ELK-DESA Resources Bhd, a non-bank lender focused in the used-car segment, saw its 4Q FY3/2024 net profit for the period ended March, 31, 2024 skyrocketed 30% to RM9.71 mil from RM7.40 mil in the corresponding quarter a year ago on higher contribution from its hire purchase financing segment.
Meanwhile, the group’s revenue during the quarter under review surged 16% to RM46.63 mil fro RM40.30 mil in 4Q FY3/2023 due to higher contribution from both its hire purchase and furniture segments.
However, ELK-Desa’s net profit for the entire FY3/2024 declined 23% to RM36.65 mil (FY3/2023: RM47.74 mil) primarily due to the absence of impairment allowance reversal for the hire purchase segment that occurred in the first quarter of FY3/2023.
However, the group’s revenue on a cumulative basis was 8% higher at RM167.78 mil (FY3/2023: RM155.24 mil).
As of end-March 2024, ELK-Desa’s hire purchase receivables rose 12% to RM641.75 mil from RM575.10 mil last year. At this point, the group’s hire purchase receivables have surpassed the level recorded prior to the COVID-19 global health pandemic.
The expansion of the group’s hire purchase portfolio saw the segment’s revenue increased by 12% to RM113.23 mil from RM100.76 mil a year ago.
However, finance cost edged up 38% to RM12.13 mil due to higher block discount interest expenses as a result of higher drawdown of block discounting facilities to support the increased hire purchase receivables. The group’s gearing as of end-March 2024 remains at a manageable level of 0.62 times.
In FY2024, ELK-Desa’s furniture segment recorded a slight rise in revenue to RM54.55 mil from RM54.48 mil previously due to higher furniture sales.
However, gross profit margin for the segment decreased to 35% from 38% primarily due to higher imported good purchase cost as a result of weaker foreign exchange, write down of inventory cost and general margin squeeze from stiffer competition.
Mainly as a result of the decline in gross profit margin, the furniture segment posted a 46% drop in pre-tax profit to RM2.99 mil from RM5.49 mil a year ago.
“We are happy to note that ELK-Desa delivered a commendable performance in FY3/2024 which was reflected in the second highest profit levels ever recorded in our history,”commented ELK-Desa’s executive director Teoh Seng Hee.
“This was primarily due to the expansion of our hire purchase receivables which have surpassed pre-COVID-19 levels. In FY2025, we aim to sustain this growth momentum further by expanding our hire purchase receivables moderately between the lower and mid-teens in terms of percentage.”
Added Teoh who is also ELK-Desa’s chief financial officer (CFO):
“We have ended the financial year on a positive note with our gross impaired loans ratio of 1.9% and net impaired loans ratio of 0.6% as of end-March 2024. This was mainly due to our ability to resume full scale recovery activities throughout FY2024.
“Prior to this, our recovery activities have been curtailed as a result of the pandemic. As we move further into FY2025, the group will be focused on driving down impaired loans ratio even more by pro-actively engaging our customers and maintaining our pace in recovery efforts.”
In view of its financial performance, the ELK-Desa board has declared a second single tier interim dividend of 3 sen/share in respect of its financial year ended March 31, 2024.
In addition to the first interim single tier interim dividend of 2 sen/share paid on Dec 18 last year, the total dividend for its FY3/2024 would be 5 sen/share (FY3/2023: 6.50 sen/share). This represents a dividend payout ratio of approximately 62% of the group’s net profit which is higher than the dividend policy of 60% set by the board.
At 3.25pm, ELK-Desa was unchanged at RM1.31 with 52,500 shares traded, thus valuing the company at RM596 mil. – May 23, 2024
