving Forces Behind Segmental Performance
A closer look at the business segments reveals a divergence in performance:
| Business Segment | Q2 2025 (RM’000) | Q2 2024 (RM’000) | Change (RM’000) | Change (%) |
|---|---|---|---|---|
| Building Management Systems (BMS) | 4,614 | 2,736 | +1,878 | +68.6% |
| Solar Thermal Systems & Energy Saving Services | 85 | 1,371 | -1,286 | -93.8% |
| Maintenance of Other Systems & Equipment | 234 | 533 | -299 | -56.1% |
| Total Revenue | 4,933 | 4,640 | +293 | +6.3% |
The BMS segment was a significant growth driver, with revenue surging by 68.6% in the current quarter to RM4.61 million, thanks to progress on government-related projects, including fast-track Rail Transit, Airline, and Ministry of Finance KL projects. This strong performance largely offset declines in other segments.
Conversely, the Solar Thermal Systems and Energy Saving Services segment experienced a sharp revenue decline, mainly due to the completion of energy performance contracts with One Medicare Sdn Bhd in March 2025. Similarly, the Maintenance of Other Systems and Equipment segment also saw reduced revenue as projects progressed towards completion.
Balance Sheet and Cash Flow Insights
SDCG’s financial position remains sound. As at 30 June 2025, total assets increased slightly to RM66.62 million from RM65.91 million at the end of December 2024. Total equity also grew to RM63.78 million, primarily due to retained profits, while total liabilities decreased, indicating an improved debt profile.
From a cash flow perspective, net cash from operating activities significantly decreased to RM0.08 million for the year-to-date, down from RM1.76 million in the preceding year-to-date. This was impacted by working capital changes, including an increase in trade and other receivables. However, cash and cash equivalents at the end of the period stood at a robust RM47.68 million, a substantial increase from RM7.72 million last year, primarily bolstered by IPO proceeds placed in short-term investments.
Risks and Prospects: Navigating Growth and Challenges
SDCG is not standing still; the company is actively pursuing several strategic initiatives outlined since its listing to expand its capabilities and market presence.
Strategic Growth Initiatives Post-Listing
The company, having listed on the ACE Market in September 2024, is actively deploying its IPO proceeds to fuel future growth. Key strategic areas include:
- Headquarters Expansion: SDCG is expanding its headquarters, with conditional approval for building plans already secured, aiming to significantly increase its built-up area.
- Enhanced Tools and Equipment: Investments are being made in advanced tools like drones with thermal sensors and solar panel cleaning equipment to boost productivity in its BMS and solar thermal segments.
- ICT Software and Services: The company is enhancing its ICT resources to expand its command and control centre, crucial for monitoring connected BMS and solar thermal systems.
- Entry into Solar PV Systems: A significant move is SDCG’s commencement of solar PV system business under the Power Purchase Agreement (PPA) model, with a recent PPA signed with Wana Properties Sdn Bhd in Melaka. This taps into the growing renewable energy sector, aligning with national green initiatives.
These initiatives demonstrate a clear commitment to leveraging the IPO proceeds for long-term strategic development and diversifying revenue streams, particularly in the burgeoning clean energy space.
Navigating Operational Headwinds and Market Dynamics
While the strategic outlook is positive, the recent financial results highlight the operational challenges SDCG is currently navigating. The increase in administrative expenses and the impact of foreign exchange fluctuations underline the need for vigilant cost management and risk mitigation strategies. The completion of key energy performance contracts also suggests a transitional phase for some segments, requiring new project acquisitions to maintain momentum.
Summary and Investment Recommendations
SDCG’s second-quarter report reveals a company in an active phase of transformation and growth post-listing. While the Building Management Systems (BMS) segment demonstrates robust performance, other core areas like solar thermal systems are experiencing a temporary dip due to project completions. The company’s strategic investments through IPO proceeds in infrastructure, technology, and new ventures like solar PV systems are commendable and set the stage for future growth.
However, the notable decline in overall profitability and earnings per share for both the quarter and year-to-date, attributed to higher administrative costs, impairment losses, and foreign exchange impact, are points for investors to monitor closely. The market will be watching how effectively SDCG manages these operational pressures while executing its ambitious growth strategies.
Key risk points highlighted in the report include:
- Ongoing Litigation: A legal action initiated by SDC against Sedafiat for outstanding payments, coupled with a counterclaim by Sedafiat. The outcome is pending a court decision on 3 September 2025, which could impact the company’s financials.
- Segmental Revenue Volatility: While BMS is strong, the dependence on new project wins to offset completed contracts in other segments, particularly solar thermal and energy-saving services, poses a revenue stability risk.
- Cost Management and FX Exposure: The increase in administrative expenses and foreign exchange losses underline potential pressures on operational efficiency and profitability.
The Board remains optimistic about the Group’s prospects, confident that the ongoing business strategies and plans, especially the expansion into solar PV systems, will ensure continued positive development. Investors should look for updates on project pipeline, cost control measures, and the resolution of the pending litigation.
What are your thoughts on SDCG’s strategy to diversify into solar PV systems while strengthening its core BMS business? Do you think the company can effectively manage the current operational challenges to realize its long-term growth potential?
Share your insights and perspectives in the comments section below! Your engagement helps foster a more informed investing community.
Stay tuned for more analyses on Malaysian companies!
