Latest / Investor Exchange / What Caused A-Smart Holdings Print Business To Plummet In Full Year 2025

Transcript

What Caused A-Smart Holdings Print Business To Plummet In Full Year 2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome back to the Deep Dive. We're here again to wade through a load of corporate
• 0:12
  data, break it down, and really figure out what matters for you, the learner.
• 0:16
  Our focus today, a pretty intensive look at the unaudited full-year results
• 0:20
  for A-Smart Holdings LTD for the year ending July 31, 2025. That's their FY 2025.
• 0:26
  And this report, well, it sends them a really stark contrast.
• 0:29
  You've got pages detailing past operational struggles and ongoing losses right
• 0:34
  next to this incredibly ambitious and, frankly, highly leveraged plan for future growth.
• 0:38
  So we need to cut through all these tables and figure out two main things.
• 0:41
  Just how bad is the current financial performance, the cash burn,
• 0:44
  and what are the huge, perhaps existential bets the companies make?
• 0:48
  Okay, let's try to unpack this. It looks like a dramatic strategic pivot.
• 0:51
  Yeah, that's a good way to put it. The immediate headline, if you just glance
• 0:54
  at the numbers, is pretty stark.
• 0:56
  The financial picture shows a loss that's getting deeper.
• 0:59
  But, you know, you can't just read these results as a straightforward failure.
• 1:03
  This report really tells the story of a huge and expensive pivot.
• 1:07
  They're funneling almost all their energy and capital away from these legacy
• 1:11
  businesses that are struggling. The print and media, the smart tech stuff. Exactly.
• 1:14
  And directing it towards massive property development. And it's almost entirely
• 1:19
  focused on, well, what you might call a frontier market, Temerlest.
• 1:22
  So the losses we're seeing, they are in large part the kind of planned cost
• 1:26
  of making that big transition happen. Okay, let's get into the hard numbers
• 1:30
  and the facts on the ground for FY 2025.
• 1:33
  Top-line revenue came in at $7.027 million.
• 1:37
  Now, that's actually only a modest dip, right? About 5.7% down from the $7.451
• 1:43
  million they did the year before in FY 2024. That's right. And that's the key thing here.
• 1:48
  The revenue drop itself isn't really the crisis point.
• 1:51
  The crisis, or maybe the challenge, is the cost structure sitting underneath that revenue.
• 1:55
  Because despite that relatively small dip in sales, the net loss for the full
• 2:00
  year widens significantly. We're talking S1.277 million dollars for FY 2025.
• 2:06
  That's 33.2% worse than the S959,000 dollar loss they posted in FY 2024. Wow.
• 2:14
  Hang on. A loss widening by a third, 33.2% when revenue only slipped about 5%.
• 2:20
  That sounds like either costs are spiraling or like you said,
• 2:23
  they're deliberately burning cash fast to reposition.
• 2:26
  Which is it? It really seems to be the latter. I mean, the cost of this big
• 2:29
  pivot seems to be driving that loss acceleration.
• 2:32
  And you see it get much more intense in the second half of the year.
• 2:34
  If you isolate just the last six months to age 2025, the net loss was $797,000.
• 2:41
  Now compare that to the $181,000 loss in the second half of FY 2024. That's a jump of 340.3%.
• 2:48
  340%. A 340.3% increase in the loss in just six months? That's not a slow lead.
• 2:53
  That's like flooring the accelerator on cash burn specifically to fund the construction side.
• 2:57
  And that kind of operational pressure,
• 2:59
  that magnitude, it's going to hit shareholder value pretty quickly.
• 3:02
  Oh, absolutely. And it does. If you look at the balance sheet impacts,
• 3:06
  the net asset value, the NAV, per ordinary share for the group, it decreased.
• 3:10
  Dropped from 10.35 cents in FY 2024 down to 9.62 cents in FY 2025.
• 3:17
  Right. The NAV is basically what's left for shareholders after you cover all
• 3:20
  the debt. Exactly. So when that falls, it's a clear sign of,
• 3:24
  well, financial erosion.
• 3:25
  And not surprisingly, the loss per share also increased. It went from minus
• 3:29
  0.42 cents to minus 0.47 cents. So the takeaway here is pretty clear.
• 3:33
  The company's performance didn't
• 3:35
  stabilize. It actually deteriorated quite aggressively in the second half.
• 3:38
  And it seems driven by this strategic investment push. Okay,
• 3:41
  so we know the losses got worse. Now let's dig into the why.
• 3:44
  Beyond just saying strategic pivot, what were the specific cost drivers?
• 3:48
  It feels like a mix struggling old businesses and new rising operational costs.
• 3:52
  Let's tackle the segment issue first.
• 3:54
  That overall revenue decline we mentioned, the 5.7% drop, that was mainly driven
• 3:59
  by the legacy print and media segment.
• 4:02
  Its revenue in the second half alone fell 21.3%. And the report says that's
• 4:07
  because they organized fewer media events compared to the previous year.
• 4:10
  So yeah, that core business line, it's definitely facing some serious headwinds.
• 4:14
  But it wasn't all bad news on the revenue side, which kind of complicates things a bit.
• 4:18
  The smart technology segment, their revenue actually grew in the second half, 2H2025.
• 4:24
  Up by 66.7%. That's true. So that suggests there are pockets of maybe future potential there.
• 4:30
  And overall, other income increased too by 7.1% for the full year.
• 4:34
  Mostly higher government grants and some miscellaneous income.
• 4:38
  Right. So yeah, a mixed picture on income, but those growth areas just aren't
• 4:41
  big enough yet to offset the main weakness in print and media.
• 4:45
  Which brings us squarely back to the expense side. And that's really the core
• 4:49
  reason for the deeper loss. Two areas really jump out.
• 4:53
  First, staff costs. They went up 11.4% year on year. And the company is quite open about this.
• 4:59
  They attribute the spike to bonus provisions, specifically aimed,
• 5:03
  they say, at retaining key talent and keeping the workforce stable.
• 5:07
  Bonus provisions. Yeah, and here's the critical part. They note this spending
• 5:11
  is happening ahead of anticipated salary freezes in the coming year.
• 5:15
  Hmm. Paying premiums now to avoid people leaving later. that sounds less like
• 5:19
  careful budgeting and maybe more like the company admitting they expect some
• 5:23
  major internal disruption.
• 5:25
  Or maybe they're worried about keeping skilled people as they make this huge shift.
• 5:28
  Is that sort of common when firms pivot so aggressively?
• 5:31
  Well, it's certainly a bit of a red flag. I mean, it suggests management feels
• 5:35
  they need to essentially buy some loyalty and stability before they bring in
• 5:38
  cost-saving measures like salary freezes.
• 5:41
  It perhaps speaks to a level of uncertainty about whether they have the internal
• 5:45
  capacity to handle this massive time or less project without key staff jumping ship.
• 5:49
  Okay, so staff costs are one big driver. What's the second? The second major
• 5:53
  driver was other operating expenses.
• 5:55
  These went up 8.9% for the full year. And within that category,
• 5:59
  you saw some pretty material increases.
• 6:01
  Expected credit losses, that's basically provisioning for bad debts,
• 6:05
  jumped from just $5,000 in FY 2024 to $50,000 in FY 2025.
• 6:11
  Ten times higher. Yeah. And they also took a hit on inventory impairment S$72,000
• 6:16
  this year, plus higher legal, professional, and compliance expenses.
• 6:20
  You know, all the costs that tend to go up with big cross-border corporate moves
• 6:24
  like this property venture.
• 6:26
  I do see one bright spot, though, looking at the cost structure.
• 6:29
  Finance costs. They were actually down quite a bit, 43.3% lower for the year.
• 6:34
  That's right. Primarily due to lower finance lease liabilities.
• 6:37
  It suggests maybe their smaller existing debt burdens are being managed okay.
• 6:42
  Although, as we're about to see, their overall debt profile is changing dramatically.
• 6:46
  And one final point on this section, their 10% stake in.
• 6:50
  Shengxiang, China, Supermarket Co., LTD, that associate company,
• 6:55
  its contribution actually improved.
• 6:57
  It swung back to a small profit of S$13,000 in the second half compared to a
• 7:03
  loss of $38,000 the year before.
• 7:05
  So a small positive there. Yeah, it's small, but it shows those strategic minority
• 7:09
  investments are starting to yield something positive, offsetting a tiny bit
• 7:13
  of the main operating pain.
• 7:15
  Okay, this feels like the turning point in the story. We've covered the existing
• 7:18
  problems, the deepening losses. Now we get into the future, the massive strategic commitment.
• 7:22
  Because those operational costs we just talked about, the staff bonuses,
• 7:25
  the compliance fees, they seem almost like, well, peanuts compared to the capital
• 7:29
  being poured into this property pivot in Timor-Lest.
• 7:32
  This is where it gets really interesting, right? The whole future of A-Smart seems staked on this.
• 7:36
  It really does. And you see this shift starkly on the statement of financial
• 7:39
  position and the cash flow statement.
• 7:40
  Just look at the development properties line item. Land under development in
• 7:44
  Timor-Leste increased by S$4.72 million in just the second half of FY 2025 alone.
• 7:50
  And that entire increase, it's purely down to construction costs piling up for
• 7:55
  the Timor-Marina Square project, or TMS as they call it.
• 7:58
  And this huge capital spend has had an immediate knock-on effect on their short-term stability.
• 8:02
  Look at total trade and other payables. Then you really doubled.
• 8:05
  Doubled. Yeah, shot up from $5.845 million in FY 2024 to a pretty staggering
• 8:11
  S11.039 million dollars in FY 2025.
• 8:15
  And the main reason for that S4.51 million dollar jump, a whopping S4.84 million
• 8:21
  dollar chunk relates directly to construction progress billings for TMS.
• 8:24
  Doubling your payables in one year to over S11 million dollars,
• 8:28
  mainly for one big construction project in a, let's face it,
• 8:31
  new and relatively unproven market like Timor-Less. That sounds incredibly risky.
• 8:35
  How vulnerable does that make them to, say, interest rate changes or supply
• 8:38
  chain issues or even just disputes with contractors? They seem really leveraged here.
• 8:42
  Oh, they are extremely leveraged at this point. That massive increase in payables,
• 8:47
  which are basically bills they owe but haven't paid yet.
• 8:51
  It leads directly to a tightening cash flow situation.
• 8:54
  The group actually recorded a net cash outflow of S1.11 million dollars just
• 8:59
  in the second half of 2025.
• 9:01
  And the cash used in operations, primarily driven by repaying these exact construction costs.
• 9:07
  It's a very, very tight capital cycle they're in. So they're burning cash and racking up bills.
• 9:11
  Right. And the fact that the company explicitly notes it's currently preparing
• 9:15
  for an equity fundraising exercise, you know, asking shareholders for more money.
• 9:19
  To strengthen working capital. Exactly.
• 9:21
  That just underscores the point. They seem to be running out of financial headroom
• 9:25
  and need fresh capital like now to keep managing this huge construction effort.
• 9:29
  If you're using every resource they have and planning to ask shareholders for
• 9:32
  more, what about previous fundraising?
• 9:33
  They did that rights issue back in 2024, raised about $8.6 million.
• 9:38
  How much of that has gone into this pivot already? Good question.
• 9:41
  Out of that S8.577 million dollars raised, they've utilized S2.085 million dollars
• 9:49
  in this past financial year.
• 9:50
  And that capital was strategically deployed for just two things.
• 9:54
  Paying for the land for their other big planned project, Timor City Square,
• 9:58
  and paying off those progress billings for the ongoing Timor Marina Square construction.
• 10:03
  So every spare dollar is feeding the Timor-Less development machine.
• 10:06
  Pretty much sums it up, yeah. OK, let's look forward then, because this is where
• 10:09
  the company's future really hangs in the balance on whether these property bets pay off.
• 10:14
  What are the key trends they're betting on, especially considering the geopolitical context here?
• 10:19
  Well, the entire forward looking strategy is really centered on property development in Timor less.
• 10:24
  That's the main game for the current big project, Timor Marina Square TMS.
• 10:28
  They report construction is progressing well. It's roughly 25 percent complete now.
• 10:32
  Management says the superstructure, the mainframe, is up to the sixth level.
• 10:36
  They mentioned this is a transition floor, and they actually expect the pace
• 10:39
  of building from the seventh floor upwards to accelerate significantly.
• 10:43
  So, ramping up. And the potential value here, if they pull it off,
• 10:48
  is huge, right? It would completely change the company's financial scale.
• 10:50
  What's the estimated gross development value they're projecting?
• 10:53
  Yeah, the numbers are big.
• 10:54
  The estimated gross development value, or GDV, that's the total projected sales
• 10:58
  revenue from the finished project, they're estimating it in a range from U.S.
• 11:03
  $80 million to U.S. $85 million. U.S.
• 11:06
  Dollars. U.S. dollars, which translates roughly to a center at 11 million millions
• 11:11
  to S118 million Singapore dollars.
• 11:14
  This potential value, this massive upside, that's the prize that justifies the
• 11:18
  aggressive cash burn and the leverage we've been talking about.
• 11:21
  But and this is crucial. This value is directly tied to a very specific bet
• 11:25
  on geopolitical timing.
• 11:26
  Oh, OK. Timor-Less is currently scheduled to be officially admitted into ASEAN.
• 11:30
  And the critical date they're banking on is October 26, 2025.
• 11:34
  The company's entire sales strategy seems built around this specific milestone.
• 11:38
  October 26th. That really is the key date then. So how does that tie into their
• 11:42
  sales strategy for TMS? What are they planning?
• 11:44
  Their plan is to actually adjust selling prices upwards immediately after October 26th, 2025.
• 11:50
  They're anticipating that formal ASEAN admission will significantly improve
• 11:54
  the market outlook for property in Delhi and boost investor interest.
• 11:58
  So they're essentially using the pre-October 26th date as a sort of deadline
• 12:04
  for early bird pricing or discounts.
• 12:06
  Banking on the country's economic risk profile dropping once that ASEAN membership
• 12:11
  is locked in. Exactly. It's a timing bet.
• 12:14
  And beyond this first big project, PMS, what's the longer term pipeline look
• 12:19
  like in Timor-Leste? Are they planning more? Oh, definitely.
• 12:22
  Planning has already kicked off for Timor City Square. That one's designed differently,
• 12:25
  aimed more at the middle class workforce in the Dilley CBD.
• 12:28
  They're envisioning low-cost, low-rise apartments, maybe with some retail space included.
• 12:33
  And beyond that specific project, they also state they're actively talking with
• 12:37
  the Timorese government, trying to explore options for new commercial real estate sites.
• 12:41
  So it signals a really deep, long-term commitment to expanding their footprint
• 12:45
  in this particular market.
• 12:46
  Okay, so huge focus on Timor. What about the legacy segments back home?
• 12:51
  What's the plan to sort of stabilize smart technologies and print media while
• 12:55
  all this is going on? Right, they haven't completely abandoned them.
• 12:59
  For smart technologies, they mentioned that revenue growth was held back,
• 13:02
  partly because a Singapore mandate for food waste segregation got postponed.
• 13:07
  Buyers apparently delayed purchases. Ah, regulatory delays hitting them.
• 13:12
  Yeah. So the group says it's responding by trying to enhance its existing systems
• 13:16
  and investing more in R&D,
• 13:18
  trying to introduce new environmentally friendly solutions, hoping maybe to
• 13:22
  get ahead of the curve for the next regulatory push, whenever that comes.
• 13:26
  Makes sense. And print and media.
• 13:28
  For print and media, the strategy seems focused on tackling those cost pressures we saw earlier.
• 13:33
  They're looking at diversifying suppliers and investing in some new machinery.
• 13:37
  The goal is to boost their in-house production capacity and rely less on costly outsourcing.
• 13:43
  They also mentioned specifically focusing more on organizing indoor theater
• 13:46
  performances, perhaps to try and offset the decline they've seen in the outdoor
• 13:50
  event side of the business.
• 13:51
  Okay, trying to find niches. And finally, that Shang Tsiong China Associate
• 13:56
  Company. Yeah, that seems to be ticking along steadily.
• 13:59
  It now has six stores open in Kunming, apparently generating healthy revenue.
• 14:03
  They're sticking to a gradual expansion strategy there.
• 14:06
  It provides, you know, a very small but stable anchor, while the rest of the
• 14:10
  company is essentially swinging for the fences into more or less.
• 14:14
  Right. Okay, so let's try and wrap this up. Sure. So to recap the overall picture
• 14:18
  for you, what we're really seeing is a company in the middle of a very high-stakes transition.
• 14:22
  The current operational losses are substantial and they are deepening.
• 14:26
  That seems partly due to legacy business struggles, but also managing internal
• 14:31
  talent retention through things like bonuses.
• 14:34
  And these losses are being fueled by really aggressive, high leverage investment
• 14:39
  in just one geographically concentrated market team at rest.
• 14:43
  The financial pressures are undeniable. I mean, the doubling of payables,
• 14:46
  the explicit need for more fundraising that confirms things are tight.
• 14:49
  But the potential payoff, the whole rationale, is directly linked to the success
• 14:54
  and, crucially, the precise geopolitical timing of that Timor Marina Square project.