Core Data Highlights: Navigating the Numbers

MKH Berhad’s second quarter of Financial Year 2025 (FY2025) presented a mixed picture, with a decrease in revenue but a stable profit before tax compared to the same period last year. However, looking at the year-to-date performance, the company shows significant growth in profitability.

Quarter-on-Quarter Performance (Q2 FY2025 vs. Q2 FY2024)

For the quarter ended 31 March 2025, MKH Berhad reported:

Despite a 17.7% decline in revenue, the company managed a slight 0.5% increase in profit before tax, indicating improved efficiency or shifts in revenue mix. However, profit attributable to owners and basic earnings per share saw declines of 14.6% and 14.5% respectively.

Year-to-Date Performance (YTD FY2025 vs. YTD FY2024)

Over the six months ended 31 March 2025, the picture is more encouraging:

While year-to-date revenue decreased by 17.8%, profit before tax surged by an impressive 18.3%. This significant improvement in profitability, despite lower top-line figures, suggests strong operational leverage or a favorable shift in segment contributions. Profit attributable to owners and basic earnings per share saw a modest decrease of 3.8% each.

Quarter-on-Quarter Comparison (Q2 FY2025 vs. Q1 FY2025)

Comparing the current quarter with the preceding quarter (Q1 FY2025) reveals a sequential decline in performance:

The decline in Q2 FY2025 compared to Q1 FY2025 was primarily attributed to lower Crude Palm Oil (CPO) production and a loss on changes in fair value of biological assets in the plantation division, coupled with lower revenue and profit recognition from the property development division.

Diving Deeper: Segmental Performance (YTD FY2025 vs. YTD FY2024)

Understanding the contributions of each business segment is crucial:

• Property Development: Navigating Challenges

  This division saw a significant revenue decrease of 34.1% to RM215.2 million and a substantial 62.6% drop in profit before tax to RM12.1 million. This was mainly due to delays in progress for TR2 Residence @ Jalan Tun Razak and the preliminary stage of newly launched projects like Residensi Naluri and Gaya Residency. However, the impact on gross profit was mitigated by a fair value gain of RM10.8 million from the transfer of land held for property development to investment properties.

  Despite the current quarter’s softness, the division boasts strong unbilled sales of RM559.0 million, providing future revenue visibility.

• Plantation: The Star Performer

  The plantation segment emerged as a key driver of profitability, recording an 18.1% increase in revenue to RM198.8 million and an impressive 110.1% surge in profit before tax to RM69.2 million. This stellar performance was primarily driven by higher average selling prices for crude palm oil (CPO) and palm kernel (PK), alongside the commencement of crude palm kernel oil sales in February 2025.

  The average CPO price rose by 12.1% to RM3,916/MT, while PK prices soared by 49.0% to RM2,711/MT for the period.

• Hotel and Property Investment: Steady but Soft

  This division maintained a stable revenue of RM17.3 million, a marginal decrease of 0.2%. However, profit before tax declined by 10.4% to RM5.0 million. This was largely due to the termination of an operating lease agreement with an existing international school in October 2024, with the new lease commencing only in December 2024.

• Trading: Internal Support

  The trading division experienced a 37.3% drop in revenue to RM35.1 million but managed to maintain its profit before tax at RM1.4 million. This segment’s sales of building materials are heavily reliant on the Group’s own development projects, accounting for approximately 70% of its sales.

• Financial Health Snapshot

  As of 31 March 2025, MKH Berhad’s total assets stood at RM3.39 billion, with total equity at RM2.13 billion. Net assets per share improved slightly to RM3.19 from RM3.16 as at 30 September 2024. The company’s cash and cash equivalents significantly increased to RM635.4 million, up from RM417.6 million a year ago, providing a strong liquidity position. Total borrowings increased to RM466.2 million from RM443.0 million.

Risks and Prospects: Charting the Future

The Malaysian economy, which grew by 5.1% in 2024, is expected to remain resilient in 2025, driven by investment activities and household spending. Bank Negara Malaysia’s decision to keep the Overnight Policy Rate (OPR) unchanged at 3% and reduce the statutory reserve requirement ratio (SRR) to 1% is expected to inject liquidity into the banking system, potentially benefiting the property sector.

Strategic Initiatives and Outlook:

• Property Development: Leveraging Unbilled Sales and New Launches

  MKH Berhad continues to ride on its strong unbilled sales of RM559.0 million. The company plans to launch new projects in 2025 with an estimated Gross Development Value (GDV) of approximately RM835.6 million. These include landed retail shops, residential developments, and high-rise service apartments strategically located in Kajang and Kuala Lumpur. The Group aims to monetise its existing inventories and leverage digital marketing to boost sales.

  Current take-up rates for key projects remain robust: Nexus @ Taman Pertama (74%), MIRAI Residences (98% apartments, 99% retail), TR2 Residence (90%), Kajang East Avenue 2 (100%), Akina @ Kajang 2 (50%), Residensi Naluri (43% apartments, 100% retail), and Gaya Residency (26%).

• Plantation: Sustained Demand and Efficiency Drives

  The plantation segment in Indonesia is expected to remain well-supported by market demand for CPO, with prices trading between RM3,600/MT to RM3,800/MT (net of export levy and duty). The Group is focused on enhancing water management, maximising crop collection and quality through mechanisation, and optimising software applications to improve production efficiency and Oil Extraction Rate (OER) amidst rising labour costs.

• Hotel and Property Investment: Recovery in Business Activities

  Retail properties like Plaza Metro Kajang and Metro Point Complex, along with RHR Hotel @ Kajang, are showing better performance due to increased business activities. The RHR Hotel maintains an average occupancy rate of 49%, supported by domestic business travelers and agencies.

Key Risks to Monitor:

While the outlook is generally positive, investors should be aware of potential risks:

1. Property Market Dynamics: Despite the positive economic outlook, the property market remains sensitive to interest rate changes, consumer sentiment, and oversupply in certain segments. Delays in project completion or slower-than-expected take-up rates could impact the property development division’s performance.
2. Commodity Price Volatility: The plantation segment’s profitability is highly dependent on global CPO and PK prices, which are subject to fluctuations driven by supply-demand dynamics, weather patterns, and geopolitical events.
3. Contingent Liabilities: The ongoing dispute regarding liquidated ascertained damages (LAD) for the KTM Komuter Station project, involving a subsidiary SKSB, presents an unquantifiable contingent liability. While management believes the LAD cannot be computed yet, it remains a point of uncertainty.
4. Foreign Exchange Fluctuations: Given the plantation operations in Indonesia, currency exchange rate volatility could impact the Group’s reported earnings when translating foreign currency denominated results.
5. Execution Risk for New Launches: The successful execution and market acceptance of the planned RM835.6 million GDV new launches will be crucial for the Group’s future growth.