ELK-Desa Resources Bhd net profit for the second quarter ended Sept 30, 2019 rose 11.6% to RM9.62 million from RM8.62 million a year earlier, due to the improved performance in its hire purchase portfolio for the quarter under review.
In a filing to the stock exchange Nov 19, the firm said revenue for the quarter rose to RM36.62 million from RM30.99 million previously.
Earnings per share was 3.24 sen versus 2.94 sen earlier.
ELK-Desa declared an interim dividend of 3.50 sen per share for the financial year ending March 31, 2020 to be paid on Jan 15, 2020.
The hire purchase receivables increase 77m in first half financial year 2020 (Jun 2019 & Sept 2019), compare to last financial year, whole year hire purchase receivables increase 89m, this year the grow rate is consider super fast. with this rate, i guess this financial year net profit will be very close to 40m, and dividend should be around 7.5 ~ 8sen whole year.
ELK-Desa 3rd Quarter Profit Before Tax Jumps by 32%
KUALA LUMPUR, 18 February 2020 – ELK-Desa Resources Berhad (Stock Code: 5228/Sector: Finance), a non-bank lender focused in the used-car segment, today announced its financial results for the third quarter ended 31 December 2019.
During the quarter under review, the Group registered a 32% increase in profit before tax to RM13.25 million compared to RM10.08 million in the corresponding quarter a year ago. The Group’s improved performance came on the back of higher revenue of RM38.65 million compared to RM31.11 million registered in the same period a year ago.
The increase in both revenue and profit before tax were primarily due to higher contribution from the Group’s Hire Purchase Division during the quarter under review.
As at 31 December 2019, hire purchase receivables was recorded at RM601.70 million, translating into an increase of 32% compared to RM456.06 million last year. Correlating to the increase in hire purchase receivables, the Group’s borrowings and debt securities was 185% higher at RM287.63 million compared to RM100.90 million a year ago.
The increase in borrowings and debt securities was mainly due to higher drawdown of block discounting facility and the Medium-Term Notes that were issued during the current financial period to finance the increase of hire purchase receivables. In spite of the rise in total borrowings, ELK-Desa’s gearing ratio remains at a low and manageable level of 0.68 times.
On a cumulative perspective, the Group registered a profit before tax of RM38.36million for the first nine months of its financial year ending 31 March 2020. This marked a notable increase of 18% from the profit before tax of RM32.39 million registered in the same period last year. Revenue for the nine-month period was also 21% higher at RM110.47 million compared to RM90.93 million a year ago.
Teoh Seng Hee, the Executive Director and Chief Financial Officer of ELK-Desa Resources Berhad, said, “The Group is progressing on a healthy growth trajectory that is supported by relatively stable domestic macro-economic factors such as low unemployment rate and manageable inflation. Based on our performance to date, we believe that we will be able to close out our financial year ending 31 March 2020 on a stronger note compared to a year ago.”
“Moving forward, we are also cognisant of the external headwinds pressuring the domestic economy. These include the potential impact from the Nova Corona virus outbreak and the uncertainties that stem from the on-going trade war between China and the US,” he added.
“While we are paying close attention to these developments, we believe that the Malaysian economy remains resilient and would be able to withstand the difficulties in the immediate to medium term.”
“In view of this, the Group intends to maintain its strategic direction to grow its hire purchase portfolio dynamically while paying close attention to safeguarding the quality of its assets. We remain confident that there is still a lot of room to grow in the underserved second hand car hire purchase financing segment and we will continue to invest in the talent and processes to manage credit risk and enhance credit recovery,” Teoh concluded.
overall another good quarter report. hire purchase receivables growing very fast, more than 8% compare to last quarter on September 2019. there only slightly higher impairment and higher tax causing net profit lower than last quarter. overall business still maintain to grow very stable. management really do a nice job.
btw, i also noticed some new term loan in the balance sheet. maybe they still continue to explore for better gearing methods. seems to be a good sign.
management also hints that next quarter business is still grow stable.
although i don't think there will be any impact to the company next quarter report from the current market conditions, but i personally don't think now is the time to collect more.. it is cheap, but overall market not good
ELKDESA has a current ratio of 2.449 times in 2019 indicating that the company does not face any liquidity issue as it BOLEH paying back its liabilities (RM71.9 million) if sesuatu berlaku. ELKDESA is able to do so by using current assets such as inventories, other assets, trade receivables, hire purchase receivables, other receivables, deposits, prepayments, current tax assets, short term funds, cash and bank balances amounting to RM176.1 million. Kemungkinan juga also indicate that the company is not efficiently using its current assets or its short-term financing facilities.
Elkdesa is not governed by Bank Negara so at least not affected by moratorium. Their previous clients still need to pay loan, in short they don't have to provide deferment plan like bank hire purchase. Btw, I am still collecting bit by bit.
the second hand car sales on April were too little. expected for the quarter April to June of 2020 will be a big impact to the company. meanwhile we all know the customer base of the company is those who unable to optain loan from banks, thus the chance of becoming bad debt will be higher especially within the MCO period. for the coming quarter results on March may not see much impact, but i rather wait 3 more months to see the report of June. we won't know how much loss will suffer from the lower new loan, and higher impairment. lucky that gearing is not high, that's the only thing feeling safe.
" As at 31 Mar 2020, the Group's profit before tax decreased by 20% to RM9.16 million as the MCO disruptions had severely affected the Group's result in the month of March due to significantly higher impairment allowances incurred for the hire purchase segment. " (based on latest report)
In my opinion, it is just going to get worse before it gets better because Malaysia MCO only started on 18 Mar 2020, and as at 31 Mar 2020, the result already showed "significant high impairment."
Coming quarter results and prospect will only gets worse ... and brutal...
at least the board is being honest of the outlook. page 11 of the quarter report .
"Impairment allowance increased by 40% to RM23.66 million. Credit loss charge (i.e. impairment allowance over average net hire purchase receivables) increased from 3.8% to 4.2%. The higher impairment allowance and credit loss charge were mainly due to a significantly larger hire purchase receivables portfolio and higher expected credit loss provisions in view of the uncertain economic effects arising from the ongoing Covid-19 outbreak. In addition, the unprecedented MCO has disrupted our hire purchase operations and the payment behaviour of our hirers.
According to the Bank Negara Malaysia, the unemployment rate is likely to surpass its earlier forecast of 4% issued in April 2020, amidst a complete halt in economic activities under the first three phases of the MCO from 18 March 2020 to 3 May 2020 ... "
the dividend is lower than expected. i expected to have at least 4 sen. the lower dividend due to the revenue and profit didn't meet the grow that it supposed to. due to the COVID19 outbreak issue, the revenue dropped compare to last quarter report. Revenue is mainly from the payment of the hire purchases interest, revenue go down meaning ppl din pay in time, that not just lower the revenue, but will increase the impairment also, as the payment didn't made by customer, the amount become bad debt and continue become impairment after period of time. with just beginning of the outbreak and 2 weeks of MCO, already see the impact to the quarter report. the next report surely will be worst. things didn't turn better until June. with the current market conditions, those bad debt will be hard to recover. we can foresee the next quarter will have more impairment at once. with higher impairment and slow business, hire purchase receivables will be lower than this quarter, then the revenue onwards will be affected. need to get the next quarter report to evaluate the value of the company.
bear in mind the incident this time will have permanent impact to the company revenue onwards. it will not recover and restore back to previous state immediately after MCO ended. company need to accumulate the amount of hire purchase receivables back to previous state in order to gain back the revenue and profit it supposed to have. and maybe need more due to lower interest rate now.
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Despite its high impairment and foreseeable more impairment, the stock price is doing very well. Have to admit it's hard not to like this company. even if more people can't pay back it's loan, the price will keep going up! Stronger than banks. Much better than all banks. See eg. CIMB stock price chart, still under pressure...
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