Net Pacific Holdings Limited: Interim Financial Report Analysis (HY2026)

Net Pacific Holdings Limited, formerly known as Net Pacific Financial Holdings Limited, released its unaudited condensed interim financial statements for the second quarter and half-year ended 31 December 2025. The report provides insights into the company’s performance following its business diversification into Golf and Luggage segments, as well as its Financing business in Hong Kong and the PRC. Below is a detailed analysis of key financial metrics, trends, and noteworthy corporate actions.

Key Financial Metrics and Comparisons

Historical Performance Trends

The Group’s revenue fell 15% YoY for HY2026, largely due to weaker sales in the Golf business and lower-margin product sales in the Luggage segment. While gross profit improved YoY for the quarter, overall losses remain substantial. Net asset value per share declined 11% over the period, reflecting ongoing losses and asset impairments.

Segment Analysis

• Luggage Business: Contributed 87% of Group revenue in HY2026. However, losses of HK\$8.5 million were recorded as Saint Pearl has not yet reached optimal sales volume for production efficiency. Lower-margin sales and diminished demand for aluminium cases negatively affected results.
• Golf Business: Accounted for 8% of Group revenue. Faced declining sales and negative gross margins due to poor demand and intense competition in the PRC. Operating expenses continue to outweigh revenue.
• Financing Business: Revenue was stable at HK\$1.7 million, with a return to profit after last year’s loss, but remains a minor contributor to overall results.

Exceptional Expenses and Related-Party Transactions

• Impairment: A HK\$3.0 million impairment loss was recognized on goodwill in FY2025 due to the underperformance of Saint Pearl.
• Related-Party Transactions: Notably, Saint Pearl had trading relationships with companies connected to its shareholders/directors, with HK\$3.2 million in sales and HK\$203,000 in purchases in the period. These arrangements are being reduced as Saint Pearl builds its own commercial track record.
• Bridging Loan: A temporary bridging loan of HK\$11.1 million was arranged for land acquisition, mostly repaid post-period using new bank loans secured by land assets.

Cash Flow and Balance Sheet

• Operating Cash Flow: Net cash used in operating activities was HK\$7.7 million, attributed to operating losses and higher working capital needs.
• Investing Activities: HK\$19.7 million was used for land-use rights and equipment purchases, primarily for the Luggage Business.
• Financing Activities: Net cash generated was HK\$30.7 million, mainly from new bank loans and the bridging loan. Cash and equivalents rose to HK\$27.6 million.
• Asset Changes: Plant, equipment, and right-of-use assets increased due to land acquisition in the PRC.

Directors’ Remuneration

Directors’ fees totaled HK\$714,000 in HY2026, up slightly from HK\$693,000 in HY2025. Staff costs also increased across segments in anticipation of higher order volumes.

Corporate Actions and Forecasted Events

• No Dividends: No interim or final dividend declared for HY2026, nor for the previous period, as the Group is not profitable and is preserving cash for new business segments and future opportunities.
• General Mandate for IPTs: Shareholders approved a mandate for commercial transactions with Guangdong Dapu All Aluminium Luggage Co., Ltd., a related party, at the EGM in October 2024, renewed in November 2025.
• Business Diversification: The Group completed acquisition of Saint Pearl, expanded into Luggage and Golf segments, and shifted its golf simulator business model from exclusive distributorship to general dealership to reduce supplier dependency and broaden options.
• Outlook: The report notes ongoing expansion into new overseas markets (especially Europe), shifting focus from the US due to tariff uncertainties. Moulding projects with OEM clients are expected to boost sales and production utilization in 2026.

Chairman’s Statement

“Several moulding development projects with key original equipment manufacturer (“OEM”) customers are scheduled to be progressively completed and brought into production during the first half of 2026. These projects are expected to drive sales volume growth, improve production utilisation, and strengthen strategic partnerships with our key customers. Additionally, Saint Pearl is expanding into new overseas markets in other Asian countries and shifting its focus from the United States to Europe to mitigate potential impacts and uncertainties arising from changes in U.S. tariff policies on Chinese goods… Moreover, marketing initiatives undertaken in the second half of 2025, particularly at the Canton Fair, have received encouraging market feedback. The Group is actively leveraging this momentum and is focused on converting these opportunities into confirmed sales orders. We remain committed to executing our strategies with discipline, with the objective of delivering sustainable value to our shareholders in a dynamic operating environment.”

The statement is cautiously optimistic but acknowledges ongoing challenges, especially margin compression and competition.

Errors, Disclaimer of Opinion, and Audit Issues

The Group’s auditors issued a disclaimer of opinion for FY2025 due to comparability issues from asset reclassification and the restatement of receivables, but the Board reports that these issues have been satisfactorily resolved as of 30 June 2025. No further action is required for FY2026.

Events Impacting Business

• Macroeconomic Environment: The Group faces weak growth recovery and geopolitical tensions. The Golf segment is especially challenged by competition and reduced discretionary spending in China.
• No Legal Disputes or Natural Disasters: The interim report did not disclose any such events.

Conclusion and Recommendations

Overall, Net Pacific Holdings Limited’s financial performance remains weak. The company continues to incur losses, faces margin compression in its new segments, and has not yet achieved scale or efficiency in its Luggage and Golf businesses. Cash flow remains adequate, supported by new financing, but asset values are under pressure and no dividends are proposed. The outlook is cautiously optimistic, with management expecting sales growth from new OEM projects and overseas expansion, but risks remain high due to competitive pressures and economic uncertainty.

Investor Recommendations

• If you are currently holding this stock: Consider maintaining a cautious stance. While the company is expanding and may benefit from future volume growth and market diversification, continued losses and margin pressure suggest limited short-term upside. If your investment horizon is short or risk tolerance is low, review your position. Otherwise, monitor upcoming quarters for signs of turnaround in Luggage and Golf segments.
• If you are not currently holding this stock: Exercise patience. The current financials do not support a compelling entry, given ongoing losses and uncertain recovery. Wait for evidence of sustained profitability, margin improvement, and successful execution of strategic initiatives before considering a position.

Disclaimer: This analysis is based solely on information disclosed in the company’s interim financial report. It is not a substitute for personalized investment advice and does not consider your individual financial situation. Investors should conduct their own due diligence and consult professionals before making investment decisions.

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