KUALA LUMPUR (Nov 27): Medical and healthcare bed manufacturer LKL International Bhd has aborted plans with Singapore-based Serv Medical Pte Ltd to open up the digital healthcare market in Malaysia with Serv Medical's various product suites.

On March 9 this year, LKL and Serv Medical had signed a memorandum of understanding (MOU) for the purpose of selling, marketing and promoting Serv Medical’s medical products or services through LKL’s network or channels in Malaysia under a licence or distribution arrangement and to source and identify customers for purchasing Serv Medical’s medical products or services in Malaysia.

"Following the expiry of the MOU and with no agreement to extend it, the MOU has lapsed and is deemed terminated with immediate effect," LKL said in a filing with Bursa Malaysia on Monday.

The termination is not expected to have any material impact on the company's earnings, net assets, gearing, share capital and substantial shareholders’ shareholding for the financial year ending Dec 31, 2023 (FY2023), it added.

In a separate filing, LKL announced that it has returned to the black in the third quarter ended Sept 30, 2023 (3QFY2023), posting a net profit of RM1.06 million compared with a net loss of RM7.58 million for the second quarter ended June 30, 2023 (2QFY2023), mainly due to the non-cash accounting adjustments including a fair value loss on investment in quoted shares of RM7.57 million in 2QFY2023.

Earnings per share for 3QFY2023 came in at 0.54 sen compared with a loss per share of 3.12 sen in 2QFY2023.

However, the group recorded a lower revenue of RM8.82 million for 3QFY2023, from RM9.45 million for 2QFY2023, mainly due to deferral in the delivery schedules of a major order of medical peripherals to meet the customer's request.

"Coupled with the gross loss registered by the new pharmacy outlets due to lower volume sales and pricing power in the initial months of operating since August 2023, the group posted a lower gross profit of RM2.03 million for the current financial quarter as against RM3.55 million in 2QFY2023," it added.

For the cumulative nine months (9MFY2023), the group posted a net loss of RM7.02 million on revenue of RM28.64 million. The group had in April 2022 announced the change of financial year end to Dec 31 from Sept 30. Hence, there are no comparative figures for the preceding year corresponding quarter/period.

Geographically, the domestic front remained as the main contributor at RM24.934 million or 87.06% of the group's revenue, while the remaining revenue of RM3.704 million or 12.94% was generated from exports, mainly to the Asia and Africa regions for 3QFY2023.

On prospects, LKL said it is confident that the amount of healthcare business through retail outlets will double during 2023 as more patients will choose retail health for their primary care needs.

"This trend has become more prominent as global economic conditions lead to squeezed budgets at traditional frontline primary care facilities. The retail pharmacy nowadays could offer healthcare services such as blood tests, vaccinations, medical checkup and consultation that have traditionally been delivered by hospitals, clinics, or doctors’ practices, which patients will increasingly find more convenient and better value than traditional primary care delivery.

"To tap into these opportunities, the group has a total of seven pharmacy outlets including six new pharmacy outlets, namely Constant Pharmacy to serve the community of the major areas in the Klang Valley. This expansion plan will improve our pricing power immediately as a result of more volumes generated from more outlets. The board of directors will continue to set up more strategic outlets to enjoy prominent savings in the supply chain in return for more savings for customers," it added.

LKL shares closed down one sen or 5.26% at 18 sen on Monday, with 4.02 million shares done. Its market capitalisation stood at RM69.85 million.

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