First, let us analyze the revenue streams for Prolexus (8966) by segments.

Thanks to the 'clever' cummulative revenue reporting style by Prolexus CFO in the quaterly reports to conceal its declining revenues, we had to put in extra effort to study the trend for each income stream.

The table below shows the actual revenue and profits based on the numbers reported in the quarterly reports.

Please do refer to the forecast segment to know more on how the numbers were derived.

The Analysis

It can be seen that the reduction in apparel orders has resulted in siginificant loss of revenue in Q3/2020 . Ths is despite the inclusion of RM 5.5 million revenue from the initial sales of fabric mask as mentioned in the Q3/2020 report.

The textile factory suffered losses Q1/2021 onwards. The odd profit numbers could be due to the addition of RM 6.5 million from contractor (liquidated damages). We can expect a strong loss in the upcoming quarter without the fabric mask sales.

The next 3 quarters (Q4/2020, Q1/2021 and Q2/2021) showed the boost of revenue due to mask development, certifications and technology exploration. However, there are three important events that occured during this period that will affect its future revenues and business prospects;

1) The resignation of Chairman and disposal of his shares

2) Possible internal conflicts resulting in departure of employees (according to information shared in the forum)

3) Reduction of apparel orders, even though counterparts such as Magni-Tech and Ramatex claimed to have secured sufficient orders

So, what else could be worse?

Textile Factory - An asset that becomes a liability without proper management

Lets look at the textile factory revenue breakdown to know how it survived.

It is clear that the fabric mask sales has boosted the textile factory's revenue to phenomenal highs.

As the textile factory requires around RM 5 to 6 million/quarter to break even, the likelyhood for it to occur again with declining mask sales at this point of of time is not possible. It can be forecasted that the textile segment will occur at least RM 4.5 million loss, even if the external sales does better this time.

The decline in inter-segmental sales also proves that the fabric mask sales has been declining.

Let us bear in our minds that the estimated RM 75 million investment on the textile factory is mainly to support inter-segmental business (international orders). If the apparel segment fails to secure orders by leveraging its own textile factory, the factory will soon become a liability.

Forecast

The above forecast was done based on:

1. Taking into account of an estimated 5% profit margin from apparel orders. The apparel segment revenue prior to the fabric mask inclusion was used as benchmark.

2. The textile segment facilities and manpower did not undergo significant changes which contributes to the operation cost of RM 6 million/quater.

3. No additional income stream from new business ventures which are yet to be announced to the public shareholders though Bursa.

4. Taking average revenue and profit numbers for both advertising and investment holding segments.

5. Exclusion of Elimination segment which adds/deducts internal transations (between subsidiaries)

So, how it would look like? Terrible, of course!

How the share price will react to this decline and lack of business prospects? Lets watch it together.

Trade Safe!

Disclaimer: The above analysis is intended solely for informational and educational purpose for peers and, should not be used as a basis for making any specific investment, business or commercial decision. Any decisions to place trades in the financial markets, including trading in stock or options or other financial instruments, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extend one believe its necessary.