Mega First Corporation Berhad (MFCB) Navigates Challenging Waters: A Deep Dive into Q1 2025 Performance
Greetings, fellow investors and market enthusiasts! Today, we’re unboxing the latest financial report from Mega First Corporation Berhad (MFCB) for the first quarter ended 31 March 2025. This report offers a crucial glimpse into how MFCB is performing amidst a dynamic global economic landscape, highlighting both its strengths and the headwinds it faces. While the company saw an uptick in revenue, its profitability took a hit, largely due to non-recurring factors and operational challenges in specific segments. Let’s delve into the details to understand what’s shaping MFCB’s trajectory.
Core Financial Highlights: A Mixed Bag
MFCB’s top line saw a commendable increase, but the bottom line tells a more nuanced story. Here’s a snapshot of the key financial figures for the first quarter of 2025 compared to the same period last year:
Revenue Growth
The Group’s revenue climbed by 9.0% to RM341.6 million in 1Q2025, up from RM313.5 million in 1Q2024. This growth was primarily fueled by the acquisition of the food security segment (CSC) in May 2024 and the recognition of construction revenue from a solar farm project in Maldives, which had no comparable revenue in the prior year.
1Q2025
Revenue: RM341,554,000
Profit Before Tax (PBT): RM70,748,000
Profit After Tax (PAT): RM65,988,000
PAT Attributable to Owners: RM62,786,000
Basic Earnings Per Share (EPS): 6.66 sen
1Q2024
Revenue: RM313,479,000
Profit Before Tax (PBT): RM117,821,000
Profit After Tax (PAT): RM108,046,000
PAT Attributable to Owners: RM95,464,000
Basic Earnings Per Share (EPS): 10.13 sen
Despite the revenue increase, MFCB’s Profit Before Tax (PBT) saw a significant decline of 40.0%, dropping to RM70.7 million from RM117.8 million in 1Q2024. Similarly, Profit After Tax attributable to owners of the Company (PATNCI) decreased by 34.2% to RM62.8 million from RM95.5 million. This substantial reduction in profitability was largely due to the absence of a one-off insurance income (RM22.4 million) received in 1Q2024 for fire-damaged assets, coupled with a notable increase in share of losses from joint ventures and associates, and adverse foreign exchange movements.
Segmental Performance: A Closer Look
Understanding MFCB’s performance requires dissecting its core business divisions:
Renewable Energy Division
This division, primarily driven by the Don Sahong hydropower project, saw a 4.3% decrease in revenue to RM131.8 million. This was mainly due to a currency translation loss and a downward adjustment in hydro energy tariff (from 6.34 US cents to 6.00 US cents) effective January 2025. However, hydro energy sales volume increased by 7.3% due to the addition of a fifth turbine, which helped offset the tariff reduction. Crucially, pre-tax profit for this segment remained stable at RM88.8 million, benefiting from reduced net interest and royalty expenses following the acquisition of water rights.
Resources Division
The Resources Division experienced a 12.2% decline in revenue to RM56.0 million, primarily due to a 15.4% reduction in sales volume of lime products to certain export markets amidst intense competition. Consequently, its pre-tax profit fell by 32.8% to RM9.7 million.
Packaging Division
Despite a challenging environment marked by soft consumer demand and overcapacity, the Packaging Division’s revenue saw only a marginal 1.4% dip to RM101.3 million. However, its pre-tax profit was significantly impacted, dropping by 48.8% to RM4.4 million. This was largely due to margin pressures from intense price competition, a weaker conversion value of USD-denominated sales, and under-utilisation of production capacities.
Investment Holding & Others
This segment swung from a RM6.0 million gain in 1Q2024 to a RM34.6 million loss in 1Q2025. This dramatic shift was mainly attributed to the absence of the RM22.4 million insurance income from the prior year, a substantial RM14.6 million increase in share of loss from joint ventures and associates (primarily Edenor), and higher foreign exchange losses.
Financial Health: Balance Sheet & Cash Flow
MFCB’s financial position as at 31 March 2025 shows a total asset base of RM5.086 billion. The Group’s total borrowings (excluding hire purchase liabilities) decreased by RM74.5 million to RM1.072 billion, reflecting net loan repayments and translation gains on USD-denominated loans. This is a positive sign for debt management.
From a cash flow perspective, MFCB demonstrated strong operational efficiency. Net cash from operating activities more than doubled, surging by 103.3% to RM215.8 million in 1Q2025 compared to RM106.2 million in 1Q2024. This significant improvement was primarily driven by enhanced trade receivables collection, particularly from Électricité du Laos (EDL). These robust operating cash inflows have notably improved the Group’s net debt position and supported strategic investments in joint ventures and property, plant, and equipment.
Risks and Prospects: Navigating the Future
The global economic outlook remains shrouded in uncertainty, with ongoing supply chain disruptions and unpredictable trade policies creating a cautious business environment. Despite these challenges, MFCB has outlined its strategies and expectations for the coming quarters:
Renewable Energy Division: A Pillar of Stability
The Renewable Energy Division is expected to remain resilient, buoyed by the long-term Supplemental Concession Agreement (SCA) and Supplemental Power Purchase Agreement (SPPA) that took effect on January 1, 2025. The addition of the fifth turbine at Don Sahong is projected to boost energy sales volume, and royalty expenses are expected to remain substantially reduced. While a lower energy tariff and increased operating and maintenance costs will provide some offset, the division’s earnings are anticipated to be relatively stable. On the solar front, MFCB is actively expanding its capacity, with an additional 62.4 MWp expected to be commissioned in the latter half of 2025, bringing the total to 94.5 MWp. The company’s pre-qualification for the Battery Energy Storage Scheme (BESS) further positions it in emerging renewable energy segments.
Resources and Packaging Divisions: Battling Headwinds
Both the Resources and Packaging Divisions face a challenging operating environment. Subdued domestic and regional demand, intensified competition, and industry overcapacity are key concerns. Management is focused on enhancing production cost efficiencies, broadening customer bases, and delivering innovative, value-added solutions. Recent capacity expansions in the Packaging Division are expected to exert short-term margin pressure but are strategically aimed at capturing greater market share as conditions improve. Both divisions are expected to deliver satisfactory earnings performance in 2025.
Edenor (Joint Venture): Awaiting Stability
The Group’s share of losses from its oleochemical joint venture, Edenor, doubled in 1Q2025 due to plant instability, a scheduled catalyst change, and a recent gas pipeline explosion that severely disrupted gas supply. While repairs and upgrades are largely complete, the ongoing gas supply curtailment means losses are expected to persist into 2Q2025. MFCB remains optimistic that Edenor can return to profitability in the second half of 2025, assuming normalized gas supply and stable plant performance.
Food Security Division: Gradual Improvement
The newly acquired Food Security Division reported a RM1.2 million loss in 1Q2025 on RM22.7 million revenue. While not expected to contribute significantly to profits in 2025, gradual earnings improvement is anticipated from increasing mature acreage of long-term crops and expansion of greenhouse farming initiatives.
Dividends: A Return to Shareholders
While no interim dividend was declared for 1Q2025, MFCB’s Board declared a second and final dividend of 4.50 sen per ordinary share for the financial year ended 31 December 2024. This dividend was paid to entitled shareholders on 18 April 2025, reflecting the company’s commitment to shareholder returns.
Summary and
Mega First Corporation Berhad’s first quarter of 2025 paints a picture of resilience in its core Renewable Energy segment, which continues to be a stable earnings driver. The strategic acquisition of water rights and the commissioning of the fifth turbine at Don Sahong are positive developments. However, the Group’s overall profitability was significantly impacted by non-recurring factors and persistent challenges in its Resources and Packaging divisions, alongside substantial losses from its joint venture, Edenor.
The management’s proactive stance in addressing operational issues and expanding solar capacity is encouraging. The strong operating cash flow generated in the quarter provides a solid foundation to navigate the current headwinds. However, the uncertainties surrounding global economic conditions and the specific challenges faced by Edenor remain key areas to monitor.
Key risk points to consider moving forward include:
- The continued instability and gas supply disruptions affecting the Edenor joint venture, which could prolong its losses.
- Intensified competition and subdued demand impacting the profitability of the Resources and Packaging divisions.
- Potential adverse foreign exchange movements, as a significant portion of borrowings are unhedged USD-denominated loans.
- The broader global economic slowdown and its ripple effects on investment and consumption across MFCB’s diverse segments.
The company’s long-term prospects hinge on the successful stabilization of Edenor, effective cost management in its competitive segments, and the continued expansion of its renewable energy portfolio.
What are your thoughts on MFCB’s latest performance? Do you believe the strategies in place will help the company overcome its current challenges and unlock further growth, especially with the expansion of its solar energy capabilities? Share your insights and perspectives in the comments below!
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