Sim Leisure Group Ltd. Annual Report: Comprehensive Update for Investors

Record Profit Driven by One-Off Compensation: Core Business Remains Resilient

Sim Leisure Group Ltd. reported a record net profit attributable to shareholders of RM41 million for the financial year ended 31 December 2025. However, it is crucial for shareholders to note that this figure was significantly influenced by RM46.67 million in “Other Income”, primarily stemming from one-off compensation related to the termination of the Bandar Malaysia project.

Excluding this extraordinary item, the underlying profitability of the Group’s core segments—Theme Park Operations and Themed Attractions Construction—remains robust. Both segments have demonstrated profitability and strong cash generation post-Covid-19. The Board reassures shareholders that the core business is healthy, supported by sustainable performance in established parks such as ESCAPE Penang and KidZania Kuala Lumpur, with maturing and newly launched parks expected to reach operational breakeven or reduce losses. Efficiency initiatives and enhanced customer experience are driving future growth potential.

Construction Segment: Order Book Replenished, Outlook Positive

The themed attractions construction segment saw a revenue decline of 37.9% to RM55.50 million, primarily due to the Six Flags Qiddiya project reaching near-completion. To counteract this, the Group secured the Exit 15 Contract for theming the Public Realm, Snow Park, and Water Park of the Al Nahda Entertainment Complex in Riyadh, Saudi Arabia, valued at SAR 112,582,252. This contract replenishes the order book and is expected to sustain construction segment activity and contribute positively to revenue and earnings in FY2026.

The Group continues to pursue new projects and recurring revenue opportunities across the Gulf Cooperation Council region, including enhancements, maintenance, and refurbishment contracts. These efforts are intended to strengthen the order book and enhance segment resilience.

Strategic Expansion into China: ESCAPE Guangzhou and SIMall Concept

The Executive Chairman’s message heralds a “homecoming” to China with the planned launch of ESCAPE Guangzhou and the SIMall concept. Despite the ongoing economic challenges in China, including the property crisis and trade tensions, the Group sees opportunity to capitalize on reduced competition and rising leisure demand among China’s vast middle class.

The Group projects capital expenditure of up to RMB100 million (approx. RM58 million) for ESCAPE Guangzhou, subject to finalization of terms and agreements. Risk mitigation measures include engaging a longstanding business associate and a reputable Guangzhou legal firm for regulatory compliance and due diligence. Notably, the Group has received strong support from local government authorities to facilitate approvals and landlord cooperation.

For the SIMall concept, the Group is actively seeking suitable sites, with a potential target of at least one SIMall location (or combination of attraction brands) within the next 12-24 months. Expansion is prioritized in China and, where viable, in Malaysia’s Greater Klang Valley and Johor. Any rollout will depend on commercial viability, with the Group’s refined operating model emphasizing co-investment or full capital funding by mall owners, supported by revenue-sharing and licensing arrangements.

Operational Update: New Parks and Performance Targets

ESCAPE Challenge Putrajaya and Johor Bahru parks, launched in FY2025, experienced higher initial operating costs during their ramp-up phase, as expected. Management anticipates these parks will achieve operational breakeven within two years under normal economic conditions, with early signs of visitor engagement and throughput supporting this trajectory. Performance metrics, especially “Smiles Per Hour” (S/H), are expected to improve as operations stabilize.

Technology Advantage: Cool Melon Management System

The Group’s proprietary in-house management system, Cool Melon, is cited as a unique value proposition. While monetization opportunities such as licensing or white-labelling may be considered in the future, the current focus is on leveraging Cool Melon internally to maximize operational efficiency and competitive advantage. Any externalization would require significant modification costs and is not prioritized if it risks diluting focus from core business operations.

Key Shareholder Considerations & Potential Share Price Impact

• One-off income: The record profit is largely due to one-off compensation; future profitability will depend on core operations.
• Order book replenishment: The Exit 15 Contract in Saudi Arabia is a major new project that could positively affect future earnings and share value.
• China expansion: ESCAPE Guangzhou and SIMall represent significant capital investment and strategic risk, but also offer substantial growth potential in the world’s largest family entertainment market.
• International expansion: The Group is shifting focus from Malaysia to international markets, particularly China, due to more favorable business environments and mall operator receptivity.
• New park ramp-up: Investors should monitor the performance of newly launched parks as they approach breakeven.
• Technology leverage: Cool Melon remains a strategic internal asset, with potential future monetization options.

Conclusion

The report highlights several material developments that could influence the Group’s share price, including the replenishment of the construction order book, strategic expansion into China, and ongoing operational improvements in core theme park segments. Investors should closely monitor the execution of the Exit 15 Contract, the progress of ESCAPE Guangzhou, and the rollout of the SIMall concept, as these initiatives have the potential to deliver substantial shareholder value and impact future profitability.