Aluminium frame manufacturer Econframe Berhad (EFRAME) published their 3rd quarter results for the financial year ended 31 May 2024 (Q3 FY2024).

To the surprise of many, EFRAME registered a lower profit level in the current quarter of RM1.47 million, on top of a revenue of RM24.94 million. But why?

Let us take a deeper look at their financial results.

Q3 financial numbers comparison ,YoY and YTD, Econframe Berhad.

For the quarter under review, EFRAME’s revenue of RM24.94 million is approximately 27.0% higher than Q3 FY2023, where the increase is largely contributed by the increase in the manufacturing segment of RM3.73 million, a commendable increase.

Segmental profit wise, EFRAME recorded RM6.59 million from manufacturing business, and RM0.90 million from trading business, which as a total, increased by 18.0% compared to a year ago.

In other words, EFRAME’s results were indeed improving compared to Q3 FY2023.

However, the growing numbers were impacted by the amortisation of intangible assets amounted to RM2.99 million, which is in conjunction with MFRS3: Business Combinations.

This is largely due to the acquisition of a 70.0% stake in Lee & Yong Aluminium Sdn Bhd (LYASB).

For non-accounting background readers, amortisation of businesses acquired is like buying an asset, which the costs need to be spreaded across useful life span (same as depreciation).

This is a non-cash, non-operational impact item onto EFRAME itself.

Q3 cashflow numbers comparison, YTD, Econframe Berhad.

In fact, for the 9-months financial period ended 31 May 2024, EFRAME had generated a total of RM9.09 million in net operating cash flow, rendering the company a strong cash generating machine.

Compared to the immediate preceding quarter however, EFRAME had seen a slight decrease of revenue from RM26.98 million to RM24.94 million, and segmental profit dropped from RM8.52 million to RM7.49 million — once again, nothing too serious, but it was dragged by the RM2.99 million one-off item in the books.

The business of EFRAME itself is closely related to the property market.

In Q1 2024, Malaysia’s property transaction hit RM56.53 billion, a significant increase from the RM14.22 billion in terms of value, up to 104,000 transactions.

This shows a positive sign to the future orders for EFRAME on top of LYASB’s further contribution to the company.

Should the market reacted negatively, this is a great opportunity to invest in the company!