Tex Cycle Technology (M) Berhad's (KLSE:TEXCYCL) Problems Go Beyond Weak Profit

The subdued market reaction suggests that Tex Cycle Technology (M) Berhad's (KLSE:TEXCYCL) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.
We've discovered 3 warning signs about Tex Cycle Technology (M) Berhad. View them for free.
In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. The ratio shows us how much a company's profit exceeds its FCF.
Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking.
Over the twelve months to March 2025, Tex Cycle Technology (M) Berhad recorded an accrual ratio of 0.21. We can therefore deduce that its free cash flow fell well short of covering its statutory profit. Even though it reported a profit of RM12.1m, a look at free cash flow indicates it actually burnt through RM25m in the last year. We also note that Tex Cycle Technology (M) Berhad's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of RM25m. Unfortunately for shareholders, the company has also been issuing new shares, diluting their share of future earnings.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tex Cycle Technology (M) Berhad.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Tex Cycle Technology (M) Berhad expanded the number of shares on issue by 9.9% over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Tex Cycle Technology (M) Berhad's historical EPS growth by clicking on this link.
As you can see above, Tex Cycle Technology (M) Berhad has been growing its net income over the last few years, with an annualized gain of 131% over three years. Net income was down 40% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 43%. And so, you can see quite clearly that dilution is influencing shareholder earnings.
In the long term, if Tex Cycle Technology (M) Berhad's earnings per share can increase, then the share price should too. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.
As it turns out, Tex Cycle Technology (M) Berhad couldn't match its profit with cashflow and its dilution means that shareholders own less of the company than the did before (unless they bought more shares). For the reasons mentioned above, we think that a perfunctory glance at Tex Cycle Technology (M) Berhad's statutory profits might make it look better than it really is on an underlying level. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for Tex Cycle Technology (M) Berhad (1 is significant!) and we strongly recommend you look at these before investing.
Our examination of Tex Cycle Technology (M) Berhad has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Bloomberg

33 minutes ago

• Bloomberg

How to Invest in Fine Wines: A Step-by-Step Beginner's Guide

Strategies to build a wine portfolio that could make you money and give you something delicious to drink. By Illustrations by Rose Wong In 2012, Domaine Armand Rousseau Chambertin Grand Cru Burgundy, vintage 2010, was released at £5,000 ($6,638) a case. Ten years later it was selling for more than £60,000. Would-be wine investors get stirred up by numbers like these—a 1,100% increase. After all, the number of bottles of a top wine is finite. As people drink them up, ever-increasing scarcity drives their value higher. You just have to have good taste and be patient, right? Like a great cabernet, the reality is more complex. Passionate collectors buy wines they love and plan to drink, yes, but to invest you have to select the right ones at the right price at the right time—if you have access to buy in the first place—and have them maintain their value. To decide when to sell, you need data and a good grasp of the current wine market. Higher interest rates, inflation, consumer confidence and geopolitical events all affect it. Right now, the threat of tariffs has caused US buyers to take a sharp pause. Still, cases of wine are tangible and won't disappear in a market crash—unless you need to drink them to take the edge off. A 2024 study of 50 US wealth managers by UK-based WineCap Ltd., which designs customized portfolios, found that 1 in 3 high-net-worth investors look to fine wine for stability in the face of stock market volatility. The advent of commercial wine auctions in the US in the mid-1990s gave wine lovers a way to buy and sell rare bottles. But it wasn't until 2000 and the introduction of Liv-ex, a sort of global fine wine stock exchange, that investors had a transparent way to track the value of individual brands and vintages. Technology has further transformed the wine investment space, with trends including blockchain tracking for authenticity, fractional investing schemes and digital sales platforms. Liv-ex may be only for merchants, but LiveTrade from London-based Bordeaux Index Fine Wine & Spirits, for example, is open to collectors as long as you store your assets in a UK or European Union in-bond warehouse. Sotheby's auction house even offers an 'instant' 90-bottle investment cellar for $25,000. It's a good time to get in. 'Wine prices go in cycles of rising, falling, going flat, then rising again,' says Justin Gibbs, Liv-ex co-founder and deputy chairman. 'We've been in a down period, and we're closer to the bottom than two years ago.' Tom Gearing, co-founder and chief executive officer of UK-based investment company Cult Wines Inc., says, 'Fine wine prices are approaching a five-year low. Château Haut-Brion 2021 is available at $315 a bottle.' That's about half its release price in 2022. But because the 2024 harvest in France was the smallest in modern times, future supply will be squeezed, pushing prices back up. So what are some industry leaders buying? Matthew O'Connell, CEO of LiveTrade and head of investment at Bordeaux Index, sees the price dip in Burgundies and grower Champagne as a big opportunity. Some almost impossible to obtain grands crus can now be had, many at prices lower than they were two years ago. Rising trading has Anthony Zhang, CEO of Vinovest Inc., 'poised for cautious optimism' in 2025. A reckoning is coming for Bordeaux futures, which used to be a big part of wine investment fund portfolios, Gibbs says. 'Release prices have been so high that if you bought a case of each of the top 50 Bordeaux châteaux when they were released as futures for recent vintages, you would have lost money.' Investment Grade 101 Only a fraction of wines qualify as truly worth investing in. To be in that tier, a wine should … ① Be consistently made to age for 15 to 20 years or more. ② Have a long-established reputation for quality. ③ Be distributed globally. ④ Have a track record of appreciation. ⑤ Earn high critic scores. ⑥ Come in a case lot of 12 bottles, each (usually) costing $100 or more. 'The concept of what's collectible and investment grade is changing,' says Cult Wines' Gearing. 'The problem with up-and-coming producers and regions is they don't have the same liquidity as most blue chips.' Ample supply and demand makes blue chips easily tradable. Those include Bordeaux, especially first-growth Lafite Rothschild, Mouton Rothschild, Latour, Haut-Brion and Margaux; Burgundy grands crus; prestige Champagnes; the Rhône's great Château Rayas; Italian Super Tuscans and Barolo and Barbaresco reds; and California cabernets. Top names from Spain and Portugal have begun to gain traction, especially among younger collectors in search of value and quality. According to Liv-ex, Vinovest and Gearing, Spain's Vega Sicilia Unico was one of the successes of 2024. 'There's a lot of opportunity in other major regions,' Westgarth says, 'like Trimbach's Clos Ste. Hune riesling, from Alsace.' The Loire and Germany are also in the mix. Benchmark Wine Group founder Dave Parker calls Oregon 'the new Burgundy' and has seen price growth for Washington state's Quilceda Creek, which has received 34 100-point scores from seven different respected critics. As with stocks and bonds, spread your risk by investing in several regions and countries. And seek out older vintages from classic labels in classic fine wine regions. Four Steps to Start ① Check your expectations Ask yourself: Do you want to drink part of your collection, or are you in it just for the profits? Are you conservative, in search of blue chips with higher liquidity, or adventurous, looking for riskier up-and-comers? Remember: Investing in wine is a long game. Even though sometimes rare, exclusive brands can be flipped quickly for profit—from January to September 2022, for example, a case of 2012 Salon Le Mesnil Champagne soared 232%, from $4,670 to $15,485—for the best gains, you really have to wait. Hold for at least 3 years, preferably 5 to 15, when enough bottles have been drunk to lower the supply, thus increasing prices. ② Research the fundamentals Browse Bordeaux Index, Cult Wines, CultX, Vinovest and WineCap for general info, and Wine Market Journal for auction prices. Liv-ex's many indexes, from the Fine Wine 100 to Bordeaux Legends 40, track the most traded wines. Both Cult Wines and Liv-ex regularly issue reports on the investment potential of different regions. A newish Substack, In the Mood for Wine, features a very basic series on investing with detailed spreadsheets to get you started. Although this shouldn't have to be said: Attend tastings and drink wine—and plenty of it! ③ Find a trusted adviser Most top platforms, like Vinovest, offer a variety of ways to invest, from self-directed to managed portfolios. Some, such as CultX, LiveTrade and Vint, include trading marketplaces, and many, like Cult Wines, offer a one-stop-shop approach: strategy and selection; sourcing (provenance is huge); storage, insurance, market analytics and valuations; and experts to authenticate bottles. Your budget helps determine which to choose. Portfolio plans at Vinovest start at $1,000, but LiveTrade's O'Connell says $10,000 is more realistic, because a single case of top Bordeaux or Burgundy could easily surpass $3,000. Alexander Westgarth, founder and CEO of WineCap, suggests $10,000 to $50,000. Remember to factor in fees, such as insurance and storage. ④ Store it Keeping wine at the correct 55F temperature in a cool, dark place is essential. Experts agree that the value of wine kept in a well-known third-party bonded warehouse such as Octavian Wine Services Ltd. is higher than for bottles stored in your own cellar, and the best advisers offer it as part of their service. The annual cost to store a case of wine in the UK is about £15 to £20, Westgarth says. Find out if an expert checks a bottle's provenance. The Big Five Regions for a Balanced Portfolio ① Bordeaux Bordeaux's long-held crown is slipping, says Liv‑ex's Gibbs. 'In 2010 its crus classés accounted for more than 70% of Liv-ex trades. But that's dropped to the 35% to 45% range.' Despite the current downturn, says Vinovest's Zhang, some vintages of certain brands are good bets, such as 2005 Château Margaux, which has appreciated 12% annually. A solid buy now might be 2021 Château Lafite Rothschild. The UK merchant's 2022 release price was £5,800 a case, and in late May it was selling for about £3,900. ② Burgundy Prices for red wines from this renowned region started soaring in the mid-2000s, with a peak in October 2022. 'Whites are now taking the top growth spots, suggesting a shift in collector preference,' Gearing says. Domaine Leflaive Chevalier-Montrachet, for example, bucked 2024's overall downward price trend, rising 8.1%; Vincent Dancer Bourgogne Blanc led with a 26.7% increase. Consider regional or village bottlings like Chambolle-Musigny, O'Connell says, as well as hot micro-producers such as Kei Shiogai, whose wines can cost $1,000 a bottle. As for grands crus such as Romanée-Conti's La Tâche and other blue-chip grands crus? 'Prices will go up again, and perhaps before too long,' he says. ③ Champagne Broad interest in Champagne started a decade ago, when investors realized great examples such as Cristal were undervalued. Despite 2024 declines of 11.2% on average, even for top-tier brands, high-end vintage and smaller-production prestige cuvées are still bubbling. One standout: Bollinger PN VZ16, up 10.7%. ④ Italy 'Italy is the strongest investment category right now,' says Benchmark's Parker. The number of Italian brands in the Liv-ex Power 100 more than doubled from 2018 to 2024. Gearing reports: 'Barolo and Barbaresco are outperforming many Bordeaux and Burgundy reds.' (Bruno Giacosa Barbaresco was up 7.5% from Jan. 1 to Dec. 31, 2024.) Elsewhere, Biondi‑Santi Brunello di Montalcino 2010 continues to hold its value. ⑤ California In 2020, 200 different California wines traded on Liv-ex, an 809% jump from five years before. Napa Valley cabernet—Harlan Estate, Screaming Eagle, Dominus and Opus One—and Ridge Vineyards Monte Bello from the Santa Cruz Mountains are the main game. Also gaining traction: Sine Qua Non, MacDonald, Hundred Acre and Futo Estate.

Bloomberg

33 minutes ago

• Bloomberg

Singapore's Core Inflation Slows as Recreation Prices Fall Anew

Singapore's key inflation gauge slowed in May due to a continued decline in recreation prices. The core inflation rate, which excludes housing and private transportation costs, stood at 0.6% in May from a year earlier, according to a statement by the Department of Statistics Singapore. That's lower than the 0.7% in April and aligns with the median estimate in a Bloomberg News survey of analysts.

Yahoo

an hour ago

• Yahoo

Here's Why Allianz Malaysia Berhad (KLSE:ALLIANZ) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should. Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Allianz Malaysia Berhad (KLSE:ALLIANZ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Allianz Malaysia Berhad with the means to add long-term value to shareholders. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Allianz Malaysia Berhad's Earnings Per Share Are Growing Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Allianz Malaysia Berhad has grown EPS by 18% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming. Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that Allianz Malaysia Berhad's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Allianz Malaysia Berhad maintained stable EBIT margins over the last year, all while growing revenue 15% to RM6.2b. That's progress. The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart. KLSE:ALLIANZ Earnings and Revenue History June 23rd 2025 Check out our latest analysis for Allianz Malaysia Berhad Fortunately, we've got access to analyst forecasts of Allianz Malaysia Berhad's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting. Are Allianz Malaysia Berhad Insiders Aligned With All Shareholders? It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Allianz Malaysia Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have RM74m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 2.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.