Statutory Profit Doesn't Reflect How Good Ocean Vantage Holdings Berhad's (KLSE:OVH) Earnings Are

Despite announcing strong earnings, Ocean Vantage Holdings Berhad's (KLSE:OVH) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

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A Closer Look At Ocean Vantage Holdings Berhad's Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. 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. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

Over the twelve months to September 2025, Ocean Vantage Holdings Berhad recorded an accrual ratio of -0.47. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of RM33m during the period, dwarfing its reported profit of RM16.4m. Given that Ocean Vantage Holdings Berhad had negative free cash flow in the prior corresponding period, the trailing twelve month resul of RM33m would seem to be a step in the right direction. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.

Check out our latest analysis for Ocean Vantage Holdings Berhad

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ocean Vantage Holdings Berhad.

The Impact Of Unusual Items On Profit

Surprisingly, given Ocean Vantage Holdings Berhad's accrual ratio implied strong cash conversion, its paper profit was actually boosted by RM13m in unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Ocean Vantage Holdings Berhad's positive unusual items were quite significant relative to its profit in the year to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Ocean Vantage Holdings Berhad's Profit Performance

In conclusion, Ocean Vantage Holdings Berhad's accrual ratio suggests its statutory earnings are of good quality, but on the other hand the profits were boosted by unusual items. Based on these factors, it's hard to tell if Ocean Vantage Holdings Berhad's profits are a reasonable reflection of its underlying profitability. If you want to do dive deeper into Ocean Vantage Holdings Berhad, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Ocean Vantage Holdings Berhad (of which 1 is a bit unpleasant!) you should know about.

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.