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When Bursa property development MKH ventured into the plantation sector in 2008, little did it know that it was to provide a lifeline to the company a decade latter.
Prior to 2016, MKH property development segment was the key revenue and earnings contributor. But since then, the Malaysian property market began to soften and the contribution from the property development segment began to decline.
At its 2016 peak, the property development and construction segment contributed nearly RM 250 million EBIT but this declined to RM 70 million in 2021.
On the other hand while the plantation segment performance was cyclical, its 2021 EBIT of RM 110 million was better than the 2016 RM 90 million EBIT. You can see from the chart that without the plantation business, MKH performance would have been worse.
The group will also allocate RM33 million or 22% of the proceeds for loan repayments, and the remaining RM13.4 million or 9.8% for working capital and listing expenses.
M&A Securities is the adviser, underwriter and placement agent for the IPO. Kenanga Investment Bank is the joint writer and joint placement agent, while AmInvestment Bank is also the joint placement agent.
Many know MKH as a property developer. But the Malaysia property sector had been so over the past 6 to 8 years.
Fortunately for MKH it ventured into oil palm plantations in mid 2000s.
If you look at the chart (refer to https://i.postimg.cc/vZWWskv4/MKH-EBIT.png) you can see that while the EBIT contribution from the property development segment had been declining since 2016, that from the plantation segment had been growing. In 2022, the plantation segment accounted for about half of MKH’s EBIT.
So, what does it mean for an investor?
• When the property sector recovers, we can expect better overall profit.
• Property and oil palm sectors are cyclical but they are affected by different factors. So MKH performance will be less cyclical.