1. Executive Summary

Techbase Industries Berhad has released its interim financial report for the six months ended 31 January 2026. The Group posted a significant loss for the period, with several notable developments that shareholders and investors must be aware of. The company is experiencing operational and legal challenges, as well as a sharp decline in profitability, which may have a material impact on share price in the near term.

2. Key Financial Highlights

• Revenue: The Group recorded a revenue of RM 89.98 million for the six months ended 31 January 2026, a sharp decrease from RM 102.13 million in the previous corresponding period.
• Loss Before Taxation: The loss before tax widened drastically to RM 80.43 million (compared to a profit of RM 9.13 million previously).
• Net Loss: The Group registered a net loss of RM 81.11 million for the six-month period.
• Gross Profit: Plunged to RM 6.38 million from RM 13.56 million previously.
• Other Operating Expenses: Soared to RM 75.08 million from RM 13.85 million in the previous period. This is a critical factor behind the poor results.
• Net Assets per Share: Dropped from RM 1.06 to RM 0.76, indicating a significant erosion of shareholder value.
• Cash Flow: Net cash used in operating activities was RM 14.81 million (previously RM 33.50 million used).
• Borrowings: Total borrowings stand at RM 39.71 million, with short-term borrowings at RM 23.52 million.
• ICULS Outstanding: 680.55 million units remain outstanding as at 31 January 2026.

These figures indicate a substantial downturn in the company’s financial health and may be price-sensitive for investors.

3. Segment and Geographical Performance

• Apparels Division: Continues to be the main revenue contributor (RM 80.94 million), but segment results are weak at RM 2.90 million.
• Textile Division: Remains loss-making, posting a loss of RM 5.84 million on RM 3.02 million in revenue.
• Advertising Division: Modest profit of RM 1.50 million.
• Others Segment: Suffered a massive loss of RM 73.21 million, substantially dragging down Group results.
• Geographical Breakdown:
  • Malaysia: RM 9.14 million
  • USA: RM 26.35 million
  • Europe: RM 17.80 million
  • Asia: RM 29.19 million
  • Other countries: RM 7.50 million

4. Major Factors Affecting Results

• Significant fair value loss of RM 69.02 million on other investments was recorded in the current period, a major factor behind the Group’s losses.
• Inventories written down (RM 0.61 million) and written off (RM 0.66 million).
• Lower sales in the apparels and textile divisions.
• Higher other operating expenses (RM 75.08 million), including losses on other investments (RM 4.74 million).
• Administrative and selling/distribution expenses are up year-on-year.
• Exchange translation losses for foreign operations of RM 7.49 million.

5. Legal and Corporate Developments (Potentially Price-Sensitive)

Material Litigations

• Trans Pacific Textile (M) Sdn Bhd (TPTM) Arbitration:
  • TPTM (a subsidiary) is party to an ongoing, protracted arbitration against Pembinaan Thong Lian Sdn Bhd (PTLSB) relating to the construction of a textile factory and associated claims.
  • PTLSB is claiming LAD of RM6.52 million, retention sum of RM1.51 million, and other damages and costs.
  • Numerous legal proceedings, amendments, and hearings have occurred, with substantive hearings now scheduled for September to November 2026.
  • Directors do not expect the outcome to have a material effect, but the amount and nature of the claim (over RM8 million) could become price-sensitive if the outcome is adverse.
• Suit 48 – Mah Sau Cheong vs Techbase and Subsidiaries:
  • The company and subsidiaries are defendants in a civil suit seeking up to RM 24.08 million (or alternatives of RM 17.02 million and general damages) for alleged deprivation of opportunity for a mandatory general offer on shares of South Malaysia Industries Berhad.
  • Legal proceedings involve multiple applications for injunctions, transfer of venue, and intervention by the Securities Commission.
  • The suit, if successful for the plaintiff, could have a significant financial impact. Investors should monitor developments closely, especially as several hearings are scheduled through 2026.

ICULS Utilisation

• Proceeds of RM 39.02 million from the Right Issue of ICULS have been substantially utilised as planned (installation of solar PV systems, working capital, and related expenses).

6. Outlook and Prospects

• Management notes the global economic environment is uncertain due to ongoing geopolitical conflicts, particularly in the Middle East, which have driven oil prices to their highest levels in four years.
• The Group will focus on operational efficiency, cost discipline, product innovation, expanding its customer base, and broadening product offerings.
• No profit forecast or dividend proposed for the current period.
• No material post-balance sheet events or changes in group composition.

7. Earnings Per Share and Shareholder Value

• Basic Loss per Share: (25.46) sen for the six months (previously 2.82 sen profit).
• Diluted Loss per Share: (16.34) sen.
• The sharp decline in EPS and net assets per share is a clear warning signal for shareholders.

8. Conclusion and Key Risks for Investors

The interim results of Techbase Industries Berhad reveal significant financial and operational challenges. Large operating losses, sharply higher expenses, and ongoing material litigations present considerable risks to shareholder value. The absence of a dividend and deteriorating net assets per share further underscore the Group’s weakened financial position.

• Investors should monitor the outcome of legal proceedings and pay close attention to the company’s ability to address its operational losses and cash flow issues.
• Any negative developments in the litigation or further deterioration in financial performance could exert downward pressure on the share price.
• Conversely, successful cost management, improvement in operating results, or favourable legal outcomes could help support a recovery in valuation.