ELK-Desa Resources Bhd, a non-bank lender focused in the used-car segment, has bucked the trend even as the Malaysian automotive industry suffered RM14 bil losses in June and July as per the recent revelation by the Malaysian Automotive Association (MAA).
Operational shutdown of the automotive industry and its related business from the imposition of full movement control order (FMCO) has not prevented the company from posting a 116% jump in its net profit for 1Q FY3/2022 ended June 30, 2021 to RM4.97 mil from RM2.3 mil in the corresponding period a year ago.
Revenue during the period under review grew modestly to RM31.37 mil from RM30.40 mil in 1Q FY3/2021.
This was due to the significantly higher contribution from the hire purchase segment during the quarter from a year ago when the company’s operations were impacted by the first movement control order (MCO) in March 2020.
The group’s hire purchase receivables as of end-June stood at RM508.87 mil or 10% lower than the previous year while its gearing during the period remains at a low level of only 0.52 times.
Although revenue for the hire purchase segment declined 3% to RM22.88 mil, pre-tax profit for the segment rose 157% to RM7.06 mil mainly due to lower impairment allowance which had decreased by 41% to RM8.22 mil.
Additionally, credit loss charge had also decreased to 1.43% from 2.46% which reflected a reduction of non-performing accounts during the quarter.
“We started our 2022 financial year on a firmer note compared to 1Q of the last financial year. However, the on-going COVID-19 crisis that resulted in the MCO in the Klang Valley has caused disruptions to our Group’s business and operations,” commented ELK-Desa’s executive director and chief financial officer Teoh Seng Hee.
“The MCO is expected to impact our performance in the immediate or short term as we are not allowed to operate.”
However, Teoh expects demand for hire purchase solutions to remain strong as Malaysia’s overall economic fundamentals continue to be resilient although the prolonged MCO may eventually hamper its customers’ ability to fulfill their loan obligations.
Moving forward, ELK-Desa is maintaining its cautious stance to protect the quality of its assets while ensuring that its hire purchase receivables does not decline any further.
“In addition, the group will also remain vigilant in credit risk management while continuing to improve operational efficiencies and optimise operating cost,” added Teoh.
At 2.37pm, ELK-Desa was up 1 sen or 0.75% to RM1.35 with 42,000 shares traded, thus valuing the company at RM402 mil. – Aug 19, 2021
