VS: Core Loss Reported Amid Revenue Decline, Gradual Recovery Anticipated
Investment Bank | PUBLIC INVESTMENT BANK |
---|---|
TP (Target Price) | RM0.64 (+8.5%) |
Last Traded | RM0.59 |
Recommendation | Neutral |
Public Investment Bank (PIVB) reports a challenging fourth quarter for the company, which recorded a core net loss of RM30.1 million in 4QFY25, a stark contrast to the RM74.8 million core net profit achieved in the previous corresponding quarter. This downturn was largely attributed to subdued sales orders, increased operational costs, and initial losses from its Philippines ventures, leading to full-year FY25 results significantly below both PIVB’s and market consensus forecasts. Despite the current headwinds, PIVB anticipates a slow but gradual earnings recovery in the coming quarters.
Performance Review
For the fourth quarter ended July 2025, the company’s revenue saw a substantial year-on-year drop of 29.2%, settling at RM858.8 million. This decline in sales was primarily a result of lower order volumes and deferred deliveries, partly due to the announcement of reciprocal tariffs by the US government which temporarily dampened market sentiment. The quarter also saw the recognition of plant set-up costs and ongoing operating losses from its newly established Philippines operations, exacerbating the financial performance. Overall, the full-year FY25 performance represented only 35.1% of PIVB’s forecast and 31.1% of consensus estimates, falling short of expectations.
Operational Headwinds and Geographical Impact
The core net loss of RM30.1 million (versus a core net profit of RM104.6 million in 4QFY24) was primarily driven by weaker revenue generation, intense customer cost-down pressures, and initial start-up expenses in the Philippines. Operationally, Malaysia recorded a pre-tax loss of RM13.5 million for the quarter, a reversal from the RM100.3 million pre-tax profit in 4QFY24. Similarly, the Philippines segment contributed a pre-tax loss of RM20.5 million. These losses were partially offset by positive contributions from Singapore and Indonesia operations.
Future Outlook and Strategy
Looking ahead, PIVB expects the company’s earnings to improve progressively, albeit at a measured pace. The recent clarity regarding Malaysia’s reciprocal tariff rate, now fixed at 19% (aligning with other ASEAN manufacturing hubs), is expected to restore confidence and facilitate the return of order flows. The Philippines operations, having recently commenced mass production, are projected to steadily increase their utilisation rate over time. Amidst a backdrop of weak consumer spending, particularly in the US, the company remains focused on enhancing operational efficiency and implementing cost optimisation measures to bolster profitability.
Investment Bank’s View
Public Investment Bank has maintained its “Neutral” recommendation on the company, reflecting the expectation of a gradual recovery in earnings. PIVB has revised its target price downwards to RM0.64 (from RM0.83 previously), based on 16x CY26F EPS, indicating an upside of 8.5% from the last traded price of RM0.59.