Financial Analysis Report: Willas-Array Electronics (Holdings) Limited
Report Date: March 28, 2025 Financial Year Reported: Nine months ended December 31, 2024
Business Description: Willas-Array Electronics (Holdings) Limited is an investment holding company. Its subsidiaries are primarily engaged in the trading of electronic components. The company operates in three main geographical segments: Southern China, Northern China, and Taiwan. The company’s products are sold to customers across various market segments, including automotive, industrial, home appliance, electronic manufacturing services (EMS), dealer, audio and video, telecommunications, and lighting.
Financial Statement Analysis:
Income Statement:
The company reported a loss attributable to owners of HK$66.1 million for the nine months ended December 31, 2024, a significant improvement compared to the loss of HK$169.2 million in the previous financial year.
Gross profit margin increased slightly to 4.0% from 3.8% in the previous financial year, mainly due to a reduction in inventory impairment.
Administrative expenses decreased by 35.2% to HK$111.2 million, reflecting the company’s cost-cutting measures.
Finance costs decreased by 48.8% to HK$26.9 million, primarily due to a lower weighted average effective interest rate.
Balance Sheet:
The company’s current ratio remained stable at 1.20 as of December 31, 2024.
Inventories decreased significantly by 41.3% to HK$415.9 million, indicating the company’s efforts to reduce its inventory levels.
Trade receivables decreased by 13.2% to HK$708.4 million, with debtor turnover days slightly improving to 3.6 months.
The company’s net gearing ratio increased to 141.4% as of December 31, 2024, mainly due to an increase in loans from the ultimate holding company and a decrease in cash and equity.
Cash Flow Statement:
The company used HK$86.5 million in operating activities, primarily due to decreases in trade payables, inventories, and trade receivables.
The company generated HK$62.0 million from financing activities, mainly from proceeds of loans from the ultimate holding company.
The company’s cash balance decreased by HK$26.7 million to HK$41.4 million as of December 31, 2024.
Key Findings:
The company’s financial performance has shown signs of improvement, with a significant reduction in net loss and a slight increase in gross profit margin.
The company has implemented cost-cutting measures and inventory reduction initiatives, which have contributed to the improved financial results.
However, the company’s net gearing ratio has increased, indicating a higher reliance on debt financing, which could be a concern for investors.
The company’s cash flow situation remains challenging, with net cash outflow from operating activities.
Recommendation: If currently holding the stock:
Considering the company’s improved financial performance and cost-cutting efforts, investors currently holding the stock may want to hold on to their investment, as the company’s prospects appear to be improving.
However, the high net gearing ratio and ongoing cash flow challenges warrant close monitoring, and investors should be prepared for potential volatility in the stock price.
If not currently holding the stock:
Investors not currently holding the stock may want to consider initiating a position, as the company’s financial results have shown signs of recovery, and the cost-cutting initiatives may continue to drive further improvements.
However, the high net gearing ratio and cash flow concerns should be carefully evaluated before making an investment decision.
Disclaimer: This report is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with financial professionals before making any investment decisions.
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