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9R Limited 1H 2026 Profit Vanishes · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. Today, we're cutting through the noise on 9R Limited's latest numbers.
• 0:12
  We're looking at their interim financial statements for the first half of fiscal year 2026.
• 0:17
  And this is a really interesting one. It's a classic case where the headline
• 0:22
  numbers seem to completely contradict each other. Right.
• 0:24
  For anyone new to them, 9R Limited is basically two very different companies in one.
• 0:30
  You've got the consumer side lifestyle retail, so karaoke, food and beverage,
• 0:34
  and their payment app, Red Pay.
• 0:37
  And then you have this other sort of strange arm, supply chain management,
• 0:41
  which is, believe it or not, distributing AI robotics.
• 0:44
  That context is so important because when you look at the big picture for this
• 0:48
  period, you see these two opposing forces.
• 0:50
  Their revenue, the top line, is actually growing pretty nicely.
• 0:53
  It suggests their core market in Malaysia is recovering, which is good news.
• 0:57
  But then you look at the bottom line and they've swung from a profit last year
• 1:01
  to a pretty significant loss this time around. It's the definition of a head scratcher.
• 1:05
  So the question for us and for you listening is what's really going on here.
• 1:09
  Did they suddenly lose control of their costs or is there some kind of,
• 1:13
  you know, accounting quirk at play?
• 1:15
  Exactly. We need to figure out that S1.2 million dollar negative of swing to
• 1:19
  see how healthy the business actually is.
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  So revenue looks promising, but the net income looks awful. Let's unpack this.
• 1:29
  Okay, so let's start with the good news because there is some.
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  For the first six months, Nine R Limited brought in $6.647 million in revenue.
• 1:38
  That's up a solid 12% from the $7.950 million they did in the same period last year.
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  And what's really important is that their gross profit grew right alongside
• 1:46
  it, also up 12% hitting S4.822 million dollars.
• 1:51
  Right. So the key takeaway there is that they're selling more and they're doing
• 1:54
  it without sacrificing their margins on each sale. The core operation is.
• 1:58
  Fundamentally just as efficient. And when you dig into the segments,
• 2:01
  it's crystal clear where that success is coming from. It is all about lifestyle retail.
• 2:05
  All of it. The karaoke and F&B side of the business is driving the bus.
• 2:09
  That's where you see the $6.631 million in external revenue.
• 2:14
  Which makes total sense.
• 2:16
  Tourism is coming back. Consumer sentiment is getting better post-pandemic.
• 2:20
  They're riding that wave. But this also throws a harsh spotlight on the other segment.
• 2:23
  I mean, it's almost embarrassing. The high-tech robotics division.
• 2:27
  Yes. the supply chain management segment delivered a just a negligible 0.01
• 2:35
  seen million dollars in external revenue. Yeah. That's not a business.
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  It's a rounding error. So that diversification attempt, the one they made back
• 2:42
  in 2022, is just not firing at all. Not even close.
• 2:45
  So this brings us back to the central mystery. If the core business is working
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  and the margins are holding steady.
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  How did they go from a profit of S$395,000 last year to a loss of S$842,000 this year?
• 2:58
  That's the million dollar question, or I guess the S$1.2 million negative swing.
• 3:03
  Well, this is where we have to talk about the one-time windfall that made last
• 3:06
  year's numbers look, frankly, a lot better than they actually were. Yeah.
• 3:09
  Okay. You're pointing to that line item with all the jargon,
• 3:12
  the reversal of loss allowance on financial assets and contract assets net.
• 3:17
  That's the one. Can you break that down for us? What does that actually mean in plain English?
• 3:22
  Okay, think of it like this. Imagine you own a small shop and a customer owes you, say, $1,000.
• 3:29
  A year goes by, you assume they're never going to pay, so you write it off as
• 3:32
  a loss in your books. Right. You take the hit. You take the hit.
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  Then a year later, completely out of the blue, that customer shows up and pays you the full amount.
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  That $1,000 isn't new sales. It's just a bonus, an unexpected recovery of old
• 3:46
  money. It's found money. It's found money.
• 3:48
  Yeah. And that's what happened to 9R Limited last year. So how big was this
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  unexpected bonus for them?
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  It was colossal. In the first half of 2025, that reversal added S1.881 million
• 3:59
  dollars to their profit before tax.
• 4:02
  That windfall is the only reason they posted a profit at all.
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  They got back almost S1.9 million dollars they had previously given up on.
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  So last year's profit was basically an illusion.
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  It was artificially inflated by this one-time debt recovery.
• 4:16
  Precisely. Now fast forward to this year, 1H2026, that same reversal. It was only $5,000.
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  A tiny fraction. So the absence of that S1.88 million dollar buffer from last
• 4:29
  year explains almost the entire swing into a loss. It's ironic.
• 4:34
  But this year's loss is actually a more honest picture of their real operational
• 4:39
  health than last year's profit was.
• 4:41
  That crystallizes it perfectly. The comparison was flawed from the start.
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  So now that we've cleared away that technical fog, let's look at the actual
• 4:49
  operational spending. What does this loss tell us about how they're managing
• 4:52
  their day-to-day costs?
• 4:53
  Well, you can see exactly where the money is going, and they're being aggressive.
• 4:56
  Take marketing and distribution expenses.
• 4:58
  I saw that. They more than doubled, right? A 107% jump. A 107% jump.
• 5:02
  From about $116,000 to $240,000.
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  Wait, that's a massive increase. If their margins are already thin,
• 5:08
  isn't that just burning cash to stay relevant?
• 5:11
  Is it even working? Well, that's the multimillion-dollar question, isn't it?
• 5:14
  Management would argue this is strategic necessary spending. Strategic how?
• 5:18
  They've tied it to three things. Pushing for new business opportunities Raising
• 5:23
  the profile of their payment service Red Pay.
• 5:26
  Big celebration for Redbox's 25th anniversary. So they're betting that this
• 5:31
  spending now will pay off in the long run. Exactly.
• 5:34
  They're investing for future growth, but it's hitting their short-term profit
• 5:38
  and loss statement hard right now.
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  It's a risky balancing act. What about the other costs?
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  Administrative expenses were surprisingly stable, which shows good discipline in the back office.
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  But other operating expenses did creep up.
• 5:51
  And that was mainly from depreciation, I see. It came in at over S2 million dollars. Yes.
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  And depreciation is basically the ghost of past investments,
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  right? Right. It's the cost of things you've already bought.
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  And that higher charge is directly linked to money they spent on renovating
• 6:06
  their outlet at the First Avenue Mall in Penang.
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  They put about $590,000 into property, plant, and equipment just in this period.
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  So it's a double-edged sword.
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  They're spending cash now to upgrade their locations, which is good for customers.
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  But that spending immediately hits their bottom line twice.
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  Once when the cash goes out the door and again through higher depreciation,
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  which adds to the net loss.
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  The capital expenditure cycle is really biting them. It is.
• 6:32
  On a small positive note, their other income did double to about S-110,000 dollars.
• 6:39
  That's from things like voucher sales, some RedPay event income.
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  And I saw robot rental income on there. Yes.
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  So even if that supply chain division isn't selling new robots,
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  they're at least squeezing a few dollars out of the old inventory they're stuck
• 6:52
  with. It's something, I guess. It's an attempt.
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  But to put it all together, the strong 12% revenue growth was completely wiped out.
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  Wiped out by that missing S1.88 million dollar windfall and then pushed further
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  down by higher marketing spend and depreciation.
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  That's what created this deep operational loss. Okay, let's follow that money
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  trail to the balance sheet and cash flow.
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  Total assets are down from about S25.7 million dollars to S23.7 million dollars.
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  And the cash flow statement really shows the squeeze they're in.
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  Net cash from their operating activities, it fell off a cliff.
• 7:23
  How bad was it? Last year, they generated S2.11 million dollars from operations.
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  This year, just S1.15 million dollars. They have essentially half the cash coming
• 7:34
  in from their core business.
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  Having your operating cash flow is a serious red flag.
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  What does that mean for them going forward, especially while they're spending
• 7:42
  on these big renovations? It means they have way less room for error, less of a cushion.
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  They're funding these investments from that smaller pool of operating cash and
• 7:52
  their existing reserves.
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  We know they used nearly $600,000 on investing activities. And the final result of all that?
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  They ended the period with a net decrease in cash of S-283,000 dollars.
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  Their cash balance is now down to S$2.58 million.
• 8:07
  So they're feeling the strain. Definitely. But, and this is critical,
• 8:11
  they do still have positive working capital of S$810,000.
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  So that's their immediate safety net. Their short-term assets are still greater
• 8:18
  than their short-term liabilities. That provides some stability.
• 8:21
  For now, yes. But looking ahead, their own commentary shows the road is full
• 8:24
  of challenges. Absolutely.
• 8:26
  They talk about a gradual recovery in retail, but the environment is getting
• 8:30
  more competitive, and costs are rising everywhere. Food and beverage costs, staffing, rent.
• 8:36
  Yeah. Everything is going up. In this industry, that's a huge problem.
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  Which brings us to what might be the biggest storm cloud on the horizon for
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  them, this new government regulation.
• 8:46
  The 10% excise duty increase on alcoholic beverages in Malaysia,
• 8:50
  that's a massive headwind.
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  It takes effect right after this reporting period, November 1st.
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  How big of a deal is this, really? It's a huge deal. Alcohol sales are a material
• 9:00
  part of their F&B revenue. This puts them between a rock and a hard place.
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  Because if they absorb the cost themselves, their already thin margins just get crushed.
• 9:08
  Crushed. But if they pass the 10% hike on to customers, they risk driving people
• 9:13
  away, especially in a price-sensitive market.
• 9:16
  So what's their plan? How are they going to fight this? Well,
• 9:18
  they talk about strategic pricing, bundling, promotions, cost management, the usual stuff. Yeah.
• 9:23
  But the real strategy seems to be diversifying away from these core challenges.
• 9:27
  Which brings us back to RedPay. They actually incorporated it as a separate
• 9:31
  company right after this period ended.
• 9:33
  That feels like a big move. It is. It's a smart pivot into fintech.
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  It gives them a potential new stream of high-margin income that isn't tied to
• 9:41
  the physical karaoke business.
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  It's all about creating synergy.
• 9:45
  Synergy is the word. But what about their other attempt at diversification,
• 9:50
  the supply chain segment that's, well, floundering?
• 9:53
  Right. And here they had to make a really frank admission in the report.
• 9:57
  They basically said their AI robotics products, the ones they acquired back
• 10:01
  in 2022, are, and I'm quoting here.
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  Comparatively less advanced than newer market models.
• 10:08
  Wow. So they're openly admitting they're stuck trying to sell outdated tech.
• 10:12
  Pretty much. They said their focus is just on selling the inventory they already have.
• 10:16
  That segment is not a growth engine. It's a liquidation sale.
• 10:19
  So given that failure, this other initiative, the Greenbox Cube,
• 10:23
  makes a lot more sense. It does. It's a compact karaoke booth.
• 10:27
  It's a product that plays directly to their core strength.
• 10:30
  Entertainment. They're trying to use their distribution knowledge for something
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  they actually understand.
• 10:36
  It feels like a strategy born from necessity. It absolutely is.
• 10:39
  This has been a really revealing deep dive.
• 10:41
  So to summarize quickly, 9R Limited grew revenue by 12%, which is great.
• 10:47
  Market recovery seems real. But that success was completely overshadowed and they swung into a loss.
• 10:53
  A loss that was mostly because last year's numbers were propped up by a huge
• 10:57
  one-time debt recovery, but we also see real operational pressures. Right.
• 11:01
  Heavy spending on marketing and renovations is eating into their cash and profitability.
• 11:05
  So the core tension moving forward is clear. They're facing rising costs and,
• 11:09
  most importantly, that 10 percent alcohol tax.
• 11:13
  And their one diversification arm is, you know, a dud with outdated tech.
• 11:17
  Exactly. So the whole company is now betting heavily on these new ventures,
• 11:21
  the RedPay platform and this Greenbox Cube product to create new, higher margin revenue.
• 11:26
  So here's the final thought for you to consider.
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  Can these new ventures, born out of a desperate need to escape this cost squeeze,
• 11:34
  actually generate enough growth to overcome the dual threat of inflation and
• 11:38
  a huge new tax on their core business? We'll be watching their next.