ELK-DESA Resources Bhd, a non-bank lender focused in the used-car segment, has posted a 254% jump in net profit to RM17.59 mil for its 1Q FY3/2023 from RM4.97 mil on the back of higher contribution for both its hire purchase and furniture segments.
During the quarter under review, the group’s revenue also recorded a strong revenue growth of 24% to RM38.96 mil from RM31.37 mil a year ago.
As of end-June 2022, ELK Desa’s hire purchase receivables stood at RM502.19 mil which was slightly lower by 1% against last year’s RM508.87 mil. A the same time, its bank borrowings also decreased by 11% to RM151.35 mil from RM169.11 mil a year ago largely due to repayment of block discounting facilities and term loans.
There was no outstanding balance for the group’s Medium-Term Notes (MTN) as they were fully redeemed in its last financial year. As of end-June 2022, the group’s gearing remains at a low level of 0.33 times.
For the hire purchase segment, revenue rose 7% to RM24.52 mil from RM22.88 mil last year, reflecting an expansion in hire purchase portfolio.
During 1Q FY3/2023, the hire purchase segment saw a reversal of impairment allowance amounting to RM5.36 mil compared to an impairment allowance of RM8.22 mil in the corresponding period last year.
The reversal of impairment allowance was due to a significant decrease in the non-performing accounts during the quarter as a result of positive recovery activities and exceptionally good collection trend.
For the group’s furniture segment, revenue increased by 70% to RM14.44 mil while pre-tax profit was recorded at RM1.38 mil against a loss of RM150,000 a year ago.
The improved performance of this segment was mainly due to higher sales in the quarter as compared to disrupted sales from the movement control order (MCO) that occurred in the corresponding quarter last year.
“We are pleased to have started our 2023 financial year on a strong note. Our positive performance was due to the better-than-expected decrease in non-performing accounts and exceptionally good collection trend,” commented ELK-Desa’s executive director and chief financial officer Teoh Seng Hee.
“While this is facilitated by the normalisation of the national economy following the disruptions caused by the global health pandemic, we do not foresee such reversal of impairment to continue in the current year as uncertainties still persist within our operating environment.
“Moving forward, the domestic economy is expected to remain on a recovery trend, supported by the continued expansion in global demand and higher private sector expenditure given improving labour market conditions and on-going policy support,” he added.
Teoh further expects ELK-Desa to leverage on the current recovery phase to gradually bring its hire purchase receivables portfolio towards pre-pandemic levels while still taking a cautious approach to protect the group’s asset quality through robust credit recovery efforts.
“At the same time, we aim to be ever-vigilant of macro-economic uncertainties which include concerns related to higher cost of living, that may impact our current and potential hirers,” he added.
At the close of today’s trading, ELK-Desa was up 2 sen or 1.5% to RM1.35 with 297,800 shares traded, thus valuing the company at RM409 mil. – Aug 19, 2022
