Plantations saved MKH

[i4value]

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”

[i4value]

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. 

I have an updated valuation of MKH that shows that it is still an investment opportunity

• I estimated its Asset Value as RM3.22 per share
• I estimated its Earnings Value as RM4.68 per share.



For more insights to MKH refer to page 20 of INVEST