Last updated on August 23, 2025
KUALA LUMPUR, Aug 21 – ELK-Desa Resources Bhd reported weaker earnings for the first quarter of its financial year 2026, as higher impairment allowances and finance costs weighed on profitability despite stronger revenue contributions from both its hire purchase and furniture businesses.
The non-bank lender, which focuses on the used-car financing segment, posted a profit before tax of RM8.58 million for the three months ended June 30, 2025, down 22% from RM10.99 million in the same quarter last year.
Group revenue, however, rose 7% to RM49.25 million compared with RM45.88 million previously, supported by growth in its hire purchase and furniture segments.
Hire Purchase Segment
Revenue from the hire purchase division increased 7% to RM32.87 million, underpinned by portfolio expansion. However, impairment allowances climbed 35% to RM13.08 million, while the credit loss charge rose to 1.77% from 1.43% a year earlier. This was largely attributed to slower repayments and higher losses from repossessed vehicle sales. As a result, profit before tax for the segment fell 18% to RM8.20 million.
Hire purchase receivables as at June 30 stood at RM721.07 million, up from RM668.34 million a year ago, reflecting the group’s strategy of moderate portfolio expansion. To support this, bank borrowings increased by 26%, pushing gearing to 0.78 times, compared with 0.63 times previously.
Furniture Segment
The furniture business recorded an 8% increase in revenue to RM16.38 million, boosted by stronger domestic sales. However, higher shipping costs to East Malaysia and rising operating expenses compressed margins, with gross profit margin slipping to 27% from 31%. Profit before tax for the segment dropped to RM0.38 million from RM0.97 million a year earlier.
Outlook
Executive Director and CFO Teoh Seng Hee said the group remains focused on moderately expanding its hire purchase portfolio while staying vigilant on repayment behaviour and asset recovery. He cited subsidy rationalisation, the expanded Sales and Service Tax (SST), and shifting consumer demand—particularly with the entry of Chinese car manufacturers—as factors that could impact used car values and repayment trends.
“In response, we will continue to strengthen our recovery efforts by staying closely engaged with customers and upholding structured recovery procedures,” Teoh said.
Despite near-term challenges, ELK-Desa expressed confidence in its resilience and long-term value creation, adding that it has no immediate plans to raise capital given its solid balance sheet.
