Higher Impairment Allowance Surge In Financing Cost Impact Elk Desa S Fy3 2025 Net Earnings

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ELK-DESA Resources Bhd, a non-bank lender focused in the used-car segment, has posted a 11% dip in its net profit for its FY3/2025 ended March 31, 2025 to RM32.65 mil (FY3/2024: RM36.66 mil) attributed primarily to higher impairment allowance and increased finance costs.
However, the group’s revenue during the period under review rose 17% to RM196.68 mil (FY3/2024: RM167.78 mil).
Higher impairment allowances in the hire purchase segment also took a toll on ELK-Desa’s net profit which declined almost 24% to RM7.41 mil (4Q FY3/2025: RM9.71 mil) for the final 4Q FY3/2025 ended March 31, 2025.
Nevertheless, the group’s topline improved 14% to RM53.02 mil (4Q FY3/2025: RM46.63 mil) mainly driven by higher contributions from both its hire purchase and furniture segments.
On a positive note, ELK-Desa’s hire purchase receivables grew by 12% to RM716.43 mil as of end-March 2025 (March 31, 2024: RM641.75 mil) in tandem with the group’s strategy to expand its core hire purchase portfolio.
Revenue from this segment also risen by 13% to RM128.04 mil (March 31, 2024: RM113.23 mil) although its pre-tax profit dwindled 14% to RM39.39 mil (March 31, 2024: RM46.05 mil) mainly due to a 67% increase in impairment allowance and a higher credit loss charge of 6.34% from 4.12% previously.
The group’s finance costs further rose 34% to RM16.26 mil from RM12.13 mil in line with the increase in borrowings to support hire purchase receivables. Gearing remained at a manageable level of 0.76 times compared to 0.62 times a year ago.

Better performance from furniture segment
Nevertheless, ELK-Desa’s furniture segment delivered a strong performance in its FY3/2025 with revenue surging 26% to RM68.64 mil (FY3/2024: RM54.55 mil) driven by higher domestic furniture sales, particularly in Sabah and Sarawak.
Gross profit margin improved slightly to 35% from 34% while pre-tax profit rose to RM4.33 mil (FY3/2024: RM2.99 mil).
The board has declared a second single tier interim dividend of 2.50 sen/share which will be paid on June 26.
In addition to the first single tier interim dividend of 2 sen/share paid on Dec 18 last year, the group’s dividend payout for the financial year ended March 31, 2025 would amount to 4.5 sen/share (FY3/2024: 5 sen).
“ELK-Desa’s performance for FYE2025 was lower than expectations despite a healthy year-on-year growth of its hire purchase receivables,” commented ELK-Desa’s executive director Teoh Seng Hee.
“Nonetheless, we acknowledge emerging pressures in collections and recovery activities, particularly due to uncertainties stemming from subsidy rationalisation and rising living costs.”
Added Teoh who is also the group’s chief financial officer (CFO): “Looking ahead to FY3/2026, ELK-Desa remains committed to sustainable growth, focusing on expanding our hire purchase portfolio within our niche and underserved market segment.
“We also aim to optimise yields from our receivables and improve operational efficiency, targeting a return on equity (ROE) of over 8% in the medium term. Recognising the potential rise in credit risk and collection challenges, we will adopt a proactive and rigorous approach to credit management.”
At 3.12pm, ELK-Desa was down 1 sen or 0.87% to RM1.14 with 145,300 shares traded thus valuing the company at RM519 mil. –  Focus Malaysia

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