OTS Holdings Limited FY2025 Financial Results Analysis

OTS Holdings Limited has released its condensed interim financial statements for the second half (“2H2025”) and full year (“FY2025”) ended 30 June 2025. This review synthesizes key financial metrics, performance trends, exceptional items, and management commentary to provide a clear outlook for investors.

Key Financial Metrics and Performance

Segment and Geographical Performance

• Modern Trade: Revenue declined 3.6% YoY due to heightened competition and weaker consumer sentiment.
• General Trade: Revenue increased 1.1% YoY, supported by stronger demand from Malaysia.
• Food Services: Revenue fell 0.9% YoY, reflecting weakness in the competitive F&B sector.
• Others (mainly e-commerce and export): Revenue up 4.5% YoY, driven by higher export and e-commerce sales.

• Singapore: Revenue fell 4.6% YoY, reflecting broad-based demand weakness.
• Malaysia: Revenue rose 12.1% YoY on higher General Trade and Food Services demand.
• Other Markets: Revenue increased 15.9% YoY, supported by higher export activity.

Expense and Cash Flow Highlights

• Marketing and Distribution Costs: Up 16.1% YoY due to higher advertising and promotions.
• Administrative Expenses: Up 2.9% YoY, linked to new factory office costs in Johor and donations.
• Finance Costs: Up 64.4% YoY, reflecting new bank borrowings.
• Cash Flow: Net cash from operations was \$1.0m; net cash used in investing activities was \$6.3m (mainly for new plant/equipment); net cash from financing activities was \$2.2m (mainly new borrowings). Net cash and equivalents fell to \$2.6m from \$5.6m a year prior.

Exceptional Items and Corporate Actions

• Gain on Disposal: \$0.5m gain from the disposal of a 50% interest in Delta Bridge Pte Ltd.
• IPO Proceeds Update: Reallocation and utilization of IPO funds, with \$0.4m balance mainly earmarked for overseas expansion and product development.
• No Dividend Declared: The board has opted to conserve cash amid ongoing business challenges.
• Significant Related-Party Transaction: \$1.84m in sales to Swee Heng Bakery Pte Ltd, a company linked to directors/shareholders, under a shareholders’ mandate.
• Expansion in Malaysia: \$4.9m invested in the Malaysian subsidiary via loan conversion to fund the new factory.

Chairman’s Statement and Outlook

The Group continues to operate in a challenging environment driven by multiple external pressures, including inflation, rising raw material and operating costs, and intense market competition with supermarkets aggressively promoting their own house-brand products. Additionally, global macroeconomic headwinds persist, including geopolitical tensions in the Middle East and Ukraine, ongoing US tariffs, elevated global meat prices, and higher shipping costs, all of which continue to weigh on the broader economic outlook.

In response to these challenges, the Group has implemented a systematic and multi-pronged strategy:

• Cost Discipline: Tightening cost controls across all operations to preserve margins;
• Operational Efficiency: Enhancing production and distribution processes to improve overall efficiency;
• Market Competitiveness: Strengthening marketing efforts to improve brand visibility and drive sales;
• Strategic Expansion: Preparing for the full operational launch of our new manufacturing facility in Malaysia.

These proactive and structured measures are aimed at mitigating external pressures, enhancing operational resilience, and supporting the Group’s long-term, sustainable growth. The benefits of these efforts are expected to be realised progressively over time.

The statement has a neutral to slightly positive tone, with management acknowledging headwinds but emphasizing cost control and strategic expansion.

Historical Performance and Trends

• Revenue: Flat YoY at \$29.75m, indicating the business has maintained sales volume despite sectoral and macroeconomic challenges.
• Profitability: Margins slightly improved (gross profit margin up to 24.8%), but losses widened modestly YoY.
• Cash Position: Lower, primarily due to heavy capital expenditure and ongoing expansion investments.

Conclusion and Investor Recommendations

Overall Financial Performance and Outlook: OTS Holdings Limited delivered stable revenues but remains loss-making, with increased costs and a heavy investment phase (notably in Malaysia). Management is proactively responding to sector headwinds, but recovery in profitability is not yet visible in the numbers. The outlook is neutral, with potential upside from the new factory, but ongoing risks from competitive and macro factors.

• If you currently hold the stock: Consider holding if you believe in the company’s long-term plans and Malaysia expansion, and are comfortable with near-term losses and lack of dividends. Monitor for improvement in profitability and cash flows as the new factory ramps up.
• If you do not hold the stock: Wait for evidence of turnaround, such as sustained profitability or clearer benefits from the new factory, before considering an entry. There is no short-term catalyst evident in the current report.

Disclaimer: This analysis is based solely on the company’s published financial statements and does not constitute investment advice. Investors should consider their own risk tolerance and perform further due diligence or consult a professional advisor before making investment decisions.

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