ELK-Desa Resources Bhd, a non-bank lender focused on the used-car segment, saw its earnings for 2Q FY3/2022 dwindled by more than half, no thanks to business disruptions stemming from the imposition of total lockdown during the June-September period.
During the quarter under review, the group’s net profit declined 56% to RM4.75 mil from RM10.8 mil a year ago due to lower contribution from both its hire purchase and furniture segments. The group’s revenue during the period shed 38% to RM23.36 mil from RM37.39 mil in the previous corresponding period.
For the sixth-month FY3/2022 period, ELK-Desa’s net profit retreated 19% to RM9.72 mil (6M FY3/2021: RM12.04 mil) while its revenue dipped 19% to RM54.73 mil (6M FY3/2021: RM67.79 mil).
As of Sept 30, the group’s hire purchase receivables stood at RM469.87 mil which is 13% lower than the previous year while its bank borrowings dropped by 14% mainly due to repayment of block discounting facilities and term loans. The group’s gearing remains at a low level of only 0.34 times.
For the hire purchase segment, revenue decreased by 20% to RM18.62 mil in 2Q FY3/2022 due to a smaller hire purchase portfolio. There was also no hire purchase disbursement during the quarter under review due to the full movement control order (FMCO).
Both impairment allowance and credit loss charge increased by 95% to RM5.36 mil and from 0.47% to 1.01% respectively. The higher impairment allowance and credit loss charge were mainly due to increase in the non-performing accounts during the quarter.
All-in-all, ELK-Desa declared a single tier interim dividend of 2 sen/share (2Q FY3/2021: 2.5 sen) in respect of the current financial year ending March 31, 2022 payable on Dec 16.
“Our performance for 6M FY3/2022 was within our expectations as the FMCO introduced from June 2021 onwards disrupted our business and operations,” commented ELK-Desa’s executive director and chief financial officer Teoh Seng Hee.
“In view of the lower hire purchase portfolio achieved to date, ELK-Desa expects its performance for financial year ending March 31, 2022 to be lower than the previous financial year due to disruptions in generating new hire purchase loans during the full lockdown.”
In the immediate term, the group will maintain a cautious stance as the disruptions caused by the MCO may impact its customers’ capability of fulfilling their loan obligations.
“We will concentrate our efforts to ensure our hire purchase receivables would not decline further while being focused on credit risk management to protect the quality of our assets,” Teoh pointed out.
In the medium to long term, ELK-Desa is confident that the operating landscape will improve.
“The fast-paced national vaccination programme, economic stimulus packages and recovery initiatives announced in Budget 2022 as well as the resumption of business activities locally are expected to positively impact our economy as a whole,” projected Teoh.
“While demand for hire purchase solutions has always been resilient, a stronger economy in the near future would allow us to better mitigate credit risks as we shift towards expanding our hire purchase portfolio.”
At 3.29pm, ELK-Desa was down 1 sen or 0.72% to RM1.37 with 123,300 shares traded, thus valuing the company at RM408 mil. – Nov 18, 2021
