Financial Analysis of New Wave Holdings Ltd. – Net Profit Decline of 39.1%

Business Description

New Wave Holdings Ltd. is a Singaporean investment holding company listed on the Catalist of the Singapore Exchange Securities Trading Limited. The company operates through two primary business segments: the sale and distribution of aluminium alloy products and the trading in cabling products, electrical and electronic equipment and components, hardware, and software engineering in micro-computer and communication systems. The company’s operations span Singapore, Malaysia, and the People’s Republic of China (PRC).

Industry Position & Market Share

New Wave Holdings Ltd. operates in the distribution sector for aluminium products and components. The company faces competition from other regional distributors and manufacturers. Its market share and competitive positioning are influenced by regional economic conditions, particularly in the PRC where market recovery has been slow.

Revenue Streams & Customer Base

The company’s revenue streams are derived from its two core segments: aluminium products distribution and components distribution. The customer base is geographically diversified, with segments in Singapore, Malaysia, and PRC. The company’s competitive advantage lies in its established supply chain and strategic geographic footprint.

Income Statement Analysis

• Revenue: Increased by 7.4% from S\$7,726,000 in 2023 to S\$8,300,000 in 2024.
• Gross Profit: Improved by 27.1%, from S\$1,057,000 to S\$1,343,000.
• Loss Before Income Tax: Reduced by 40.1%, from S\$1,810,000 to S\$1,085,000.
• Net Loss: Decreased by 39.1%, from S\$1,784,000 to S\$1,087,000.
• Loss Per Share: Improved from (0.10) cents to (0.06) cents.

Balance Sheet Analysis

• Total Assets: Decreased from S\$25,398,000 as at 30 September 2023 to S\$22,857,000 as at 30 September 2024.
• Net Assets: Reduced from S\$11,900,000 to S\$11,300,000.
• Accumulated Losses: Increased from S\$13,132,000 to S\$14,223,000.

Cash Flow Statement Analysis

• Net Cash Used in Operating Activities: S\$248,000 (outflow).
• Net Cash Used in Investing Activities: S\$11,000 (outflow).
• Net Cash From Financing Activities: S\$909,000 (inflow).
• Cash and Cash Equivalents: Increased from S\$1,274,000 to S\$1,437,000.

Key Findings & Investment Recommendations

Strengths

• Improved revenue and gross profit margins.
• Reduction in net loss and loss before income tax.
• Positive cash flow from financing activities.

Risks

• Continued net losses and accumulated losses.
• Decreased total assets and net assets.
• Operating cash outflow and increased trade receivables.

Special Activities

The company is leveraging the positive effects of the global tech upcycle, particularly in Malaysia, to improve its profitability. It has also acquired a new term loan for working capital purposes.

Investment Recommendations

If currently holding the stock: Given the improved financial performance in terms of reduced losses and better revenue, it may be prudent to hold the stock and monitor the company’s efforts to further improve profitability.

If not holding the stock: Potential investors may take a cautious approach due to the ongoing net losses and uncertainties in the operating environment. Consider monitoring the company’s performance in the next reporting period before making an investment decision.

Dividend

No dividend has been declared or recommended for the financial period ended 30 September 2024 due to accumulated losses.

Report Date & Financial Year

This financial analysis pertains to the half year ended 30 September 2024, with the report date being 12 November 2024.

Disclaimer

This analysis is for informational purposes only and should not be considered as financial advice. Investors are advised to conduct their own research and consult with a financial advisor before making any investment decisions.