Industrial high-temperature masking tapes manufacturer cum construction company Central Global Berhad (KLSE: CGB) has in the last week released their FY2023 Q4 results. To the surprise of many, the company reported a loss in the said quarter, but the share price showed zero to NIL impact.

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Source: moomoo

‌For the current quarter, CGB reported revenue of RM48.86 million, where the manufacturing segment contributed RM12.13 million and the construction segment contributed RM36.73 million. All in all, the revenue has seen a decrease of 25.08% as compared to a year before.

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Source: Quarterly Report

‌The dip in revenue was largely due to lower work progress in the current quarter, especially for Gum Gum project and Lahad Datu Fasa 1 Menaik taraf Sistem Bekalan Air Project. Additionally, CGB has stopped the recognition of revenue from the Gerbang Bukit Kecil Project and Sungai Pinang Project from November 2023.

‌A further investigation into the financial reports of CGB, noted that CGB is currently in a material litigation with the contractor and parties involved in the said project. Hence, CGB, by accounting standards to be prudent, have to stop the revenue recognition until the end of the material litigation. Notably, the company also incurred a Loss Before Tax (LBT) of RM42.05 million, which was largely due to the one-off, non-cash impairment related to the Gerbang Bukit Kecil Project and Sungai Pinang Project.

‌As a matter of fact, CGB is actually undergoing several cost rationalisation and cost containment measures to achieve better efficiency overall. For this quarter, CGB is recognising the one-off impairment is most likely to clean up the accounts of the company, and prepare for FY2024.

‌Going into 2024, the company with their facility in Kuala Muda, Kedah, is expected to have an enhanced capacity to produce up to 70 million square metres per year of tapes from the existing 20 million sqm of tapes per year, due to the upgrading work on the machinery.

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​Source: Company

‌For those who are new to CGB, the company had acquired 70% stake in RYRT International Sdn Bhd (RYRT) back in 2022, where the company, on October 2023 has completed the acquisition of the remaining 30% equity of RYRT, rendering the company a wholly-owned subsidiary of CGB.

‌Currently, RYRT has an orderbook of RM227.85 million, and most importantly, the company, upon cleaning up the accounts with the prudent decision to impair the said projects, is likely to have better financial performance for the financial year ending 31 December 2024, as the quarterly report has mentioned.

‌What is next for investors? The reaction on share price towards the financial results of CGB is clear as day - investors are investing into the prospects of CGB instead of the current results. Going forward, it is very likely for us to see continuous improvement on CGB results, rendering it one of the strongest players in manufacturing and construction in Malaysia.

‌Hence, any dip in share price could post a good investment chance.

‌Disclaimer:

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