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MSM International's Profit Jumps 264% In Half-Year 2026 · Investor Exchange

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  Time for another Investor Exchange Podcast. Here are your hosts, Matt and Sally.
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  Welcome back to the Deep Dive. Today, we're jumping into the latest numbers
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  from MSM International Limited.
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  We're looking at their condensed interim financials for the half year ending
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  September 30, 2025. That's HY2026.
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  And we'll be comparing that against, you know, the same period last year, HY 2025.
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  Our goal here really is to get beyond just the raw numbers. We want to figure
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  out why things look the way they do, what's driving their performance,
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  and what the outlook might be. We're looking for the real story in the data.
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  And honestly, the place to start is the big headline.
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  Because MSM, while they posted some really, really strong profit growth,
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  it's quite dramatic, actually.
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  Especially when you consider they're saying the market is, you know,
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  challenging and competitive.
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  Right. Let's get into those top line figures then. HY-2026 versus HY-2025. What are we seeing?
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  Well, first off, revenue. That saw a pretty solid jump, 28.8%.
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  It climbed from about RM-39.6 million up to nearly RM-51 million.
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  Okay. RM-50.949 million to be exact. So a good increase in activity.
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  Definitely. But the profit numbers, that's where it really pocks.
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  Profit before tax, PBT, it exploded. We're talking a 227.6% increase. Wow.
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  From what to what? From RM666,000 in HY2025, way up to almost RM2.2 million in HY2026.
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  That's huge leverage on the increased sales. And net profit.
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  Similar story. Even stronger, actually. Net profit surged 264.2 percent.
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  Went from just under half a million ring at RM492,000 up to almost RM1.8 million.
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  You really don't see growth rates like that very often. Something must have
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  clicked operationally. Absolutely.
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  And that flows right through to the shareholders, of course.
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  Look at earnings per share, the EPS.
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  It rocketed from 1.86 Malaysian cent up to 6.21 cent. Okay, 1.86 cent to 6.21 cent.
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  But you mentioned, or rather the report mentions, that 1.86 number is restated.
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  Why the restatement? Ah, good catch. Yeah, that's crucial. It's because of a
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  share consolidation they did.
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  On July 16th, 2025, they consolidated shares on a four-into-one basis.
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  So if they didn't restate that prior year EPS, you'd be comparing apples and oranges.
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  The old number would look tiny just because there were four times as many shares.
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  Restating it gives you the true like-for-like growth picture. Got it.
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  That makes the 6.21 cent figure even more impressive then, knowing it's a proper comparison.
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  Okay, so phenomenal profit growth. Let's unpack why. Where did that extra,
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  was it RM 11.4 million in revenue come from?
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  Which parts of the business fired on all cylinders?
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  Yeah, you can really pinpoint the main engine here. It was their OEM contract
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  manufacturing segment.
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  That division was responsible for the lion's share, about RM 8.3 million of that revenue increase.
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  RM 8.3 million just from OEM. What happened there? New contracts,
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  market recovery. It looks like both, actually.
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  They specifically mentioned adding a new customer in the energy sector.
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  That single win brought in RM5.2 million. Wow. Okay.
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  And then on top of that, they noted seeing, quote, early signs of recovery in
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  the semiconductor industry, which is, you know, a big cyclical driver for their
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  OEM work. That's interesting.
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  Landing a big energy client helps smooth out that semiconductor cycle dependence a bit.
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  Smart move. What about the other segments? The clean room and laboratory segment also did well.
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  Revenue there was up by RM 2.5 million.
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  And what's driving that? Clean rooms for hospitals, labs?
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  Exactly. They put it down to general expansion and upgrades by hospitals.
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  Basically, more demand for health care services is leading hospitals to improve
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  their facilities, like operating theaters, specialized labs,
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  that sort of thing. It's a solid underlying trend.
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  Okay. And the smallest bit? The kitchen appliances and F&B services.
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  That saw just a modest increase, about RM 4.6 million.
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  So clearly OEM and Cleanroom were the big stories this half.
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  Makes sense. And geographically. Still mostly Malaysia.
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  Overwhelmingly, yes. Malaysia is still 94.6% of their revenue.
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  But interestingly, Singapore's contribution grew quite a bit.
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  It went from only 1.4% of revenue last year to 4.4% this year.
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  So maybe some successful cross-border expansion happening there,
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  even if it's small overall. Seems like it. A positive sign for their regional strategy.
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  Okay, so we've got this picture. Strong revenue growth, massive profit jump,
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  driven by OEM and cleanroom wins. But now the twist.
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  You mentioned the gross profit margin actually went down from 26.7% to 25.0%.
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  How does that happen with such great profit numbers?
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  Yeah, that's the nuance, isn't it? It seems counterintuitive at first glance,
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  but they spell it out pretty clearly in the report. What do they say?
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  They state the decrease was because, and I'm quoting here, major projects secured
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  under the cleanroom and laboratory segment in HY2026 has contributed lower profit margin.
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  Ah, so they basically bought some revenue. they took on big cleanroom jobs,
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  maybe needed the volume, but had to accept a lower margin to win them.
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  That's exactly how it reads. It's a strategic choice.
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  You land, say, RM 2.5 million in new cleanroom work, which looks great on the
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  top line and helps overall profit volume, but the rate of profit on those specific
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  jobs is lower than their average.
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  So the sheer volume of profit from the OEM side and maybe even the volume from
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  cleanrooms, despite lower margins, overwhelmed the margin percentage dip.
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  Precisely. The 227% PBT growth proves the overall strategy worked for the bottom
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  line in this period, but it does raise a question about whether this is a temporary
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  tactic or a longer-term shift in the cleanroom business. Something to watch, definitely.
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  Okay, let's quickly touch on expenses. Cost of sales went up,
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  expected with higher revenue.
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  What about admin costs, up 8.3%? Any specifics there? Yeah, they broke that
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  down. It was mainly two things.
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  Higher staff salaries, about RM 0.3 million more, so investing in people.
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  Okay. And also higher professional fees, another RM 0.3 million,
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  which they linked primarily to costs around the EGM, the Extraordinary General
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  Meeting, probably related to that share consolidation.
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  Right. Those corporate actions always come with legal and advisory fees.
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  But on the flip side, finance expenses actually decreased, down 12%.
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  Correct. A reduction of about RM 0.2 million. They attributed that specifically
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  to paying lower interest on their term loans and bills payable.
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  Which suggests they're managing their debt well.
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  It does. And that leads us nicely into the balance sheet position. Let's go there.
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  Strong sales usually impact working capital.
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  Trade receivables, for example, jumped by RM7.4 million. That's quite a bit.
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  It is substantial. Their explanation is straightforward.
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  Higher sales towards the end of the second quarter, Q2HY2026,
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  which just weren't due for payment yet by September 30th.
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  So a timing thing, mostly. Or maybe looser payment terms to win those big deals.
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  Could be a bit of both. It naturally happens with rising sales,
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  especially late in the quarter. But a jump that big might also hint at slightly
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  longer payment cycles for some of these new, larger contracts,
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  like maybe that energy client.
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  It's something to keep an eye on for cash flow, but seems okay for now.
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  And inventories were up slightly, too, by RM 1.3 million.
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  Yes, and they said that was deliberate. They were building up inventories specifically
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  for customer deliveries planned for Q3, so stocking up for expected orders.
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  And you see other signs of prepping for future business, too,
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  right, in other current assets.
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  Yeah, exactly. That category increased partly because of deposits paid for new
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  machinery, about RM 0.3 million, and a pretty significant RM 1.5 million increase
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  in prepayments to suppliers.
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  So locking in materials, reserving capacity. Looks like it.
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  These are all signals that management is anticipating continued demand and investing
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  ahead of it. Okay. And on the other side of the balance sheet, the liabilities.
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  Yeah. You mentioned the lower finance costs, suggesting debt reduction.
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  Did the total borrowings actually go down?
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  They did. Total borrowings decreased by about RM3.1 million overall.
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  That came from reducing both bills payable and their bank loans.
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  So they're expanding the top line, investing in machinery and inventory,
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  and paying down debt simultaneously. That's quite strong financial management.
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  It really is. It points to good operational cash generation.
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  And the cash flow statement backs that up.
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  Net cash from operating activities was positive RM 2.1 million.
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  Slightly up from RM 1.9 million the year before.
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  So the profits are translating into actual cash. Makes sense.
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  And given all this investment and focus on growth, what about dividends?
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  Did they declare anything for HY 2026? No, nothing declared or recommended.
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  And the reason they gave was pretty explicit. to preserve capital for business growth.
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  Which ties everything together, really. They're reinvesting everything back
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  into the company to fuel this expansion phase. Exactly.
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  Now, looking forward, the director's commentary adds a layer of realism.
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  Despite this fantastic half year, they describe the outlook for the next 12
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  months as, quote, remaining challenging.
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  OK, challenging in what way? What are they worried about? They flag a few things.
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  Intense competitive pressure in their industries, which probably explains why
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  they took those lower margin cleanroom deals, right, to secure the business. Third point.
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  They also mention uncertainties around global and domestic tax rules,
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  which is always a factor, and just the general unpredictable economic climate.
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  So they seem aware that repeating this kind of growth won't be easy.
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  So how are they planning to compete in this challenging environment? What's the strategy?
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  It sounds quite ambitious, actually. They plan to expand the business across
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  all their segments, both in Malaysia and abroad. Oh, organically.
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  Acquisitions. All of the above, it seems. They specifically mention developing
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  new products, making strategic investments, pursuing acquisitions,
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  and even looking at joint ventures.
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  It's a pretty broad-based growth plan. Okay, throwing everything at it.
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  And there's a key event that happened after this reporting period closed,
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  which really underscores their financial maneuvering for the strategy. Well, what's that?
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  On October 15th, just a couple of weeks after the half-year end,
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  they signed agreements to sell off about 4% of their shareholding in another
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  company, Cosmos Technology International Burhad.
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  And did that bring in much cash? It certainly did. The total cash they received
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  was just over RM4 million.
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  RM4 million, 45,980 to be precise. So a significant cash injection right after the period ended.
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  Exactly. And it lands right when they're talking about needing capital for investments,
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  acquisitions and growth.
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  It's a clear move to fund that strategy they outlined, selling a non-core investment
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  to fuel core business expansion.
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  This has been really insightful. So recapping the core story.
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  Absolutely phenomenal profit growth driven by big wins in OEM,
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  especially that new energy customer, and also solid performance in clean rooms
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  thanks to health care demand.
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  Right. But balance against that, we saw the gross margin dip slightly because
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  they deliberately took on some large, lower margin clean room projects, a strategic tradeoff.
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  And they managed their finances really well, paying down debt while investing
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  for the future and then topping up their cash reserves with that post-period
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  asset sale. Which leads us to the final thought, the thing for you,
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  the listener, to really ponder.
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  We know those lower margin cleanroom projects were the main reason the overall
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  GP margin percentage fell.
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  So the question is, was taking on that high volume, lower margin work just a
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  smart short-term tactic to grab market share while hospitals are upgrading?
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  A temporary move? or does it signal something more fundamental?
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  A longer term shift where MSM is becoming more focused on revenue scale,
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  perhaps sacrificing some premium margin, particularly in the clean room segment. Interesting.
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  Yeah. Is it a tactical play or a strategic pivot?
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  Exactly. The answer to that will really shape how we see MSM International's
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  financial model evolving over the.