Southern Alliance Mining Ltd FY2024: Transitioning to Underground Mining with Diversified Growth Strategy

Report Date and Financial Year

• The report covers the six months and full financial year ending on 31st July 2024, with comparisons to the same periods in the previous financial year (FY2023).

Key Financial Highlights

• Revenue: The Group’s revenue increased by 33.7% from RM 124.1 million in FY2023 to RM 165.8 million in FY2024. This increase was driven by a higher volume of iron ore concentrate production and favorable average realized selling prices.
• Cost of Sales: The cost of sales increased by 25.5% to RM 156.8 million, mainly due to increased production costs, processing expenses, external ore purchases, and changes in inventory movements.
• Gross Profit: A turnaround from a gross loss of RM 0.8 million in FY2023 to a gross profit of RM 9.1 million in FY2024, leading to an increase in gross profit margin from -0.7% to 5.5%.
• Other Income: Other income rose by 26.1% to RM 8.4 million, mainly from increased interest income and gains on asset disposal.
• General and Administrative Expenses: Increased by 31.7% due to professional fees related to proposed acquisitions and asset write-offs.
• Loss Before Tax: The Group recorded a loss before tax of RM 2.5 million in FY2024, significantly lower than the RM 9.7 million loss in FY2023.
• Income Tax: Recorded an expense of RM 8.8 million, mainly due to under-provisioning in previous years.
• Net Assets: The Group’s net assets decreased to RM 335.4 million from RM 346.7 million in the previous year.
• Cash Flow: The Group’s net cash from operating activities improved significantly to RM 21.7 million in FY2024.

Dividends

• The company did not declare or pay any dividends for FY2024. The report states that this decision was made to conserve cash for business expansion strategies.

Special Activities or Actions

• Transition to Underground Mining: The Group officially transitioned to full underground mining operations in September 2023 to optimize its mining operations and improve production reliability. This shift from open-pit mining is expected to enhance cost-effectiveness and environmental sustainability.
• Expansion into Gold and REEs: The Group is diversifying its business by extending its core activities to include mining of gold and rare earth elements (REEs). This strategic expansion is aimed at stabilizing revenue streams and reducing reliance on the cyclical iron ore market.

Key Points for Investor Actions

1. Current Holders:
   • Investors holding the stock should monitor the company’s transition to underground mining and its diversification into gold and REEs. These initiatives could potentially improve long-term profitability.
   • Consider the company’s current financial performance, including its improved revenue, gross profit turnaround, and cash flow position. Despite the net loss, the company is taking actions to stabilize and enhance future revenue.
2. Potential Investors:
   • If not currently holding the stock, investors may want to closely watch the company’s progress in underground mining and gold exploration. The company’s expansion strategy could present future growth opportunities, making it a potential long-term investment option.
   • However, the current financial loss and market volatility in iron ore prices suggest cautious evaluation before investment.

Special Considerations

• The company’s decision to conserve cash by not declaring dividends indicates a focus on reinvestment and growth. This is a positive sign for long-term growth, but investors seeking regular income might find this less attractive.
• The profitability is closely tied to the global iron ore market, particularly China’s economic conditions and demand, which have been volatile. Thus, the company’s future revenue and profit margins may fluctuate in line with market conditions.

Recommendation Disclaimer

• The information provided is based solely on the company’s financial report. Investors should conduct further research, consider their risk tolerance, and consult financial advisors before making any investment decisions.