GSS Energy Limited Addresses Shareholder Concerns and Outlines Growth Strategies at 2026 AGM

Key Highlights from the Eleventh Annual General Meeting

Gross Profit Margins Remain Pressured: Despite improvements in revenue and customer base, GSS Energy’s gross profit margins remain low at around 7.42%. The management attributes this to ongoing cost pressures and a shift to a consignment-based business model, which lowers gross margins but reduces financing needs and exposure to interest rate volatility.
Operational Efficiency Initiatives: The company has implemented cost optimisation measures, streamlined processes, and improved operational efficiencies to reduce operating costs. These efforts are expected to support profitability going forward.
No Fixed Gross Margin Target: Management did not provide a specific gross margin target, noting that margins may fluctuate based on product mix and business segment, such as precision engineering, PCBA, and plastic injection moulding.
Focus on Net Profit Improvement: The Group is targeting improved net profitability, noting that FY2025 losses contained significant non-cash items. Management is committed to strengthening core businesses and achieving sustainable earnings through better cost control and operational discipline.

Recent Fund-Raising Utilisation: Approximately S\$5.47 million raised in recent exercises has been fully deployed for working capital and to support the development and production of the Group’s new battery pack business.
Working Capital and Growth Plans: The Group remains cautiously optimistic about new orders, supported by potential supply chain shifts and new customer opportunities. Management will continue to monitor and manage working capital needs, actively engaging financial institutions and exploring suitable funding arrangements.
Flexible Funding Approach: The company will consider various funding options including bank loans, placements, or rights issues—balancing growth opportunities with prudent financial management.

Early-Stage Progress: The battery pack segment is in its infancy, with initial customer orders secured (subject to qualification and project timelines). Production capacity has been established and will be scaled up as demand grows.
Breakeven Timeline: Management expects the segment to reach breakeven within 12 to 18 months, depending on order flow and customer mix. This segment is strategically aligned with growing global demand for energy storage solutions.
Strategic Rationale: The company sees energy storage as a core growth driver, benefiting from the global shift towards electrification and renewables. Collaborations with strategic partners who also function as sales channels are opening up broader market opportunities.

Revenue Concentration in Batam: 80% to 85% of the Group’s revenue is generated from Batam, Indonesia, with energy storage and battery packs contributing meaningfully. Operations in China and Singapore provide some diversification, but Batam remains the key revenue driver. Management is aware of geographical concentration risk and is monitoring and optimising its operational footprint.

Mitigating Cost Pressures: The consignment model shifts raw material cost fluctuations to customers. Logistics and energy cost increases can be contractually passed on to customers within agreed thresholds, and government subsidies in some jurisdictions help cushion energy cost rises.
Operational Improvements: The company continues to focus on streamlining operations and improving efficiency to offset rising costs and support profitability.

No Immediate Plans for Rights Issue: The company currently has no plans for another rights issue, focusing instead on operational improvements and optimising its funding structure. However, management remains open to future fund-raising if value-accretive opportunities arise.
Alternative Funding Options: Board is open to placements and bank financing, with the choice of funding method dependent on cash flow needs, market conditions, and strategic considerations.
Pricing and Shareholder Value: Any future placements or rights issues will be priced based on financial discipline, expected returns, prevailing market conditions, and regulatory requirements. The objective is to ensure that the cost of financing is justified by anticipated returns.
Full Utilisation of Past Proceeds: All proceeds from previous fund-raising exercises have been fully utilised, as disclosed in the company’s annual report and regulatory announcements.

Strategic Shift to Consignment Model: This shift reduces working capital needs but comes at the cost of lower gross margins, which investors should monitor for future profitability trends.
Battery Pack Business as a Growth Catalyst: Successful execution in this segment could materially improve earnings and valuation, especially if breakeven is achieved within the next 12–18 months.
Geographical Concentration Risk: Heavy reliance on Batam exposes the company to operational risks, but management’s efforts at diversification and operational optimisation are positive signals.
Prudent Funding Approach: The company’s flexible approach to funding, with no immediate equity dilution, is a shareholder-friendly signal, but investors should be alert to future fund-raising if large opportunities arise.