ARB IOT Group Ltd

ARB IOT Group Limited (the "Company") operates as a provider of comprehensive Internet of Things (IoT) solutions, encompassing system design, integration, and deployment for clients. The Company's business model is centered on delivering holistic solutions with full turnkey deployment, including installation of wire and wireless and mechatronic works. Revenue is primarily generated from the sale of IoT systems, devices, and engineering solutions, as well as system development solutions. The Company's operations are organized into two main business lines: IoT Smart Building and Engineering, and IoT Smart Agriculture and System Development. The Company's functional currency is Ringgit Malaysia (RM), while its reporting currency is also RM, with USD translations provided for convenience at a rate of RM4.2150 to $1.00 ¹.

For the fiscal year ended June 30, 2025, the Company reported total revenue of RM197.3 million ($46.8 million) ², a significant increase of RM139.1 million ($34.5 million) or 239% ³ compared to RM58.2 million ($12.3 million) ⁴ in the prior year. Despite this revenue growth, the Company recorded a gross loss of RM8.1 million ($1.9 million) ⁵, an improvement from a gross loss of RM20.3 million ($4.3 million) ⁶ in the previous year. Total expenses increased by RM18.3 million ($5.5 million) or 39.1% ⁷ to RM65.1 million ($15.4 million) ⁸. The net loss for the year was RM71.4 million ($16.9 million) ⁹, widening from a loss of RM54.7 million ($11.6 million) ¹⁰ in the fiscal year 2024. Basic and diluted loss per share were RM40.43 ¹¹ and RM40.43 ¹² respectively for the year ended June 30, 2025. As of June 30, 2025, cash and bank balances stood at RM32.6 million ($7.7 million) ¹³. The Company had trade receivables, net, of RM41.8 million ($9.9 million) ¹⁴ and total current liabilities of RM9.8 million ($2.3 million) ¹⁵.

The IoT Smart Building and Engineering segment generated revenue of RM96.4 million ($22.9 million) ¹⁶ for the year ended June 30, 2025, a substantial increase from RM0.5 million ($0.1 million) ¹⁷ in the prior year, primarily driven by additional sales from AI Wi-Fi Optimization. The IoT Smart Agriculture and System Development segment contributed RM101.0 million ($24.0 million) ¹⁸ in revenue, up 94.2% ¹⁹ from RM52.0 million ($11.0 million) ²⁰ in the previous year, mainly due to increased sales of IoT vending machines and IoT network hardware. The IoT Gadget Distribution business line was disposed of on October 6, 2023, due to its insignificant profit generation ²¹.

Significant operational developments during the period include strategic partnerships and major order acquisitions. In November 2024, the Company signed a Memorandum of Understanding with ASUSTek Computer Inc. and ServerSphere for collaboration on AI server solutions, with the Company handling assembly, testing, localization, and global sales. An AI Data Centre Experimental Lab was established in February 2025 in collaboration with the Institute of Visual Informatics of Universiti Kebangsaan Malaysia and Gajah Kapitalan Sdn Bhd (GKSB) ²². The Company secured a major AI server supply deal worth approximately $45 million with GKSB ²³ for 500 ARB-222 AI servers, and another contract worth approximately $53 million with Whizzl Group for advanced AI data center server solutions ²⁴. Expansion into East Malaysia was initiated with the appointment of Whizzl Sdn Bhd as an exclusive wholesaler and system integrator for Sabah and Sarawak. The Company also secured orders in March 2025 to deploy its AI smart IoT palm farming system across 3,000 acres ²⁵ and an additional 2,000 acres ²⁶ of plantations in Sabah, Malaysia, expected to generate yearly recurring revenue of approximately $20 million ²⁷ and $13 million ²⁸ respectively. In March 2025, an AI-powered fertilizer system with integrated smart AI robots was unveiled, followed by an AI-powered plantation mapping system with integrated smart AI drones in April 2025.

The Company's cash flow from operating activities decreased significantly to RM0.8 million ($0.2 million) ²⁹ for the year ended June 30, 2025, from RM55.1 million ($11.7 million) ³⁰ in the prior year, primarily due to an increase in credit sales in receivables. Cash generated from investing activities was RM1.1 million ($0.3 million) ³¹, an increase of 103.71% ³² from cash used in investing activities of RM28.7 million ($6.1 million) ³³ in the year ended June 30, 2024, mainly due to the withdrawal of fixed deposits. Cash flows used in financing activities were RM0.1 million ($0.03 million) ³⁴ for the year ended June 30, 2025, compared to RM49.5 million ($10.5 million) ³⁵ in the prior year. The Company's total assets as of June 30, 2025, were RM206.4 million ($49.0 million) ³⁶, with non-current assets totaling RM131.8 million ($31.3 million) ³⁷ and current assets at RM74.7 million ($17.7 million) ³⁸. Total liabilities were RM16.2 million ($3.9 million) ³⁹, comprising current liabilities of RM9.8 million ($2.3 million) ⁴⁰ and non-current liabilities of RM6.5 million ($1.5 million) ⁴¹.

The Company aims to be one of the top IoT players in the ASEAN region, with a particular focus on the agriculture, property development, and logistics industries. It anticipates collaborating with local partners for IoT products and services to penetrate local markets in ASEAN countries. The Company expects to establish a regional center in Singapore to support its IoT business for ASEAN countries and plans to establish sales representative offices in other major ASEAN cities such as Jakarta, Phnom Penh, Manila, Bangkok, Hanoi, and Ho Chi Minh City.

A major growth vector is the Company's expansion into AI capabilities and market presence through strategic partnerships and significant order acquisitions. The Memorandum of Understanding signed in November 2024 with ASUSTek Computer Inc. and ServerSphere for AI server solutions positions the Company for growth in assembly, testing, localization, and global sales of these solutions. The establishment of an AI Data Centre Experimental Lab in February 2025 with Universiti Kebangsaan Malaysia and Gajah Kapitalan Sdn Bhd (GKSB) is intended to support AI research, development, and training, aligning with Malaysia's AI growth initiatives.

Another significant growth area is the acquisition of major AI server supply deals. The Company secured a contract worth approximately $45 million ⁴² with GKSB to supply 500 ARB-222 AI servers ⁴³ for high-performance computing in Malaysia. Additionally, a contract worth approximately $53 million ⁴⁴ was secured with Whizzl Group for advanced AI data center server solutions, also involving ARB-222 AI servers. These orders are expected to drive revenue growth in the near term.

The Company is also strengthening its presence in smart farming with AI-driven solutions. In March 2025, an order was secured to deploy its AI smart IoT palm farming system across 3,000 acres ⁴⁵ of plantations in Sabah, Malaysia, projected to generate yearly recurring revenue of approximately $20 million ⁴⁶. A subsequent order for an additional 2,000 acres ⁴⁷ in Sabah is expected to generate yearly recurring revenue of approximately $13 million ⁴⁸. The introduction of an AI-powered fertilizer system with integrated smart AI robots in March 2025 and an AI-powered plantation mapping system with integrated smart AI drones in April 2025 further underscores the Company's commitment to enhancing efficiency, boosting yield, and supporting sustainable palm oil production through technology.

The Company believes that its available cash and bank balances, along with current assets such as accounts receivable, should enable it to meet anticipated cash needs for at least the next 12 months. However, it acknowledges that additional cash resources may be required in the future due to changing business conditions, the implementation of its business expansion strategy, or other investments or acquisitions. The Company may seek to sell additional equity or debt securities or obtain additional credit facilities if its financial resources are insufficient.

The Company faces several material risks, including those related to its limited operating history in the Malaysian IoT industry, which makes it difficult to evaluate its business and prospects. Credit risks are associated with a significant amount of accounts receivable, with normal trade credit terms ranging from 30 to 210 days ⁴⁹, and an impairment loss of approximately RM4.0 million ($0.9 million) ⁵⁰ was recorded for bad debt in fiscal year 2025. The Company is a holding company, dependent on distributions from its subsidiaries, which may be restricted by future financing arrangements or applicable laws. There is no assurance that its IoT agriculture projects will operate as intended, exposing it to risks related to design, integration, deployment issues, and external agronomic factors. Customer agreements often allow termination without cause with 30 days' prior notice, leading to revenue uncertainty. A significant portion of revenue is derived from a limited number of customers, with three major customers accounting for 69.19% ⁵¹ of total revenue in fiscal year 2025, making the Company vulnerable to the loss of any of these customers. Failure to meet project milestones and completion dates could result in financial penalties or liquidated damages. Dependence on third-party providers and suppliers for hardware and software components, coupled with potential global supply chain disruptions, could harm business operations. The Company lacks product liability or disruption insurance, which is consistent with customary industry practice in Malaysia, but exposes it to significant costs and business disruption in case of losses. Strategic transactions, including acquisitions, could divert management attention, result in shareholder dilution, disrupt operations, and may not achieve anticipated benefits. Impairment charges against goodwill and other intangible assets, which had a net book value of RM53.8 million ($12.8 million) ⁵² as of June 30, 2025, may be required in the future if acquisitions do not yield expected returns. Planned international expansions in the ASEAN region subject the Company to risks inherent in international operations, including increased costs, new competition, and compliance with foreign laws and regulations. The success of its business model relies on the ability to recruit, deploy, and manage outsourced contractors, exposing it to risks of shortages, wage inflation, and inconsistent performance. AI partnerships, regional expansion, and large server orders may not commercialize as expected, exposing the Company to execution, supply chain, and working capital risks, including potential strain on working capital due to inventory purchases and milestone-based billing. The AI Data Centre Experimental Laboratory and broader AI offerings may not achieve research or commercialization objectives and may increase compliance, cybersecurity, and intellectual property risks. Autonomous ground equipment and unmanned aerial systems used in AI-driven smart farming are subject to permitting, pilot qualifications, airspace and pesticide application regulations, and environmental constraints, with failures or noncompliance potentially leading to deployment delays, enforcement actions, or product liability claims. The market for IoT solutions is competitive, and failure to adopt new technologies or address evolving customer needs could adversely affect the business. Non-compliance with evolving laws, regulations, and industry standards addressing information and technology networks, privacy, and data security could lead to penalties, liability, and reputational harm. Changes in trade policy, such as tariffs, could adversely impact the business. Operations are subject to various Malaysian laws and regulations, and developments in the social, political, regulatory, and economic environment in Malaysia could have a material adverse impact. Fluctuations in exchange rates, particularly between the RM and USD, could adversely affect the business and the value of securities. The Company is subject to foreign exchange control policies in Malaysia, which could restrict its ability to repatriate dividends or other payments from subsidiaries. As a Cayman Islands company with principal assets and all directors and officers residing outside the United States, enforcing rights based on U.S. federal securities laws or judgments of U.S. courts may be difficult for U.S. investors. The Company's status as an emerging growth company and foreign private issuer allows it to rely on exemptions from certain reporting and corporate governance requirements, which may afford less protection to shareholders. Concentration of ownership, with the Chairman and CEO, Liew Kok Leong, beneficially owning approximately 27.1% ⁵³ of the Company's voting power, may prevent minority shareholders from influencing significant corporate decisions and could result in conflicts of interest. Anti-takeover provisions in the Company's articles of association could discourage third-party acquisitions. There is a risk of being classified as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. The Company may have difficulty scaling and adapting its existing infrastructure to accommodate a larger customer base, technology advances, or customer requirements. Adverse developments in general business and economic conditions, including geopolitical issues and trade disputes, could negatively affect demand for services, business, and financial condition.

Management's message to shareholders emphasizes the Company's mission to become a leading player in the IoT landscape in the ASEAN region, driven by its comprehensive solutions for IoT system integration and deployment. They highlight the reorganization of operations into two key business lines: IoT Smart Building and Engineering, and IoT Smart Agriculture and System Development, to better address evolving market demands. Management points to recent strategic partnerships, such as the Memorandum of Understanding with ASUSTek Computer Inc. and ServerSphere for AI server solutions, and the establishment of an AI Data Centre Experimental Lab with academic and commercial partners, as crucial steps in expanding AI capabilities and market presence. The securing of major AI server supply deals, including approximately $45 million ⁵⁴ with GKSB and approximately $53 million ⁵⁵ with Whizzl Group, is presented as a testament to the Company's growth trajectory. Furthermore, management underscores the strengthening of its smart farming presence through orders to deploy AI smart IoT palm farming systems across 3,000 acres ⁵⁶ and an additional 2,000 acres ⁵⁷ in Sabah, Malaysia, which are expected to generate yearly recurring revenue of approximately $20 million ⁵⁸ and $13 million ⁵⁹ respectively. The introduction of AI-powered fertilizer robots and AI-enabled drone mapping systems is also highlighted as a strategic priority to enhance efficiency and support sustainable agricultural production. Management acknowledges the need for continued investment in technology and R&D to maintain a competitive edge and adapt to rapid technological changes.