01/09/2025

BIZ & FINANCE MONDAY | SEP 1, 2025

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Affordable housing projects buoy Gagasan Nadi Cergas quarterly results PETALING JAYA: Construction and property group Gagasan Nadi Cergas Bhd is riding a strong wave of growth, posting solid earnings for two consecutive quarters, lifted by affordable housing projects under its property development segment. Net profit came in at RM6.5 million in the second quarter ended June 30, 2025 (Q2’25), turning around from a net loss of RM1.2 million in the corresponding quarter last year (Q2’24), and is 25% more than the net profit of RM5.2 million of the preceding quarter (Q1’25). The conse cutive quarters’ performance resulted in net profit for the six-month period ended June 30, 2025 (H1’25) surging nearly eightfold to RM11.6 million from RM1.5 million in the previous corresponding period (H1’24). The stronger net profit in Q2’25 was underpinned by an 87% jump in revenue to RM112.7 million from RM60.2 million in Q2’24, propelled by the robust property development segment. For H1’25, revenue almost doubled to RM207 million from RM107.4 million last year in tandem with the growing contributions from affordable housing projects. The momen tum was mainly supported by the Idaman Bukit Jelutong project, which was completed last month, and the ongoing Idaman Kwasa Damansara R4-1 project. The property development segment, which contributed 75.8% of group revenue in Q2’25, recorded a 160.1% increase in revenue to RM85.3 million during the quarter under review from RM32.8 million during the corresponding quarter last year. Group managing director Datuk Wan Azman Wan Kamal said: “The stellar financial results in Q2’25, following a solid first quarter, signal sustained momentum as we enter a new phase of accelerated growth, anchored by the strong expansion of our property development segment in affordable housing.” With a target of delivering affordable housing projects worth RM4 billion in gross development value (GDV) over the next eight years, Gagasan Nadi Cergas is well positioned to play a defining role in turning the dream of home ownership into reality for many Malaysians, he said. In addition to Idaman Bukit Jelutong and Idaman Kwasa Damansara R4-1, the company is developing six other Idaman affordable housing projects in part nership with Permodalan Negeri Selangor Bhd. Collectively, these eight projects encompass 15,000 units and carry a total GDV of RM4 billion. Meanwhile, the construction segment remains resilient, supported by an external order book of RM228 million as at June 30, as well as substantial in-house construction works. The concession and facility manage ment segment is poised for significant growth, supported by the proposed RM185 million acquisition of Konsortium PAE Sepakat Sdn Bhd, pending regulatory and shareholder approvals.

Decoding the treatment of hybrid financial instruments

Distinction between debt and equity To distinguish whether a hybrid financial instrument falls within the equity or loan bucket for tax pur poses, it is vital to examine the legal rights and obligations created by the instrument for the issuer and the instrument holder and the facts and circumstances surrounding the instrument to understand the underlying true nature of the instrument.

HYBRID financial instruments are financial securities that combine the features of both debt and equity. These instruments are widely used across corporate finance, investment structuring, tax planning and regulatory capital (banking and insurance) to optimise the financial performance, reduce risks and increase flexibility to the issuer and the instrument holder. The tax treatment of hybrid

the coupon payments are gua ranteed, and thereafter upon con version, such payments are no longer assured and begin to adopt features of an equity. In such instances, to determine whether the instrument is a loan or equity, it is important to scrutinise the legal documents which will state the rights and obligations of the issuer and the holder. It is possible that before the conversion, the holder of the instrument may not be entitled to vote or participate in the management, and may be given priority on any distribution in the event of any liquidation. The same instrument upon conversion will have more features akin to equity.

transaction was done on an arm’s length basis. The most important feature of an equity instrument would be the absence of any guarantee of the repayment of principal or distri bution of profits, and any such repayments will be dependent on the profitability of the company. Equity holders will have the right to vote. In the event of liquidation, the equity instrument will have a lower level of priority compared to the creditors or any other debt instru ments. The equity holder will face a higher risk compared to the holder of debt. Equity holders do not have any guarantee of fixed returns or distributions, and there will be no fixed repayment dates. Equity holders can participate in the management of the company. The equity holder invests in an instrument with the expectation of participation of profits and long term capital appreciation of the investment. Convertible instruments such as convertible redeemable preference shares which can be converted into equity are instruments that may contain both equity and loan features where in the initial years, growth, underscoring TM’s strong fundamentals, core operations and cost discipline in delivering profit despite revenue pressures. The group continues to demon strate its focus towards value creation and disciplined capital management, as reflected in the improvement of return on invested capital to 12.81% from 12.34% a year ago. TM maintains a positive outlook for the year and is confident in

Transactions between third parties would be conducted under a caveat emptor (buyer beware) principle. In most cases, the under lying purpose of

financial instruments is subjective. The decision on whether the instru ment is debt or equity will be based on the features of the instru ment. The underlying principle here is

whether the payment of distribution of profits will be tax deductible. If it is debt, it is tax deductible, but if it is equity, it is not tax deductible. The common examples of hybrid instruments in the market place are redeemable preference shares, convertible bonds and loan notes, perpetual bonds, mezzanine financing, profit participating loans, warrants and hybrid sukuk. In such cases, the tax treatment can change as the nature of the instrument changes its character. Initially it can be treated as a debt, and thereafter once the instrument is converted, it can be treated as equity. This article is contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai (www.thannees.com). TM posts higher Q2 net profit, declares 12.5 sen dividend issuing these instru ments would be evident from the legal document unless there is collusion between the parties. However, in related party transactions, greater scrutiny would be required to determine the substance of the transaction as the issuer and the holder are not deemed to be undertaken on an arm’s length basis. The burden of proof lies with the taxpayer to show that the

PETALING JAYA: Telekom Malaysia Bhd’s (TM) financial results for the second quarter ended June 30, 2025 (Q2’25) reflected the group’s resi lience in a competitive market and continued progress on its strategic priorities. During the quarter, profit after tax and non-controlling interests (Patami) rose 1.7% compared to the corresponding quarter last year to RM403 million, while earnings

before interest and tax (Ebit) grew 4.5% to RM640 million. For the first half of 2025 (H1’25), revenue stood at RM5.62 billion versus RM5.74 billion a year earlier due to an intensely competitive market. Meanwhile, the group regis tered Ebit of RM1.19 billion, down 5.8% compared to the corres ponding period last year, mainly due to foreign exchange losses. Adjusting for these, underlying Ebit recorded

meeting its 2025 guidance. The board has declared an interim dividend of 12.5 sen per share, amounting to RM479.7 million for the financial year 2025. “Digital infrastructure and AI are no longer just a vision for TM. It’s becoming a reality, from the esta blishment of data centres, sovereign cloud and GPU-as-a-Service to various enterprise applications that continuously help businesses to unlock digital capabilities and growth,” said TM Group CEO Amar Huzaimi Md Deris. “While the market environment remains challenging, our results demonstrated resilience and ability to execute our strategic priorities. We are building positive momentum through stronger convergence growth, improved cost structures and disciplined capital management. “With our investments in future ready infrastructure, we are ad vancing towards our aspiration to become a digital powerhouse by 2030, while delivering sustainable value for our stakeholders,” he added.

Amar Huzaimi (left) and group chief financial officer Ahmad Fairus Rahim at TM’s results briefing on Friday.

Malaysia’s cocoa export earnings top RM9 billion in first-half 2025 TELUK INTAN: Malaysia’s cocoa export earnings reached RM9.69 billion in the first half of this year (H1’25), driven by strong overseas demand and encouraging product prices, said Malaysian Cocoa Board (MCB) director-general Datuk Dr Ramle Kasin. He said the main importing countries included the United States, Singapore, Japan and Indonesia. “We expect export revenue to reach up to RM15 billion by the end of this year,” he told reporters after officiating the closing of the third series of the Super Koko Trainee Course Programme for the Peninsular Region here on Saturday. Ramle said nearly 100 participants from the indigenous community in Peninsular Malaysia have so far been involved in cocoa cultivation. “Their participation is consistent with their culture and way of life, and they are among the contributors to relatively high cocoa production. MCB also provides various incentives and assistance to the indigenous com munity, such as fertilisers, pesticides and training courses on cocoa cultivation,” he added. Earlier, in his speech, Ramle said

the average price of dry cocoa beans rose 141% to RM24,274 per tonne last year, compared with RM10,073 the previous year. At the same time, he noted that international demand for high quality cocoa continues to grow. – Bernama