Hey! Today, R-Table will be covering MKH Berhad by presenting 10 years financial results in a short, fun & interesting way. Click the link below to watch the video.

Link: https://youtu.be/DMDDcIPttA4 
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Their palm trees r near to mature in kalimantan, interesting times aheard. Hold or buy, it will not go south anymore. RM1.24 is cheap. 

MKH is a property company with a plantation arm. This could be the reason why over the past 12 yeats, it achieved an average ROE of 8%. In contrast the mean ROE of the Bursa large property companies averaged 7%. The Malaysian property sector is turning around as per the article  Will the Malaysian Property industry turn around by 2024? I would expect MKH to benefit from this. 

Plantations saved MKH

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 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.

For more insights into the Bursa plantation sector, refer to “How the Malaysian plantation sector performed over the past 10 years”

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.

Moral of the story? The property sector is cyclical and if property companies want a “stable” performance, diversification to a non-property sector is critical. For more insights to MKH refer to page 20 of INVEST