Greenpro Capital Corp. (NASDAQ: GRNQ) is a diversified financial services and advisory company headquartered in Kuala Lumpur, Malaysia. The company has established a strong foothold in the Southeast Asian market, providing a range of business consulting, corporate advisory, and venture capital services. However, Greenpro's most significant development in recent years has been the launch of its wholly-owned subsidiary, Green-X, a pioneering Shariah-compliant digital asset exchange.
Company Background
Greenpro Capital Corp. was incorporated in the state of Nevada on July 19, 2013, initially focusing on providing cross-border business solutions and accounting outsourcing services to small and medium-sized businesses located in Asia, with a particular emphasis on Hong Kong, Malaysia, and China. The company's business segments include corporate advisory services, such as cross-border listing support, tax planning, and accounting outsourcing, as well as a venture capital division that invests in select start-ups and high-growth potential companies.
Greenpro's venture capital business operates through its subsidiary, Greenpro Venture Capital Limited, which focuses on establishing a business incubator for start-up and high-growth companies to support them during critical growth periods. This includes providing education and support services. Another segment of the venture capital business involves rental activities of commercial properties and the sale of investment properties. The company's venture capital activities primarily target companies located in East and Southeast Asia, including Hong Kong, China, Malaysia, Thailand, and Singapore.
Green-X: A Game-Changing Initiative
In 2022, Greenpro took a significant step forward by obtaining a license from the Labuan Financial Services Authority (LFSA) to operate Green-X, the first Shariah-compliant digital asset exchange in Malaysia. This strategic move has positioned the company at the forefront of the rapidly growing Islamic finance and fintech sectors in the region.
Green-X's mission is to provide a secure and regulatory-compliant platform for the trading of digital assets that adhere to Islamic financial principles. The exchange offers a range of services, including the tokenization of real-world assets (RWAs), the listing of Shariah-compliant security tokens, and the facilitation of primary and secondary market transactions.
Key Focus Areas and Partnerships
One of Green-X's key focus areas is the tokenization of RWAs, which aligns with the growing demand for Shariah-compliant investment opportunities. The exchange has already forged strategic partnerships with several organizations, including Nahdlatul Ulama (PWNU), one of the largest Islamic organizations in the world, to develop RWA tokenization projects that cater to the Islamic community.
In addition to its RWA tokenization efforts, Green-X has also made significant progress in building its pipeline of security token offerings (STOs). The exchange aims to host at least 10-15 security token launches by the end of 2024, covering a diverse range of sectors such as advanced battery technology, refined Chinese ceramics, and gold-backed digital assets.
Business Segments
Greenpro Capital operates in two main business segments: service business and real estate business.
Service Business Segment: This segment primarily provides corporate advisory and business solution services, including cross-border listing advisory services, tax planning, advisory and transaction services, record management services, and accounting outsourcing services. The company focuses on serving clients located in Asia and Southeast Asia, such as Hong Kong, Malaysia, China, Thailand, and Singapore.
In the third quarter of 2024, the service business segment generated revenue of $521,760, a decrease from $1,040,000 in the same period in 2023. This decline was primarily due to fewer listing service obligations being completed during Q3 2024 compared to Q3 2023. For the nine months ended September 30, 2024, the service business segment generated revenue of $1.5 million, down from $2.24 million in the same period in 2023.
The cost of revenue for the service business was $138,400 in Q3 2024, down from $219,870 in Q3 2023. For the nine-month period, the service business cost of revenue was $249,110, a decrease from $374,050 in the same period of 2023. The lower cost of revenue was mainly due to a decrease in other professional fees directly attributable to providing the services.
Real Estate Business Segment: This segment focuses on the acquisition, rental, and sale of commercial properties in Hong Kong and Malaysia. The rental revenue was $17,930 in Q3 2024, down from $27,610 in Q3 2023. For the nine months ended September 30, 2024, rental revenue was $61,090, a decrease from $70,240 in the same period of 2023. The decline in rental revenue was primarily due to the distribution of 40% of the real estate properties from the company's subsidiary Forward Win International Limited to its non-controlling interest in April 2024, resulting in fewer units available for lease.
There was no revenue generated from the sale of real estate properties in either the three or nine-month periods ended September 30, 2024 and 2023. The cost of rental revenue was $6,240 in Q3 2024, down from $9,630 in Q3 2023. For the nine-month period, the real estate business cost of revenue was $19,120, a decrease from $28,320 in the same period of 2023.
Financials
Greenpro's financial performance has been impacted by global economic challenges in recent years. In 2020 and 2021, the company incurred significant net losses of $3.76 million and $14.35 million, respectively, partially due to the COVID-19 pandemic's impact on its business. The company also had to deal with impairment charges and write-offs related to its investments and assets. In 2022, the company continued to struggle, reporting a net loss of $6.35 million.
For the fiscal year 2023, Greenpro reported annual revenue of $3.48 million and a net income of $1.07 million. The company's operating cash flow for the year was negative $1.59 million, while its free cash flow stood at negative $1.69 million.
In the most recent quarter (Q3 2024), Greenpro reported: - Quarterly revenue: $539,700 - Quarterly net loss: $330,320 - Year-over-year revenue growth: -49.8%
The decrease in revenue was primarily due to a decline in business services revenue, as fewer listing service obligations were completed during Q3 2024 compared to Q3 2023.
For the nine months ended September 30, 2024, the company recorded a net loss of $1.17 million, in contrast to net income of $6.56 million in the same period of 2023. The increase in net loss was primarily driven by the decline in service business revenue, which was not fully offset by the lower operating costs.
Performance by Geographic Markets
Greenpro operates in three main regions: Hong Kong, China, and Malaysia. In the first 9 months of 2024, Hong Kong accounted for 63.0% of total revenue, Malaysia 25.4%, and China 11.5%.
Liquidity
Despite the financial headwinds, Greenpro has maintained a relatively strong balance sheet. As of September 30, 2024: - Debt-to-Equity ratio: 0.012 - Cash and cash equivalents: $1.03 million - Current ratio: 1.35 - Quick ratio: 1.35
The company does not have any available credit lines disclosed.
Future Outlook and Challenges
Looking ahead, Greenpro's management is focused on the continued growth and expansion of its Green-X platform. The company is targeting the launch of additional Shariah-compliant digital asset products and the expansion of its partner network within the Islamic finance ecosystem.
However, Greenpro and its Green-X subsidiary face several risks, including regulatory uncertainties, competition from other digital asset exchanges, and the challenge of building widespread adoption within the Islamic finance community. The company's ability to navigate these challenges and successfully execute its strategy will be critical to its long-term success.
Additionally, the company will need to address the recent decline in its service business revenue and work towards improving its overall financial performance. The distribution of real estate properties to non-controlling interests has impacted the real estate segment's revenue, and Greenpro will need to strategize on how to optimize its remaining property portfolio.
Conclusion
In conclusion, Greenpro Capital's foray into the Shariah-compliant digital asset market through its Green-X exchange represents a significant opportunity for the company to capitalize on the growing demand for Islamic finance solutions in Southeast Asia. While the company's recent financial performance has been challenging, with decreases in both service and real estate revenues, its strategic focus on the high-growth digital asset and Islamic finance sectors positions Greenpro as a potential leader in the emerging Islamic fintech space. The company's ability to leverage its diverse business segments, particularly the promising Green-X platform, while addressing current financial challenges, will be crucial in determining its future success in the competitive and evolving financial services landscape of Southeast Asia.