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95% Revenue Drop: Disaster Q1 2026 For Incredible Holdings · 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 are jumping into a really high stakes,
• 0:12
  I think highly critical financial report. We are.
• 0:15
  It's the unaudited condensed interim financial statements for Incredible Holdings LTD.
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  This covers their first quarter of fiscal year 2026, so the three months ending
• 0:26
  30 September December 2025.
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  And our mission really is to cut through all the density here and pull out the
• 0:33
  absolute truth about their financial health. Find out what's really going on. Exactly.
• 0:38
  We need to know what were the real drivers behind their performance?
• 0:42
  These cost-saving measures they talk about, are they sustainable?
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  A very important question. And maybe the biggest question of all,
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  What's the outlook for a company that's, you know, fighting on three different fronts?
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  And we have to start, I think, before we even look at a single dollar figure
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  by setting the regulatory stage.
• 1:00
  Okay. Because it really frames this entire discussion.
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  Incredible Holdings is required to announce their results quarterly,
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  which is, you know, more frequent than standard.
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  Why is that? Specifically because their independent auditor issued a disclaimer
• 1:14
  of opinion for their financial year that ended way back on 31 December 2022.
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  A disclaimer of opinion. For those of us who aren't CPAs, what does that technical
• 1:27
  phrase, what does it actually signify?
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  Well, it's the highest level of warning you can get.
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  Really? Yes. It means the auditors essentially told the market,
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  we cannot verify if the financial foundation of this company is sound.
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  Wow. They just couldn't get enough evidence to form an opinion.
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  So this tells you right away that the company is under intense scrutiny and
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  is still grappling with these profound unresolved issues.
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  And these issues are related to the fundamental value of assets on their balance sheet. Precisely.
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  So the stakes here, even before we start, are just incredibly high. High stakes, indeed.
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  And let's just quickly remind everyone of the battlefield here.
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  The group operates in three very distinct and, I think, challenging segments.
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  Very different businesses.
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  You've got distribution, which is specialty chemicals, then luxury goods,
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  so trading watches, and finally, a loan financing business mostly centered in Hong Kong.
• 2:17
  Right. Okay, let's look at the financial performance for the quarter.
• 2:20
  Because the top line number is, well, it's not just bad. I'd say it's genuinely catastrophic.
• 2:24
  That's a fair word for it. If you look at the group revenue,
• 2:27
  it basically disappeared. It plummeted from S $104,000 in Q1 of 2024 to just $5,000 in this quarter.
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  5,000? We are talking about a 95% revenue contraction.
• 2:40
  Just look at the sheer scale of that shutdown. Their entire revenue engine just
• 2:44
  seized up completely, dropping from six figures to barely $5,000.
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  It's a near total operational collapse in terms of sales. And the company's
• 2:53
  pretty clear about why. It's a combination of
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  decreased customer demand, and increased competition. And you can see that pain
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  across every single segment, can't you? Oh, absolutely.
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  Luxury goods went from $28,000 last year to, well, to nil revenue this quarter. Nothing.
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  Distribution, which was their largest segment at $75,000, that dropped 93% down to only $5,000.
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  And loan financing. Also flatlined, down from $7,000 to nil.
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  It's, you know, it's hard to find a business unit that wasn't critically hit.
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  Okay, so given that level of devastation on the sales front,
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  you would logically assume gross profit would be just completely wiped out. You would.
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  And in value terms, it was. It was reduced substantially, dropping from S$13,000 down to $2,000.
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  That's an 85% reduction. But here's where the numbers tell a fascinating and
• 3:41
  I think a pretty misleading story.
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  A misleading hell. If you look at the gross profit margin, so the percentage,
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  it actually increased significantly.
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  Increased. It jumped from 12.5% in Q1 of 2024.
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  All the way to 40.0% in Q1 of 2025.
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  Wait, 40%. How is that mathematically possible?
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  How can a near total collapse in sales lead to a quadrupling of the gross profit margin percentage?
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  It sounds like amazing operational success, doesn't it? It does,
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  but clearly that isn't the case here. It's not.
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  It's purely a function of the extremely low volume. The reduction in the cost
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  of sales was even more drastic than the revenue drop.
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  Ah, okay. Their cost of sales went from $31,000 down to just $3,000.
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  Since they sold virtually nothing, their cost of goods sold was negligible.
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  So they made a 40% margin, but on a tiny $5,000 worth of sales. Exactly.
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  You can think of it like this. If you used to sell 100 affordable watches at
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  a low margin, but now you only sell one extremely expensive watch that you already
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  had in inventory at a huge markup. Your margin percentage source.
• 4:45
  Right. But you're barely selling anything. Yeah. It's not a sign of a robust business.
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  It's just the mathematical outcome of a shrunken operation. That's a crucial distinction.
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  It's an indicator of minimal fixed costs in that specific bucket,
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  not, you know, thriving commerce. Precisely.
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  Okay, so let's turn to the bottom line because this is where it gets even stranger.
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  Despite that revenue disaster, the overall statutory net result showed a smaller net loss for the period.
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  Right. The loss actually improved. The group reported a net loss of S$175,000 in Q1 2025,
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  which is an improvement of over 21% compared to the S$222,000 loss in the same
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  quarter last year. How did they pull that off?
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  Well, this is where we see some really aggressive cost mitigation driving the result.
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  But, and this is a big but, much of it is temporary or non-recurring.
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  Okay, so let's unpack that. They got to a reduced loss before tax thanks to
• 5:40
  massive expense reductions in two critical areas.
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  First, administrative expenses. Right. They decreased by $65,000.
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  That's about a 27% cut.
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  Management was explicit. They cut staff and moved to a smaller office.
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  So that's real, painful, structural cost control.
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  It is. But the second reduction, this is where we see the artificial boost. Okay. Finance costs.
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  They dropped from $70,000 to nil. To zero.
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  How? It wasn't because they paid off their loans. It was due to an interest-free
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  period that spanned these three months, from July to September 2025.
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  So you're saying the only reason their statutory loss improved year over year
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  is largely thanks to a temporary interest holiday.
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  That's it. That $70,000 savings, a non-recurring swing that basically makes
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  the entire quarterly loss improvement look, well, artificial. Exactly.
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  If you annualize that, I mean, if you put that cost back in,
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  it paints a very different picture of their underlying cost structure. A very worrying one.
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  Even with the staff cuts and rent reductions, they are reliant on external forbearance
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  just to look better on paper. And at the same time they were cutting internal
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  costs, they also lost significant external income.
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  Yes, that's the other side of the coin. Other operating income decreased sharply by $77,000.
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  That's a 96% drop, mainly because income from a Hong Kong subsidiary's internet
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  marketing just vanished. Right.
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  So they lost external revenue streams while aggressively slashing internal costs.
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  And, you know, here's the hidden bad news.
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  The metric management probably hopes you don't look at too closely.
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  Which is? Total comprehensive loss.
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  So while the statutory loss before tax improved, the total comprehensive loss
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  actually increased significantly by almost 85%. So explain that.
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  What exactly is total comprehensive loss, and why is it worse here than the standard net loss?
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  It's generally seen as a better measure of the true economic change in a company,
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  because it includes non-cash items that net loss often excludes.
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  Like currency fluctuations.
• 7:40
  Exactly. Things like currency translation differences. In this case,
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  the total comprehensive loss went from S$94,000 last year to S$175,000 this
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  year. So what caused that big divergence?
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  It happened because Q1 of 2024 included a positive currency translation difference of S$128,000.
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  That was absent this period.
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  So when you strip out that favorable currency swing from last year,
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  the current performance looks dramatically worse. It does.
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  It shows the company's actual financial health deterioration is much deeper
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  than that statutory net loss figure suggests. That contextualizes it perfectly.
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  So they look better on the P&L because of temporary interest savings,
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  but their underlying economic health is demonstrably worse.
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  That's the takeaway. Let's shift to the balance sheet then, because the group's
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  financial health here appears...
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  Tenuous. Net assets, that's the book value of the company, have decreased sharply. Very sharply.
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  Dropping from S$248,000 just three months prior in June 2025 to only S$73,000 in September.
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  That is a quick burn of equity. The rapid erosion of net assets is alarming,
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  and their liquidity position, it really confirms the danger.
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  Let's talk about working capital.
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  Their negative working capital position, meaning their short-term liabilities
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  exceed their short-term assets, it worsened. It grew from negative S4.59 million
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  dollars to negative S4.76 million dollars.
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  So they're falling further behind on their ability to pay immediate bills. That's right.
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  Their current liabilities increased by S112,000 dollars, mainly from other payables and accruals.
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  At the same time, they were pulling in cash where they could,
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  you know, decrease in current assets by selling off inventory and collecting receivables.
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  So they're slowing down cash spend, but their obligations are piling up faster.
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  Faster than they can liquidate assets, yes. I know. And cash flow is struggling, too.
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  Net cash used in operating activities increased. They used S$38,000 this quarter,
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  leaving them with only S$109,000 in cash reserves.
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  Okay, this is where it gets really, really interesting, because we have to circle
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  back to that initial disclaimer of opinion you mentioned. Yes, it all connects.
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  We're reporting on September 2025, yet the integrity of this balance sheet is
• 9:48
  still tainted by unresolved audit issues from the 2022 financial year. Three years ago.
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  This isn't just paperwork, is it? this is what could fundamentally crater the
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  remaining book value of the company if they can't fix it. Absolutely.
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  The company is actively wrestling with two major unresolved items related to asset valuations.
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  First, they have to deal with the impairment of website development costs. What's the story there?
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  Specifically, there was a S-403,000 loss recorded back in 2022.
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  It was for a planned Korea project that was abandoned. Okay.
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  Now, the company is still endeavoring to provide sufficient evidence to auditors
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  to support the carrying value of the remaining website development costs if
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  they fail. They face more write-downs. Exactly.
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  And the second issue relates to internal financing, right? Correct.
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  The impairment assessment of a loan to a subsidiary and amounts due from subsidiaries.
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  These are internal debts. And the auditors are questioning them.
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  Management still needs to provide the auditors with appropriate audit evidence
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  to support their assumptions for those impairment assessments.
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  If the auditors decide, those internal loans aren't recoverable.
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  It's another major balance sheet write-down.
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  And given that their net assets are already down to just $73,000,
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  a major write-down could easily wipe out their entire equity position.
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  So just to sum it up, management is fighting for survival on three fronts.
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  They're battling a massive revenue collapse. They're trying to manage cash flow
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  with temporary cost cuts.
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  And at the same time. Simultaneously trying to convince auditors that historical
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  asset valuations are actually sound. It's an incredible amount of pressure.
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  So given this deeply challenging backdrop, what does management say about the
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  next 12 months? What is their path ahead?
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  Well, the commentary really highlights just how stuck they are in their existing
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  markets. Let's look at the outlook for each business segment. Okay.
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  For distribution, while they acknowledge Singapore's strong logistics sector,
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  they face, and I'm quoting, material challenges.
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  Because a major customer has scaled down operations in Singapore since 2021.
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  That foundational business is just gone. So their strategy is just buy new customers.
• 11:54
  It is. They're focused on the high-risk, expensive strategy of finding new domestic
• 11:59
  and overseas customers to replace that lost volume.
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  And the luxury goods segment, the watch trading, I mean, they went to nil revenue this quarter.
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  The outlook is bleak, according to their own words.
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  They cite weak consumer sentiment, uncertainties in Hong Kong tourism,
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  and growing competition as global luxury brands shift focus towards mainland China.
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  So what's the strategy there? They recognize they're in a highly adverse market,
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  and their strategy is simply to differentiate and expand operations to other geographical areas.
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  That sounds like hopeful boilerplate when you've just recorded zero revenue.
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  It does. And finally, the loan financing segment is similarly crowded.
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  The market is facing increased competition from the growth of the credit market
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  and the rise of virtual banks in Hong Kong.
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  And the plan is... Again, the focus is placed entirely on exploring new customers
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  in Hong Kong, a very, very competitive space.
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  It sounds like a survival strategy built on immediate painful cuts and just
• 12:55
  the hope of expansion into markets that are already shrinking or getting more competitive.
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  There's no underlying market strength they seem to possess right now.
• 13:03
  And of course, no dividend was declared or recommended as the company is deep
• 13:07
  in a loss making position. And surprisingly.
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  So that brings us to the summary of this deep dive for you.
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  Incredible Holdings LTD is, I think it's fair to say, in a highly precarious position.
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  They showed a massive near-total revenue decline of 95% across all segments,
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  driven by unforgiving competition and market contraction.
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  And that top-line failure was masked. It was, masked by aggressive but temporary
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  cost-cutting, most notably that $70,000 swing created by the interest-free loan period.
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  And if we look at the bigger picture, this is a company fighting for structural
• 13:45
  survival in all three core segments while also trying to execute those temporary cost efficiencies.
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  And the critical factor is that they're attempting all of this while dealing
• 13:54
  with these serious, complex, unresolved audit issues.
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  Issues that relate to core balance sheet items that date back three years and
• 14:01
  that could force massive write downs if they cannot provide the evidence to their auditors.
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  This all raises a really important question. And that leads us to our final
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  provocative thought for you to consider.
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  Incredible Holdings is relying heavily on maintaining these razor-thin cost
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  controls and desperately trying to find new customers in these fiercely competitive
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  markets. A very difficult position.
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  So, given that a significant component of their secured borrowings,
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  specifically that HKD 7.6 million component,
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  is collateralized by two properties, how long can they sustain these high-stakes,
• 14:34
  largely artificial cost-saving efforts before external market pressures and
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  their dramatically worsening negative working capital position force them to
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  make critical, perhaps necessary,
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  asset-related decisions regarding those underlying properties.
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  That is the real challenge I had.