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Restructuring Is Reshaping ecoWise’s Future After Q2 FY2026 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Okay, let's jump right in. We are doing a deep dive today into a very specific
• 0:12
  and I think very high stakes financial document. We are.
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  This is the unaudited, condensed, interim, consolidated financial statements
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  for EcoWise Holdings Limited.
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  And specifically, we're looking at the results that ended on October 31st, 2025.
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  So that gives us their latest performance, for the second quarter and the first
• 0:32
  half of their 2026 financial year.
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  And, you know, the context here is absolutely crucial for you to understand.
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  EcoWise isn't just publishing this for fun. No. They're under mandatory quarterly
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  reporting requirements.
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  This whole intense level of scrutiny, it was triggered after their auditor,
• 0:49
  Baker Tilly, issued what's called a qualified audit opinion on last year's financials.
• 0:54
  Exactly. And a qualified opinion is, it's basically a public warning from your
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  auditor. It means they couldn't sign off on certain key numbers from the past.
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  Which forces the company into this nonstop reporting cycle.
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  So our mission today is a bit more complex. It's not just reading numbers.
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  It's figuring out if the company's actually stabilizing and if they're strong
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  enough to finally fix those really serious audit issues.
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  And what jumps out at me immediately is this real paradox.
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  There's a tension between their operational success and the bottom line.
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  On one hand, you see great momentum, strong revenue growth, a big spike in gross
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  margins in the last quarter.
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  But then you look at the net result and they're still posting losses from their
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  core continuing operations.
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  So we have to dig into that. Why isn't that growth translating into actual profits?
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  Okay, let's start with the good stuff then, the momentum, because that's where
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  the operational success story is. Absolutely.
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  A top line. For the second quarter of FY2026, group revenue went up by a very
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  solid 12%. Right, hitting almost $9.5 million.
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  And that strong performance helped pull the whole half-year revenue up by 8%. So growth is there.
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  The revenue growth is positive, yeah, but the gross profit margin improvement
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  is where it gets really interesting. This shows management is,
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  you know, making the right tactical moves. How so?
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  In Q2, the gross profit just spiked. It was up 51% year on year.
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  It jumped from about $1.1 million to $1.64 million.
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  To 51%. And because of that, their gross profit margin in that quarter improved
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  dramatically. It went from, what, just under 13% to almost 17.5%.
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  That kind of jump tells you they're either getting more efficient or selling
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  a much better mix of products.
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  Both, probably. Higher margin products, for sure. Okay, so they're selling more,
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  and they're making much better margins on those sales. And this is the big but.
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  Despite that huge 51% jump in gross profit, the group still recorded a loss
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  from continuing operations.
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  $147,000 in the red for the quarter. How does that happen? How can you improve
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  your operational profitability so much and still end up with a loss?
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  This is the core conflict we have to figure out. I mean, the reason the gross
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  profit didn't just flow straight to the bottom line is almost entirely due to overhead.
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  Administrative expenses were
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  a huge pressure point. They went up by 32% in the second quarter alone.
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  32%. What's driving that? It was mainly manpower costs. They're spending nearly
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  half a million dollars more on staff.
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  $456,000 more just in Q2. They are shelling out a lot of cash to keep the lights
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  on and the talent in place.
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  It sounds like they're having to spend big just to stabilize the ship.
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  That's an alarming jump.
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  Was there anything on the other side of the ledger? Any cost savings to soften that blow?
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  Absolutely. And this is a really crucial financial win for them.
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  Their finance costs, their debt payments, they dropped sharply.
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  How bad? Down 42% in the second quarter and 43% for the half year.
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  It's huge. And that's a direct result of management action. Exactly.
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  They've been actively reducing their interest-bearing debt. They settled some
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  borrowings early after selling off some assets like properties in Malaysia that
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  were used as collateral.
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  So while operational overhead shot up, their debt costs went way down.
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  And that saving is probably the only reason that quarterly loss wasn't a lot
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  worse. So we've got this tension.
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  Rising sales and margins, which is great, but then you have rising admin costs
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  being offset by some really serious debt reduction. A very dynamic picture.
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  Now, let's drill down into where that operational success, that impressive 51%
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  gross margin jump is actually coming from.
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  Which parts of the business are firing on all cylinders?
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  Well, we can see it pretty clearly. The resource recovery segment was the main engine.
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  It accounted for about $783,000 of that Q2 revenue increase.
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  And what's in that segment? It's driven by two main things.
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  Higher sales of their core product, which is rubber compounds, both local and export.
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  And, this is interesting, increased revenue from food waste tipping fees.
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  Ah, so that shows they're making moves on their strategic green goals. Exactly.
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  And the renewable energy side wasn't just sitting still either.
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  No, the renewable energy segment also grew by about $237,000 in the quarter.
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  Okay, so where did that come from?
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  A mix of things. Higher sales of dried spent grains, some other revenue streams,
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  plus an increased contribution of about $716,000 from their tri-generation plan.
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  So both of their core continuing businesses are delivering growth. Clearly.
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  Delivering top-line growth and, in Q2 at least, margin improvements.
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  Which brings us back to that margin signal, though. Because while Q2 looked
• 5:28
  amazing at almost 17.5% GPM, the overall half-year GPM actually fell slightly.
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  Yeah, it dropped from about 17% to 16.5%. Which tells you mathematically that
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  the first quarter this year must have had much, much lower margins dragging that average down.
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  It suggests volatility, which is, you know, a bit of a warning sign.
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  And that volatility is probably tied to some of the restructuring they're doing.
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  I think so. And you can see a fascinating sign of management actively cutting
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  away the dead weight. How so?
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  We see a big S-184,000 increase in provisions on the balance sheet.
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  And management is very clear about this. The increase is mainly a provision for redundancy costs.
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  Redundancy, so severance. Exactly.
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  It's from discontinuing certain, and I quote.
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  Loss-making, tire-retreading production lines.
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  Ah, so they're performing triage. They're taking a painful one-time severance
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  hit right now to basically cut off a part of the business that was bleeding cash.
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  Precisely. To ensure the rest of the patient can survive.
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  And this ties directly back to why the bottom line is a loss this year when
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  they technically had a small profit last year.
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  Right, I remember that. For the first half of FY 2025, they had a total profit of S$33,000.
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  But S$181,000 of that came from discontinued operations.
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  The gain on selling those China subsidiaries. Yes, that safety net is gone.
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  In the first half of this year, profit from discontinued ops is zero. It's a clean break.
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  The group now has to stand entirely on its own two feet. Okay,
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  let's shift gears completely to the balance sheet.
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  With the mandatory reporting and the focus on just stabilizing after that audit
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  flag, liquidity has to be everything.
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  They need cash. How does their financial health look?
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  The liquidity picture is, well, it's stabilizing and even improving,
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  which is really encouraging.
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  Their cash and cash equivalents increased by almost $1.5 million in the first
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  half. They're now sitting on S8.76 million dollars.
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  That's a decent buffer. It is. And importantly, their net current assets improved
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  to S-16.37 million dollars.
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  That positive working capital is what supports the critical going concern assumption.
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  Meaning there's confidence they can pay their bills for the foreseeable future.
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  Right. Plus, they're managing that working capital better.
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  Their receivables are down by almost half a million dollars because they're
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  collecting cash from customers faster.
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  And what about their operational cash flow? Are they funding themselves through
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  sales or are they just borrowing? They're generating cash.
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  Net cash flows from their core operating activities were positive, $1.83 million.
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  A little down from last year, but still positive. In debt. Overall,
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  loans and borrowings only went up slightly, by about S-210,000.
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  And that was mainly from drawing on bankers' acceptance facilities.
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  Which isn't distressed borrowing. That's short-term financing to buy raw materials.
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  Exactly. It actually suggests they're ramping up operational activity.
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  So that paints a picture of improving stability. But.
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  We can't forget the elephant in the room. The audit red flags.
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  The two issues that caused all this mandatory reporting in the first place.
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  The qualified opinion from Baker Tilly.
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  Are these things resolved yet? No, they're still hanging over the company.
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  The first issue was a limitation of scope. It was related to transactions with
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  those disposed China subsidiaries.
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  Meaning the auditors couldn't get enough evidence. Right. They couldn't get
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  sufficient evidence about the financial impacts of those deals right up to the
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  disposal date. So they couldn't fully vouch for the numbers.
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  That past messiness still clouds things.
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  And the second flag was a valuation issue, right? An investment they made. That's right.
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  A valuation issue with a financial asset they hold.
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  Specifically, their investment in something called CULCEC. It's on the books
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  for S1.11 million dollars. And the problem is?
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  The auditor couldn't satisfy themselves that the opening balance of this asset,
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  dating back to May 2023, didn't contain misstatements.
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  Again, the company discloses the risk, but the underlying issue isn't resolved.
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  So there's a serious question mark hanging over that S1.1 million dollar asset.
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  A very big one. Okay, shifting to the future now.
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  Management's overall sentiment, they describe it as cautiously optimistic.
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  They say they need to pivot from crisis management to incremental operational
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  and innovative improvements.
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  But looking ahead, what is the single biggest, most concrete threat they're
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  facing in the next few months?
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  The biggest shadow hanging over this whole company, the one operational threat
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  that could completely derail the recovery we've been talking about,
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  is the relocation risk of their core assets.
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  Their biomass power plant and their resource recovery facilities,
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  they're at a place called Sunye Kadut, and they are operating on temporary land
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  leases. Which is Spire when?
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  Very, very soon. March 15th, 2026 and April 10th, 2026.
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  That is practically tomorrow in coordinate planning terms. We're talking about
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  their main revenue drivers just losing their physical homes in a few months.
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  That sounds existential.
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  It is existential. Management says they're actively seeking alternative locations,
• 10:27
  working with JTC and other agencies.
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  But if they fail to execute this relocation on time, it would be devastating.
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  The strong segment growth we just praised would just vanish.
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  Overnight. You can't operate if you don't have a place to operate from.
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  So beyond just navigating that massive hurdle, where are they strategically looking to grow?
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  Their strategy is very much rooted in sustainability and innovation.
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  First, stabilize the bread and butter operations in Singapore and Malaysia.
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  Second, lean hard into the green economy. Like the food waste we mentioned earlier.
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  Exactly. They are actively exploring growth in food waste recovery and waste-to-energy
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  initiatives, which aligns perfectly with Singapore's net zero carbon goals.
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  This is where their capital is targeted. And speaking of capital,
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  how much do they have for that expansion? They did that placement-come-warrants issue. Correct.
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  The net proceeds were about $3.06 million.
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  Crucially, S2.94 million dollars of that is still unutilized sitting in the
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  bank. And it's earmarked. Yes.
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  About 1.6 million dollars for working capital and it's 1.3 million dollars specifically
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  for capital expenditures.
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  That includes new machinery for that new food waste recovery business.
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  So the cash is there. They also mentioned collaborations in digitalization and ISEA. Right.
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  Instrumentation, computerization, and automation.
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  That's them acknowledging that you can't scale a modern environmental business
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  without technology. Exactly. That's the third pillar of the strategy. Yeah.
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  Innovate to future-proof their processes. But here's the kicker.
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  All of these strategic growth plans, the food waste, the tech,
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  they are all 100% contingent on successfully navigating that Sungai Kadut relocation.
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  You can't modernize a facility if you don't have a facility.
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  You got it. So what does this all boil down to for you, the listener,
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  who's tracking this company's attempt to stabilize?
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  Well, EcoWise is showing clear, verifiable evidence that its core business is
• 12:24
  structurally getting better. That Q2 gross profit margin jump,
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  the big drop in finance costs, those are concrete wins.
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  They signal that the cost cutting and debt reduction is working.
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  They're pointed in the right direction. They are.
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  However, that qualified audit opinion still puts them under a microscope.
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  And there is absolutely massive execution risk tied to those property lease
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  deadlines in March and April 2026.
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  They're fighting a war on two fronts. They are. Cleaning up the past while trying
• 12:52
  to secure the ground for the future. So the company is building a strong war chest.
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  They're increasing their cash. They're improving core performance.
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  They're shedding bad debt.
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  But the successful negotiation and execution of that Soongae Kadut relocation,
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  that is the single biggest factor for their near-term future.
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  It's a binary event. It outweighs any positive revenue growth in the short term.
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  It's a race against the calendar. It really is. And this brings up a final thought for you to consider.
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  If their resource recovery and renewable energy segments are performing this
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  strongly and their cash position is getting more robust, how much financial
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  capacity, how much extra buffer do they truly have to handle an expensive or,
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  even worse, a delayed relocation?
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  Especially when the shadow of that qualified audit opinion means they have zero
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  room for error with regulators.
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  Their financial health is improving. But the operational deadlines are non-negotiable.
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  That is the critical risk to watch in the next four months.