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Summary and Investment Conclusion of Pecca Group Berhad's Q1 FY2025 Financial Report.

I. Overview of Financial Performance

(I) Comparison between This Quarter and the Same Quarter of the Previous Year
- Revenue: The revenue for this quarter (Q3 2024) was RM55.911 million, a 13% decrease compared to RM64.046 million in the same quarter of the previous year (Q3 2023). The main reasons were the factory maintenance shutdown of customers and the Hari Malaysia celebrations in September 2024, which led to a lower sales volume of automotive seat covers and other products.
- Profit: The net profit for this quarter was RM14.571 million, a 12% increase compared to RM13.045 million in the same quarter of the previous year. Despite the slight decline in revenue, the improvement in net profit was mainly due to the increased production cost efficiency in the automotive segment and the enhanced financial income resulting from improved operating cash flow and optimized financial resource management.
- Earnings per Share: The basic earnings per share for this quarter was 1.97 sen, a 14% increase compared to 1.73 sen in the same quarter of the previous year.

(II) Comparison between This Quarter and the Previous Quarter

- Revenue: The revenue for this quarter was RM55.911 million, a 2% increase compared to RM54.994 million in the previous quarter (Q2 2024), mainly due to the increased sales volume of automotive seat covers for various models.
- Net Profit: The net profit for this quarter was RM14.571 million, which was basically the same as the RM14.565 million in the previous quarter, thanks to the further cost efficiency achieved in production.

(III) Key Data of Financial Position

- Assets: The total assets decreased from RM288.649 million as of June 30, 2024, to RM262.918 million as of September 30, 2024. Both non-current assets and current assets changed, with the cash and cash equivalents decreasing by RM26.125 million to RM127.318 million.
- Liabilities: The total liabilities decreased from RM54.135 million to RM40.626 million, including changes in short-term and long-term borrowings. The company repaid part of the borrowings in this quarter.
- Equity: The equity decreased from RM234.514 million to RM222.292 million, mainly due to transactions such as treasury share repurchases and dividend payments.

(IV) Cash Flow Situation

- Cash Flow from Operating Activities: The net cash flow from operating activities in this quarter was RM13.604 million, mainly affected by operating profit, changes in inventories and accounts receivable, and after paying income tax and interest.
- Cash Flow from Investing Activities: The net cash flow from investing activities was - RM326,000, including expenditures on the acquisition of fixed assets and intangible assets, as well as the received interest income.
- Cash Flow from Financing Activities: The net cash flow from financing activities was - RM39,403 million, mainly due to activities such as treasury share repurchases, dividend payments, and loan repayments.

(V) Business Segment Analysis

- Automotive Segment: It is the main source of revenue, including automotive leather seat covers (classified by OEM, REM, PDI), leather cut piece supply, sewing of fabric seat covers, etc. The revenue for this quarter was RM55.677 million, accounting for about 99% of the total revenue, with OEM contributing about 91%. The demand in the Malaysian automotive industry is growing, and the group plans to invest in capacity expansion and expand the international market, such as seeking OEM contracts in Indonesia.
- Aviation Segment: The business includes the manufacturing and repair of aircraft seat covers. After successfully completing the Airbus A320 project, it is actively seeking new contracts, participating in industry events to enhance visibility, and pursuing more international certifications to expand the Southeast Asian market.
- Other Segments: The revenue for this quarter was RM234,000, accounting for a relatively small proportion.

(VI) Other Important Information

- Dividend Payment: In the third quarter of FY2024, two interim single-tier dividends were paid, at 1.50 sen per share each, totaling RM22.403 million. A special single-tier dividend and the first interim single-tier dividend for FY2025 were also announced, both at 1.50 sen per share.
- Capital Commitment: There was no authorized capital commitment.
- Change in Group Composition: There was no significant change in this quarter.
- Contingent Liabilities and Contingent Assets: As of the reporting date, there were no significant contingent liabilities or contingent assets.
- Related Party Transactions: There were transactions such as sales, rentals, and management services with related parties like Rentas Health Sdn Bhd, with relatively small amounts.

II. Investment Conclusion

(I) Investment Advantages

- Revenue Growth Potential: Although the revenue decreased year-on-year in this quarter, it increased by 2% quarter-on-quarter, and the continuous growth in demand in the automotive industry and the group's capacity expansion plan are expected to drive further revenue growth.
- Profitability Improvement: The net profit increased by 12% year-on-year, and the cost control in the automotive segment and the optimization of financial income have shown significant effects. The continuous improvement in cost efficiency will help maintain profitability.
- Optimistic Industry Outlook: The growth of the Malaysian automotive industry and the government's promotion of electric vehicle development; the aviation segment has successfully entered the market and is actively expanding its business, and is expected to benefit from the growth in industry demand.
- Stable Dividend Return: Regular dividend payments with a certain level of stability in dividend levels are attractive to investors seeking dividend income.

(II) Investment Risks

- Intensifying Market Competition: The automotive and aviation interior markets are highly competitive, and the company may face challenges in market share competition and price pressure, which could affect revenue and profit growth.
- Fluctuations in Raw Material Prices: The cost of raw materials accounts for a relatively high proportion, and fluctuations in prices of materials such as leather and fabric may affect production costs and profit margins.
- Uncertainty in the Economic Environment: Global economic uncertainty may affect consumer confidence and corporate investment, thereby affecting the demand in the automotive and aviation industries and having a negative impact on the group's business.
- Project Execution Risks: The capacity expansion and new market expansion plans face project execution risks, such as construction delays and low market acceptance.

(III) Overall Evaluation and Investment Recommendation

Pecca Group Berhad demonstrated certain financial stability and growth potential in Q1 FY2025. The automotive and aviation segments have development opportunities, with improved profitability and stable dividend returns. However, it also faces risks such as market competition, fluctuations in raw material prices, and macroeconomic uncertainty. For investors with moderate risk tolerance, seeking long-term stable returns, and optimistic about the development of the automotive and aviation interior industries, the company's stock can be part of the investment portfolio. However, it is necessary to closely monitor industry dynamics and the company's business progress and pay attention to diversifying investment risks.