Hong Seng cites long gestation period, impairment in Classita stake sale
The company was responding to a Bursa query regarding the disposal, which comes after Hong Seng's July 14 and July 23, 2023 announcements of the acquisition, then touted as having 'promising potential in, among others, the undergarments manufacturing and property development and construction businesses.'
For the audited period ended June 30, 2024, Classita posted a net loss of RM3.02 million, of which Hong Seng's share was RM763,000.
Net assets stood at RM189.28 million, with Hong Seng's portion amounting to RM62.26 million.
For the nine months to March 31, 2025, Classita recorded a net profit of RM676,000.
Segmental revenue for the group fell from RM75.83 million in the 15-month period to June 30, 2022, to RM50.49 million in FY2024, due mainly to a slump in manufacturing sales and direct retail.
Manufacturing revenue slid from RM70.46 million to RM45.77 million over the period, hurt by shifting consumer preferences, heightened competition from fast fashion and direct-to-consumer brands, and higher shipment costs from a shift to air freight to meet delivery schedules.
Direct selling and retail revenue plunged from RM5.3 million to just RM18,230 over the same period, as Classita pivoted away from in-house brands towards other segments.
The property development and construction segment, meanwhile, swung from nil revenue in FY2023 – due to the reversal of prior years' sales after property buyers failed to secure financing – to RM4.65 million in FY2024, but still posted a loss.
In the nine months to March 31, 2025, Classita's revenue improved by RM8.96 million year-on-year, thanks to higher manufacturing export sales to Germany, Turkey and the US, as well as slightly higher property sales.
Hong Seng said: 'While the prospects of Classita's businesses remain, Hong Seng has recognised a partial impairment of the investment based on a value-in-use calculation… considering the longer gestation periods required for the property development and construction projects to materialise.'
The impairment of RM34.52 million was derived under MFRS 136, using a five-year cash flow projection for the manufacturing segment only, discounted at 8.16%.
The property and construction segments were excluded due to the inability to reliably estimate near-term cash flows.
'Retaining the investment would require a longer timeframe before the Group could recoup the investment and generate returns, with such returns being subject to various market and business risks and uncertainties,' Hong Seng said.
'The disposal represents a more favourable option to divest, realise immediate cash proceeds, and sidestep potential risks,' it added.
Proceeds from the disposal will be channelled into Hong Seng's existing businesses, future expansions and prospective ventures. — TMR
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Malaysian Reserve
5 days ago
- Malaysian Reserve
Hong Seng cites long gestation period, impairment in Classita stake sale
HONG SENG Consolidated Bhd has told Bursa Malaysia that its decision to dispose of its 32.61% stake in Classita Holdings Bhd, just two years after buying in, was driven by the longer gestation period needed for the property development and construction projects, alongside the desire to realise immediate cash proceeds and redeploy funds into existing and new businesses. The company was responding to a Bursa query regarding the disposal, which comes after Hong Seng's July 14 and July 23, 2023 announcements of the acquisition, then touted as having 'promising potential in, among others, the undergarments manufacturing and property development and construction businesses.' For the audited period ended June 30, 2024, Classita posted a net loss of RM3.02 million, of which Hong Seng's share was RM763,000. Net assets stood at RM189.28 million, with Hong Seng's portion amounting to RM62.26 million. For the nine months to March 31, 2025, Classita recorded a net profit of RM676,000. Segmental revenue for the group fell from RM75.83 million in the 15-month period to June 30, 2022, to RM50.49 million in FY2024, due mainly to a slump in manufacturing sales and direct retail. Manufacturing revenue slid from RM70.46 million to RM45.77 million over the period, hurt by shifting consumer preferences, heightened competition from fast fashion and direct-to-consumer brands, and higher shipment costs from a shift to air freight to meet delivery schedules. Direct selling and retail revenue plunged from RM5.3 million to just RM18,230 over the same period, as Classita pivoted away from in-house brands towards other segments. The property development and construction segment, meanwhile, swung from nil revenue in FY2023 – due to the reversal of prior years' sales after property buyers failed to secure financing – to RM4.65 million in FY2024, but still posted a loss. In the nine months to March 31, 2025, Classita's revenue improved by RM8.96 million year-on-year, thanks to higher manufacturing export sales to Germany, Turkey and the US, as well as slightly higher property sales. Hong Seng said: 'While the prospects of Classita's businesses remain, Hong Seng has recognised a partial impairment of the investment based on a value-in-use calculation… considering the longer gestation periods required for the property development and construction projects to materialise.' The impairment of RM34.52 million was derived under MFRS 136, using a five-year cash flow projection for the manufacturing segment only, discounted at 8.16%. The property and construction segments were excluded due to the inability to reliably estimate near-term cash flows. 'Retaining the investment would require a longer timeframe before the Group could recoup the investment and generate returns, with such returns being subject to various market and business risks and uncertainties,' Hong Seng said. 'The disposal represents a more favourable option to divest, realise immediate cash proceeds, and sidestep potential risks,' it added. Proceeds from the disposal will be channelled into Hong Seng's existing businesses, future expansions and prospective ventures. — TMR
New Straits Times
12-08-2025
- New Straits Times
Tex Cycle's Q2 earnings rise 20pct, revenue up 5.0pct
KUALA LUMPUR: Waste management and recycling solutions provider Tex Cycle Technology (M) Bhd posted a net profit of RM3.02 million for the second quarter ended June 30, 2025, up 20.5 per cent from RM2.50 million a year ago. Its revenue increased five per cent to RM8.6 million from RM8.3 million, driven by stronger contributions from its trading and renewable energy segments. For the six months to June 30, 2025, the company recorded revenue of RM17.5 million, representing an eight per cent growth compared to RM16.3 million in the corresponding period last year. Group chief executive officer Gary Dass A/L Anthony Francis said the first-half performance underscored the resilience of Tex Cycle's core operations. He added that with the completion of the Meridian World acquisition, the company is venturing into the e-waste segment, a rapidly expanding and highly specialised niche within the scheduled waste management industry. "In addition, our Tex Cycle (P2) Sdn Bhd's 2MW biomass gasification power plant successfully completed the initial operation date test with Tenaga Nasional Bhd and is now undergoing the power quality measurement test. "With these strategic developments, we are confident of further strengthening our capabilities, enhancing sustainable income streams, and unlocking greater value for our stakeholder," he added. Tex Cycle's shares ended the day at RM1.11, giving the company a market value of RM312.1 million.
The Star
12-08-2025
- The Star
Tex Cycle posts 20.6% rise in 2Q net profit
Tex Cycle group CEO Gary Dass Anthony Francis KUALA LUMPUR: Tex Cycle Technology (M) Bhd 's net profit rose 20.6% in the second quarter ended June 30 (2Q25) to RM3.02 mil, up from RM2.5 mil in the same quarter last year. This translates to earnings per share of 1.15 sen in 2Q25, compared with 0.99 sen a year earlier. The waste management and recycling solutions provider's revenue increased to RM8.6 mil from RM8.2 mil, supported by contributions across its trading and renewable energy divisions. For the first six months to June 30, Tex Cycle posted a net profit of RM5.2mil, down 43.2% from RM9.1mil while revenue climbed to RM17.5mil against RM16.2mil last year. Group chief executive officer Gary Dass Anthony Francis said the company is pleased with its resilient performance for the first half of the year, which reflects the strength of its core operations and disciplined investment strategies. 'With the successful completion of the Meridian World acquisition, Tex Cycle is now expanding into the e-waste segment, a fast-growing and highly specialised area within the scheduled waste management sector. 'Meridian World's established track record of approximately 30 years and strong expertise in specialised waste streams, including chemical waste and niche waste codes such as e-waste, positions us better to capture this market and strengthen our presence across industries,' he said in a statement. Additionally, Francis said that on July 29, 2025, Tex Cycle (P2) Sdn Bhd's 2MW biomass gasification power plant completed the initial operation date (IOD) test with Tenaga Nasional Bhd (TNB) and is currently undergoing the power quality measurement test. 'With these strategic developments, we are confident of further strengthening our capabilities, enhancing sustainable income streams, and unlocking greater value for our stakeholder,' he said.
