Net Pacific Holdings Limited (1Q2026) Financial Analysis: Transition Amid Losses and Diversification

Net Pacific Holdings Limited (“Net Pacific” or “the Group”) has released its unaudited condensed interim financial statements for the first quarter ended 30 September 2025 (“1Q2026”). This report covers a period marked by significant change, including a new company name, the completion of a major acquisition, and ongoing business diversification into the Golf and Luggage segments.

Key Financial Metrics and Quarter Comparisons

*NM: Not meaningful due to deeper loss.

Segment Analysis

• Luggage Business: Accounted for 88% of group revenue (HK\$13.4 million; +12% YoY). However, this segment incurred a loss of HK\$4.4 million, as production scale has not yet reached efficiency and margins have been pressured by mix and competition.
• Golf Business: Revenue fell YoY due to a reduction in unit sales and selling prices amid weak consumer sentiment and intense competition. Losses widened to HK\$1.1 million due to operating expenses outweighing lower revenues.
• Financing Business: Revenue was stable at HK\$0.8 million, but segment profit dropped to HK\$0.76 million (from HK\$3.4 million last year) due to lower reversals of credit loss and absence of foreign exchange gains.

Historical Performance Trends

The Group’s transition from predominantly financing activities towards manufacturing (luggage) and recreational services (golf) has resulted in increased revenue but at the cost of higher operating losses and lower gross margins. Gross profit margin slipped from 21% to 11% YoY, reflecting the lower-margin nature of the new businesses and ramp-up costs.

Exceptional Items and Related-Party Transactions

• The period saw no dividend declared, with management opting to conserve cash for reinvestment and business stabilization.
• There was an HK\$1.7 million revenue contribution from related parties in the Luggage Business, as Saint Pearl initially relies on its corporate shareholder Limingzhu and related entities for sales while building its track record and certifications.
• Significant related-party loans are guaranteed by Mr. Ben Lee, a non-independent, non-executive director, with interest income recognized from these guarantees.
• An interested person transaction mandate covers dealings with Guangdong Dapu All Aluminium Luggage Co., Ltd., controlled by the sibling of a major shareholder/director.

Audit Issues and Financial Restatements

• The company’s most recent audited financials received a disclaimer of opinion due to prior years’ asset valuation and recoverability issues. Following asset assignments and restatements, management believes these are resolved, but comparability issues linger in the accounts.
• Goodwill on the Saint Pearl acquisition was written down entirely due to underperformance.

Cash Flow and Balance Sheet Highlights

• Cash and cash equivalents fell by HK\$2.5 million to HK\$22.1 million during the quarter, mainly due to operating and financing outflows.
• Net asset value per share fell 5.4% quarter-on-quarter to 12.31 HK cents, reflecting the operating loss and asset write-downs.
• Debt levels are moderate (bank loan at HK\$7.8 million, lease liabilities at HK\$16 million), with loans secured against Saint Pearl’s assets and personal guarantees.

Directors’ Remuneration

• Directors’ fees for the quarter were HK\$356,000. Notably, professional fees and staff costs remain significant components of overhead.

Outlook and Chairman’s Statement

“Our ongoing pursuit of potential investments has led to the Group’s expansion into the Golf and Luggage businesses. Following the completion of the Acquisition on 10 May 2024, the Group will continue to manage its business operations in both PRC and Hong Kong as it simultaneously seeks business opportunities to strengthen its fundamentals. … The Board holds the view that acquiring controlling stakes in operating businesses would offer greater growth potential, primarily due to the possibility of higher profit margin compared to the financing business. … No dividend was declared or recommended during the financial period ended 30 September 2025 because the Group was not profitable in 1Q2026. Also the Group would like to preserve cash for the new business segments and other investment opportunities, if any.”

The tone is cautiously optimistic about the long-term prospects of the new business mix, but acknowledges current losses, margin pressures, and the need for further scaling and cost control.

Key Risks and Forward-Looking Factors

• The Luggage Business faces competition and the need to transition from OEM to branded sales, while the Golf Business is pressured by macroeconomic headwinds and shifting consumer demand.
• The Group is focusing on cost-cutting, process optimization, and expanding into new markets (Europe, Asia) to mitigate US tariff risks and overreliance on related parties.
• Cash conservation remains a priority, with no immediate plans for dividends.
• No material legal, regulatory, or natural disaster events were disclosed.

Conclusion and Investor Recommendations

Overall, Net Pacific Holdings is in a transitional phase, posting higher revenue on the back of diversification but still struggling with deepening losses, margin pressures, and uncertainties around its new business models. The absence of dividends, asset write-downs, and a recent audit disclaimer further cloud near-term visibility.

• If you are currently holding the stock:
  Consider caution and monitor for evidence of margin improvement, successful ramp-up in the Luggage segment, and clarity on sustainable profitability. If the losses continue and management cannot deliver on cost control or sales ramp-up, portfolio rebalancing may be warranted.
• If you are not currently holding the stock:
  There is no clear catalyst for entry at this time. Prospective investors should wait for a demonstrated turnaround in operating metrics, improved audit status, or visible progress in business scaling and margin recovery before considering exposure.

Disclaimer: This analysis is based solely on the content found in the company’s published financial report. It does not constitute investment advice. Investors should perform their own due diligence and consider their own risk tolerance before making any investment decisions.

View Net Pacific Fin Historical chart here