Will Asia File see a turnaround to trend higher?

Asia File Corporation Bhd is poised for a rebound in share price having closed at RM1.80 on Nov 28.

After posting a 65% surge in net earnings to RM52.1 million in FY Mar 2024, its bottom line declined 36% to RM10.3 million in 1QFY25. According to consensus estimates, Asiafile is expected to report a net profit of RM41.2 million in FY25 and RM43 million in FY26. This translates to prospective PERs of 8.3x and 7.9x, respectively.

The group maintains a debt-free balance sheet and is in a strong financial position. It has cash & investments holdings totalling RM353.2 million or RM1.86 per share, which exceeds its current share price as of end-Jun 2024.

However, things do not look so positive for the company as it plunged into the red with a net loss of RM10.6 million from a net profit of RM6.9 million a year ago. This was on the back of lower revenue of RM68.5 million versus RM79 million. The company saw lower demand for it filing products

Its Consumer & Food Ware division saw an 8% increase in revenue. It reached RM11.82 million, up from RM10.94 million last year driven by strong sales performance on online platforms.

For the six months' period ended 30 September 2024, the company reported total revenue of RM145.68 million as compared to RM154.69 million for the same period last year.

This represents a 5.8% drop in overall revenue. The decline was mainly attributed by weaker sales in the Filing division which saw its revenue decreased from RM133.56 million to RM121.74 million.

The above drop was partially mitigated by improvement in Consumer & Food Ware division where sales rose from RM21.11 million to RM23.93 million during the period.

Profit before tax for the six-month period dropped to RM5.81 million as compared to RM29.23 million recorded in the corresponding period last year.

In addition to lower revenue, Asia File bottom line was negatively impacted by an unfavorable foreign exchange loss of RM16.48 million as compared to foreign exchange gain of RM5.33 million recorded in the corresponding period last year.

The operating margin was further hit by the escalation in costs in sea freight and a higher share of loss from associate company of RM5.82 million, as opposed to RM3.25 million losses shared during the same period last year.

The company had been consistently profitable in the past 5 financial years. Net profit decreased from RM36.9mil in FYMar20 to RM31.6 million in FYMar23, but rebounded to a high of RM52.1 million in FYMar24.

The increase in net profit from FYMar23 was driven by improved margin. Investors can only hope that the company can recover and generate better profits in subsequent quarters.