Econframe Berhad (EFRAME, 0227), Malaysia's leading comprehensive door frame system supplier, recently unveiled its stellar quarterly performance. Despite a minor decline in revenue compared to the previous quarter, this hasn't deterred the company's trajectory for sustained growth. Without further ado, let's delve into the details.

Revenue Comparison (YoY +46.39%, QoQ -0.75%)

For the second quarter ending February 29, 2024, the company recorded a revenue of approximately RM26.98 million, marking a significant increase of approximately 46.39% compared to the same period last year. This growth can be primarily attributed to EFRAME's acquisition of Lee & Yong Aluminium Sdn Bhd (LYASB) in August 2023. However, EFRAME only holds a 65.00% ownership stake in LYASB. LYASB contributed approximately RM8.72 million to the company's manufacturing segment revenue, accounting for approximately 32.00% of the total revenue.

Out of the RM26.98 million revenue, approximately RM22.64 million came from the manufacturing segment, showing a year-on-year increase of approximately 39.58%. The remaining approximately RM4.33 million came from sales, witnessing a year-on-year increase of approximately 96.68%.

However, compared to the previous quarter, the company's revenue decreased by approximately RM0.20 million or 0.75%.

Net Profit Comparison (YoY +6.61%, QoQ -23.46%)

EFRAME achieved a net profit of approximately RM3.37 million in this quarter, marking a year-on-year increase of approximately 6.61%. It's noteworthy that although the company's overall business income is strong, the decrease in the overall gross profit margin has impacted its profitability.

Additionally, due to higher payroll-related expenses and professional fees, the company's net profit decreased by approximately RM1.03 million or 23.46% compared to the previous quarter.

It's worth mentioning that EFRAME remains a net cash company. In this quarter, the company holds approximately RM20.80 million in cash and cash equivalents, with borrowings amounting to approximately RM7.35 million.

Outlook

LYASB is expected to continue contributing significant profits to EFRAME. Additionally, with the acquisition of a 70% equity interest in ETA World Sdn Bhd (ETA), EFRAME has expanded its business into industrial property development and construction activities.

According to the survey, LYASB is set to provide a minimum profit guarantee of at least RM4.00 million annually for the fiscal years 2024 to 2026, while ETA will ensure a minimum annual profit of not less than RM10.00 million for the company over the next three years. Therefore, the management is confident about the future prospects of EFRAME.

So, dear readers, what are your thoughts on EFRAME, currently trading at a price-to-earnings ratio of approximately 18.17 times?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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