Trive Property Group Berhad (KLSE:TRIVE): Assessing the Sustainability of ROCE Growth Amid Operational and Capital Challenges

For investors evaluating Trive Property Group Berhad (KLSE:TRIVE), the company's recent Return on Capital Employed (ROCE) of 1.8% as of July 2025 represents a symbolic turnaround from years of losses, according to a Yahoo Finance report. However, this figure-while a positive development-remains far below the 11% industry average for the Electrical sector, raising critical questions about the sustainability of its growth. To assess whether Trive can deliver durable returns, we must dissect its capital allocation strategies and operational efficiency initiatives, both of which appear to be underdeveloped despite recent restructuring efforts.

A Modest ROCE Turnaround, But Industry Lags Persist

Trive's ROCE of 1.8% reflects a significant improvement from its loss-making position five years ago. This metric, calculated as EBIT divided by (Total Assets minus Current Liabilities), suggests enhanced operational efficiency, as the company has managed to generate profits from its existing capital base. Yet, the stagnation in capital employed-totaling RM127 million minus RM8.2 million in liabilities-indicates that the company has not reinvested to expand its asset base. This raises a key concern: without reinvestment, the ROCE gains are likely to plateau, as the denominator in the calculation remains static.

The company's ROCE underperformance relative to the industry average of 11% underscores structural inefficiencies. While Trive's FY2025 net profit of RM0.002 per share marks a turnaround from a FY2024 loss of RM0.004 per share, as shown in the i3investor overview, the lack of capital growth suggests that the company is not leveraging its asset base to scale operations. For context, industry peers typically reinvest capital to drive higher returns, a strategy Trive has yet to adopt meaningfully.

Capital Allocation: A Share Buyback to Stabilize, Not to Grow

Trive's most notable capital allocation move is its proposed RM85 million share capital reduction, aimed at wiping out accumulated losses and aligning its financial position with its asset base, according to The Edge Malaysia report. This restructuring, expected to be finalized by mid-2025, is a defensive measure to restore credibility with stakeholders after seven of the last eight years of losses. However, the absence of new capital deployment plans for 2023–2025 is telling. While the company's long-term investments grew by 3% in 2024 with a 14% CAGR over three years, these figures pale in comparison to the aggressive reinvestment seen in high-ROCE industries.

The capital reduction, while necessary, does not address the root issue: Trive's inability to generate returns comparable to its peers. By focusing on erasing losses rather than deploying capital for growth, the company risks remaining a laggard in a sector where innovation and scale are critical drivers of ROCE.

Operational Efficiency: Progress, But No Clear Roadmap

Operational efficiency improvements have contributed to Trive's ROCE growth, as noted in its 2023 Corporate Governance Report. However, the report does not outline specific initiatives such as cost-cutting measures, technological upgrades, or process optimizations. This lack of transparency makes it difficult to assess the durability of the efficiency gains. For example, while the company's battery management systems segment accounts for 77% of revenue, there is no detail on how this core business is being optimized for higher margins.

Moreover, recent quarterly results highlight volatility. Q2 2025 saw a revenue drop to MYR 950,000 from MYR 1.78 million in the same period the prior year, alongside a loss before tax of MYR 54,000. These results suggest that operational efficiencies have not yet translated into consistent profitability, particularly in a challenging market environment.

The Investor Dilemma: Turnaround or Stagnation?

Trive's stock has declined by 93% over five years, a trajectory that reflects deep skepticism about its ability to sustain growth. While the ROCE improvement is a positive signal, it is insufficient to justify long-term confidence. The company's capital allocation strategy remains focused on stabilization rather than growth, and its operational efficiency initiatives lack specificity. For ROCE to rise meaningfully, Trive must either reinvest capital into high-return projects or demonstrate that its current efficiency gains can be scaled.

Investors should monitor two key areas:
1. Capital Deployment Post-2025: Will the company use its restructured balance sheet to fund new ventures or expand existing operations?
2. Operational Transparency: Will the 2024 and 2025 annual reports provide concrete details on efficiency initiatives, such as automation or supply chain improvements?

Until these questions are answered, Trive's ROCE growth remains a work in progress-one that is more symbolic than sustainable.