KTI Landmark Berhad's (KLSE:KTI) Earnings Are Weaker Than They Seem

KTI Landmark Berhad (KLSE:KTI) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Examining Cashflow Against KTI Landmark Berhad's Earnings

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). 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. This ratio tells us how much of a company's profit is not backed by free cashflow.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.

KTI Landmark Berhad has an accrual ratio of 0.43 for the year to September 2025. As a general rule, that bodes poorly for future profitability. And indeed, during the period the company didn't produce any free cash flow whatsoever. Even though it reported a profit of RM19.4m, a look at free cash flow indicates it actually burnt through RM204m in the last year. Coming off the back of negative free cash flow last year, we imagine some shareholders might wonder if its cash burn of RM204m, this year, indicates high risk.

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

Our Take On KTI Landmark Berhad's Profit Performance

As we have made quite clear, we're a bit worried that KTI Landmark Berhad didn't back up the last year's profit with free cashflow. As a result, we think it may well be the case that KTI Landmark Berhad's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 51% per annum growth in EPS for the last three. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into KTI Landmark Berhad, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for KTI Landmark Berhad (of which 2 don't sit too well with us!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of KTI Landmark Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.