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Asian Micro Sold Assets To Wipe Out 1H FY2026 Losses · Investor Exchange

• 0:02
  Time for another Investor Exchange Podcast. Here are your hosts, Matt and Sally.
• 0:07
  Welcome back to the Deep Dive. Today, we have a genuine financial mystery on our hands.
• 0:13
  I want you to imagine a scenario. Let's say you run a lemonade series.
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  You look at your sales for the year, and you realize you sold significantly
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  fewer cups than last year.
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  Your customers, you know, they just weren't showing up. Not a great start to
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  the fifth goal year for the lemonade stand.
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  Exactly. But when you sit down to count your money, to calculate your losses
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  at the end of the day, you realize something strange.
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  Your losses have almost completely vanished. You've gone from bleeding cash
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  to practically breaking even.
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  Is it magic? Did the lemons become free? Or is it accounting?
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  It is almost always accounting.
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  Or, you know, to be more specific, the answer is usually hiding somewhere in
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  the footnotes of the financial statements, just waiting for someone to find it.
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  And that is exactly what we are unpacking today. We are looking at a company
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  called Asian Micro Holdings Limited.
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  Specifically, we are doing a deep dive into their condensed interim financial
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  statements for the six months ended December 31st, 2025.
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  We'll just call this the first half of fiscal year 2026. And this is a fascinating
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  case study for anyone interested in how headline numbers can be deceiving.
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  Asian Micro Holdings is listed on the Catalyst board in Singapore.
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  And on the surface, they are a pretty diversified group. They aren't just one
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  thing. They do manufacturing.
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  They handle natural gas vehicle components.
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  And more recently, they've been dabbling in the property market.
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  But as we went through these documents, the mission for this deep dive became
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  pretty clear. We need to put on our investor hats.
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  We aren't just reading numbers here. We are trying to figure out if this business
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  is actually healthy or if they are just, you know, moving money around to keep the lights on.
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  Precisely. The goal is to separate the operational performance,
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  how well they are actually selling their products and services,
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  from the financial engineering or one-off events that impact the bottom line.
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  Because as an investor, you pay for future earnings, not for a one-time trick.
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  Okay, let's start with that headline mystery I teased, the top line,
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  the revenue. In the first half of fiscal year 2025, they brought in S dollars 3.25 million.
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  But for this period, ending December 2025, that number dropped to S dollars, 2.72 million.
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  That is a 16% drop. Right. And in the corporate world, a double-digit revenue
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  drop usually sets off some alarm bells. Yeah.
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  If you were just scanning the summary, you might think the business is,
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  I don't know, collapsing or losing market share rapidly.
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  But you pointed out that we need to look at why. It turns out the drop isn't
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  because people stopped buying their main products. it's almost entirely driven
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  by their property business segment.
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  And this brings us to a concept that often trips up new investors.
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  Revenue recognition. Property is, well, it's lumpy. It's not like selling a
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  cup of coffee where you hand it over and ring up the sale instantly.
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  Right. With a building, you don't just sell the whole thing all at once,
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  legally speaking, right? Exactly.
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  In Singapore and many other places, for development projects,
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  you often recognize revenue based on a percentage of completion,
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  or POC. So imagine you are building a skyscraper.
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  You don't wait until the ribbon cutting to say you made money.
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  You say, okay, we finished 40% of the building this year, so we book 40% of the revenue.
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  And that's what happened last year. They had a big chunk of completion. Yes.
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  In the previous corresponding period, they recognized a POC of 40% on a specific
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  development property. Yeah.
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  They did a lot of work, so they booked a lot of revenue this year.
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  They only recognized an incremental 10%. So it's not that the property business
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  fell off a cliff per se. It's just that they ran out of easy construction milestones
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  to bill for in this specific six-month window.
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  Correct. So while a 16% revenue drop looks bad on a chart, it's largely a timing
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  issue with their property development cycle.
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  It just makes the year-over-year comparison look a lot worse than the underlying
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  reality might be. Okay, so that solves the mystery of the revenue drop.
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  It's property accounting doing its thing. But here's where it gets really interesting.
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  This is the part that made me stop and reread the report three times.
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  Despite selling less, their loss from operations basically disappeared.
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  It is quite the turnaround on paper. Let's look at the stats.
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  Last year, they lost $117,000 from operations. This year, they lost just $2,000.
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  That is a 98% improvement. And the net loss went from $122,000 down to $40,000.
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  If I'm a shareholder, I'm looking at that and popping the champagne right.
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  And I'm thinking, wow, management really tightened the belt.
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  We're almost profitable.
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  Well, maybe put the cork back in the bottle for just a moment.
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  Yeah. This is where we have to look at the quality of those earnings,
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  or in this case, the quality of that loss reduction.
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  Because I can tell you right now, this wasn't because they sold a million more
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  widgets or slashed their electricity bill in half.
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  I have a feeling you're going to tell me about a specific line item.
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  I actually circled it in red ink on my copy of the report. It's called other
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  operating income. That is the culprit.
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  Or the savior, depending on how you want to look at it. It jumped 940% from
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  $22,000 last year to $225,000 this year.
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  That is a massive spike for a company this size. It is.
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  And when you see a spike like that in other income, you immediately have to
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  check the notes section.
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  You have to ask, is this recurring? Is this something that will happen again next year?
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  Because if it's not recurring, you just can't rely on it. And when we dig into
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  note five, it's clearly not recurring.
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  No. The breakdown shows a gain on disposal of investment properties of $133,000
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  and a gain on disposal of motor vehicle of $97,000.
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  So let's be crystal clear here for everyone listening. They sold a building
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  and they sold a car. Essentially, yes. That's what happened.
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  And because they sold those assets for more than their book value,
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  more than what they were listed for on the balance sheet, they booked a profit.
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  And that profit is what wiped out their operating loss.
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  That is the reality. the operational business, you know, selling gas and packaging,
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  didn't suddenly become wildly profitable.
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  The company just liquidated some of its assets. It's like our lemonade stand
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  analogy again. You didn't sell more lemonade, you sold the blender.
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  That is the perfect analogy. You can sell your blender to pay your debts this
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  month. Your personal balance sheet looks great.
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  You have cash. You paid the bills.
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  But next month, you still have bills, but you don't have a blender to sell anymore.
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  You've cannibalized your asset base to plug a hole in the P&L.
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  It's a non-recurring boost. It makes the spreadsheet look pretty for the six-month
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  period, but it doesn't tell us anything about the long-term health of the business.
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  In fact, if you strip those out, they are definitely still losing money on an operating basis.
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  Oh, absolutely. If you remove that $225,000 of other income,
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  the operating loss would be significantly deeper than that reported $2,000.
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  They are still burning cash on an operational basis, which is the core concern.
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  Which brings us to the next logical question. If we ignore the car and the building
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  sale, where is the actual business? What is keeping this company going?
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  Because surely they can't just keep selling cars forever.
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  No, they can't. So we have to look at the segments. We mentioned there are four listed in the report.
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  But really, when you look at the data, there is one clear MVP here.
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  The natural gas vehicle or NGV business.
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  This is the core engine of Asian micro holdings. It generated S dollars,
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  2.27 million in revenue.
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  Which, if my math is right, is the vast majority of their total S dollars,
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  2.72 million revenue. basically the whole company at this point. It is.
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  And crucially, even though the total company revenue dropped,
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  the profit from this NGV segment actually increased. It went from about $109,000
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  last year to $191,000 this year. That is a solid margin improvement.
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  And looking at the geographical breakdown, this is almost entirely a Singapore story, isn't it? Yes.
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  S$2.27 million of their revenue comes from Singapore. And that aligns perfectly with the NGV business.
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  They trade NGV products, provide compressed natural gas refilling,
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  and handle maintenance.
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  Think about taxis, buses, fleet vehicles that run on natural gas.
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  They need fuel and maintenance, regardless of whether the stock market is up or down.
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  So it's a steady eddy business, low glamour, utilitarian, but it brings in reliable cash. Exactly.
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  It's the sturdy leg of the stool. But the other legs are a bit wobbly.
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  Let's talk about the manufacturing leg. This is the clean room packaging stuff. Right.
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  Manufacturing and trading. They make clean room bags and other materials for
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  hard disk drives and semiconductors. Sounds high tech.
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  It is, but it appears to be a shrinking sauce of the pie.
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  Revenue dropped from $383,000 to $320,000, and profit fell with it down to $147,000.
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  Is that because of the tech cycle, or is it because hard disk drives are kind
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  of going away? It's likely a mix of both.
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  The HDD market is mature, and solid-state drives are taking over.
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  This segment is still profitable, which is good. It contributes that $147,000
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  to the bottom line, but it doesn't seem to be a growth engine right now.
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  It feels like a legacy business that is slowly fading into the background.
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  And then there's the property business, which we touched on.
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  Revenue plummeted there because of that percentage of completion issue, down to just $129,000.
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  But interestingly, it still posted a profit of $184,000.
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  Wait, how do you get $184,000 in profit on $129,000 of revenue?
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  That's better than magic.
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  That's alchemy. That is likely where the gain on disposal of investment properties is sitting.
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  Remember, segment results often include these one-off items.
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  So that profit number is heavily inflated by the asset sale we discussed earlier.
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  It's not that they are amazing at selling condos. They just sold the land or
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  the building itself. Ah, right. It all connects back.
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  So the NGV business is really the only one generating consistent operational
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  profit without needing to sell the furniture. Correct.
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  And that leads us to the most critical part of any financial analysis,
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  especially for a company of this size, the balance sheet, or as I like to call
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  it, the liquidity check.
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  I always look at the cash first. Do they have cash in the bank?
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  Because profit is an opinion, but cash is a fact. A very wise maxim.
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  And what did you find when you looked at the cash fact? It's dropping.
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  Cash-in-cash equivalents went from about $600,000 down to $316,000.
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  For a public company, S-dollars $316,000 isn't a huge buffer. It's quite tight.
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  That's barely enough to cover a bad month or an unexpected expense.
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  But what's more concerning is the operating cash flow. This tells you if the
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  actual day-to-day business is generating cash or eating it. And this was a massive red flag for me.
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  Net cash used in operating activities was S-dollars $1.06 million.
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  That's a big outflow. Last year, it was only $379,000.
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  Why are they burning so much cash if the NGV business is profitable?
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  They are spending money on assets.
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  Specifically inventories and development properties. You can see in the cash
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  flow statement a large outflow for increase in development properties.
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  Okay, so they are building stuff. They are investing in that property business,
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  hoping to sell it later. Exactly.
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  They have about S dollars, 3.56 million tied up in development properties under current assets.
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  That is money that is sitting in bricks and mortar or land waiting to be sold.
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  It's not liquid. You can't pay wages with a half-built condo.
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  So let's do the math here.
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  If they are burning a million dollars in cash for operations and building,
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  but they only have $316,000 in the bank, how are they surviving? Who is paying the bills?
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  This brings us to the financing section. And this is really the key to understanding
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  the risk profile of Asian microholdings right now.
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  They are reliant on loans, but not from banks. I saw that line item. Loans from directors.
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  Yes. The liability for loan from director increased by over $300,000.
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  And looking at the cash flow statement, they brought in $726,000 from director
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  loans during this period. A lifeline.
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  It absolutely is. In fact, if you look at Note 9 regarding other information,
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  they explicitly mention a loan agreement entered into on October 22, 2024.
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  It's an interest-free loan facility of up to 5 million Malaysian ringgit from
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  the controlling shareholder and CEO.
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  Interest-free? Well, that's a nice boss to have. It is generous.
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  It's cheap capital, but it also highlights a dependency.
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  A healthy company usually goes to a bank or uses its own cash flow.
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  When you are relying on the CEO to write personal checks to keep operations
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  running, it puts the company in a very precarious position.
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  It definitely raises the stakes. If the CEO decides to stop lending or if his
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  personal liquidity dries up, the company just hits a wall. Precisely.
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  And speaking of hitting a wall, did you notice note 2.1, the note about the
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  going concern assumption. I did. It sounded serious.
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  It talked about liabilities exceeding assets. Yes.
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  The note states that the company's current liabilities exceed its current assets by $195,000.
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  Wait, I thought looking at the group balance sheet they had positive net assets.
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  They do, at the group level, about $2.16 million in net current assets.
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  But the company, the holding entity itself, is in a net liability position.
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  The note explains that the directors believe the going concern basis is appropriate
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  only because the major shareholders have agreed to provide continuing financial support.
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  So translation, we are okay to keep operating, but only because the owners promise
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  to keep lending us money if things get tight. That is the translation.
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  For an investor, that is a major risk factor to be aware of.
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  You aren't just betting on the business model. You are betting on the continued
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  support and solvency of the directors.
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  So let's pivot to the future. We've looked at the numbers, we've seen the cash
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  burn, and we've seen the lifeline loans.
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  What is management saying about the road ahead? The tone is caution, very distinct caution.
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  They explicitly state that the next 12 months will be challenging.
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  They cite global economic uncertainties, which is the standard everything is
• 14:13
  weird right now disclaimer.
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  It is. But for a company this size, global uncertainty hits hard.
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  They don't have the buffer that a multinational giant has.
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  Their strategy, according to the report, is focused on three things.
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  Operational efficiency, cost control, and cash conservation.
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  Cash conservation sounds pretty critical given that they only have $316,000 in the bank. Indeed.
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  They're in defensive mode. They need to manage their working capital very, very carefully.
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  But are there opportunities? It can't be all doom and gloom.
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  There are some bright spots. As we discussed, the NGV business is profitable and seems stable.
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  If they can maintain that, it provides a floor, a steady trickle of cash.
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  And then there is that S dollars, 3.56 million in development properties.
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  Right. That's sitting on the books as an asset. Eventually, they will finish
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  building that and sell it. Exactly.
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  When that sale happens, we should see a spike in revenue and,
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  more importantly, cash inflow.
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  It's essentially deferred gratification. They are spending the cash now to build
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  it and the payoff comes later.
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  And the risk is simply, can they stay liquid long enough to reach that payday? That is the gamble.
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  It's a race against time and liquidity.
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  And there is also the risk of valuation. The property market isn't exactly a
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  guaranteed win these days.
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  True. If property values drop, that $3.56 million asset might not be worth as
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  much as they hope when it comes time to sell. Correct.
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  Valuation is always a variable. So let's try to summarize this for the listener
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  who is maybe driving to work or at the gym.
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  What is the elevator pitch on Asian Microholdings' latest report?
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  I would summarize it like this.
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  Asian Micro Holdings is a company with a small but profitable core business
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  in natural gas vehicles. That is the heartbeat.
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  However, their overall financial picture is currently distorted by the property
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  development cycle and these one-off asset sales.
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  The magic disappearance of their losses was really just them selling a car in a building.
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  Correct. And beneath that, they are cash flow negative because they are investing
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  heavily in property development.
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  To bridge that gap, they are relying on interest-free loans from their directors.
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  So it's a waiting game, waiting for the property to sell, relying on the boss's
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  wallet in the meantime, and just keeping the NGV engines running.
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  That is a fair assessment.
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  It's a company in a transition phase, juggling liquidity while trying to unlock
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  the value in their property portfolio.
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  It really forces you to look past the headline, doesn't it?
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  If you just saw loss reduced by 98%, you'd buy the stock.
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  But when you see sold the company car to reduce loss, you pause.
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  And that is why we read the notes.
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  The truth is always in the notes. I want to leave our listeners with a thought
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  to chew on. We see this strategy a lot in smaller companies selling assets to
• 16:59
  smooth out earnings. But here's the question.
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  When a company improves its bottom line by selling the furniture rather than
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  selling its products, is that a savvy maneuver to weather a storm or a sign
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  they're running out of runway?
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  That is for the investor to decide. A very provocative question,
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  and one that every shareholder should be asking.
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  Before we sign off, we have to handle the legalities. Please read the disclaimer. Certainly.
• 17:23
  This content is intended to serve strictly and only as an informational,
• 17:27
  independent, objective summary of recent events and should in no way be interpreted,
• 17:32
  construed or relied upon by any party as inside information or financial advice.
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  Thanks for listening to The Deep Dive. Keep digging into those numbers and we'll
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  catch you on the next one.