The Risks of Relying on Non-Recurring Gains in Ellipsiz's (SGX:BIX) Earnings

Ellipsiz (SGX:BIX) has experienced a dramatic swing in its financial performance over the past two fiscal years, transitioning from a S$3.84 million net loss in FY2024 to a S$1.94 million profit in FY2025 [1]. While the 2025 turnaround has been attributed to cost reductions and improved operational efficiency, the absence of clear non-recurring gains in FY2024 raises critical questions about the sustainability of the company’s earnings and its long-term profitability. Investors must scrutinize whether Ellipsiz’s recent performance reflects genuine operational resilience or is skewed by one-time adjustments.

A Volatile Earnings Trajectory

Ellipsiz’s FY2024 results were marred by a 6.9% decline in revenue to S$55.1 million and a S$4.2 million impairment charge on goodwill for its egg farm project, alongside a S$0.5 million hit to other intangible assets [2]. These non-recurring expenses, while not gains, underscore the company’s vulnerability to structural risks. By contrast, FY2025 saw a return to profitability, with earnings per share (EPS) rising to S$0.012 from a loss of S$0.023 in 2024 [3]. However, this recovery was driven by reduced expenses rather than revenue growth, a distinction that highlights the fragility of the company’s earnings model.

The reliance on cost-cutting to restore profitability, rather than organic revenue expansion, signals a precarious path forward. As stated by a report from Yahoo Finance, “the transition to profitability was primarily driven by cost reductions and improved operational efficiency” [3]. While such measures can stabilize short-term results, they do not address underlying challenges in scaling the business or diversifying revenue streams.

The Absence of Non-Recurring Gains and Its Implications

A key concern for investors is the lack of transparency around non-recurring gains in Ellipsiz’s FY2024 financials. While the company’s 2025 earnings appear robust, the absence of one-time gains in 2024 means that its profitability is not underpinned by extraordinary windfalls. Instead, the recovery seems to stem from operational adjustments, which, while commendable, may not be easily replicable in future periods.

For instance, the FY2024 impairment charges—particularly the S$4.2 million goodwill write-down—reflect a strategic misstep or asset overvaluation that could recur if the company undertakes similar high-risk ventures [2]. Conversely, the absence of non-recurring gains in 2024 suggests that Ellipsiz’s earnings are not artificially inflated by one-off events, which could be seen as a positive. However, this also means that the company’s ability to sustain profitability hinges entirely on its core operations, which have shown volatility.

Long-Term Profitability: A Question of Resilience

Ellipsiz’s FY2025 results, though encouraging, must be viewed through the lens of its broader financial history. The company’s net income in 2025 (S$1.94 million) remains modest compared to its FY2023 profit of S$2.05 million [3]. This indicates that even with cost discipline, Ellipsiz has yet to restore pre-2024 profitability. For long-term investors, the critical question is whether the company can achieve consistent revenue growth without relying on non-recurring items—either gains or losses—to mask operational weaknesses.

The proposed 1 cent per share dividend in FY2024, despite a net loss, further complicates the picture [2]. While this demonstrates a commitment to shareholder returns, it also raises concerns about the company’s capacity to sustain payouts during periods of financial stress. A reliance on dividends as a proxy for earnings strength, without corresponding cash flow generation, could erode investor confidence if earnings volatility persists.

Conclusion: A Cautionary Tale for Investors

Ellipsiz’s recent financial trajectory illustrates the risks of conflating short-term cost-cutting with long-term sustainability. While the absence of non-recurring gains in FY2024 may be seen as a virtue, the company’s earnings remain exposed to operational and strategic risks. Investors should prioritize metrics such as revenue growth, recurring cash flows, and asset quality over one-time adjustments when evaluating Ellipsiz’s prospects.

Source:
[1] Ellipsiz Full Year 2024 Earnings: S$0.023 loss per share (vs S$0.012 profit in FY2023), [https://finance.yahoo.com/news/ellipsiz-full-2024-earnings-0-230306051.html]
[2] Ellipsiz Ltd Annual Report 2024 – Key Insights and Investor Guidance, [https://www.minichart.com.sg/2024/10/07/ellipsiz-ltd-annual-report-2024-key-insights-and-investor-guidance/]
[3] Ellipsiz Full Year 2025 Earnings: EPS: S$0.012 (vs S$0.023 loss in FY2024), [https://finance.yahoo.com/news/ellipsiz-full-2025-earnings-eps-222219691.html]