MKH: Exciting Prospect Ahead

Result Update

For QE31/12/2017, MKH's net profit rose 171% q-o-q but dropped 59% y-o-y to RM16 million while revenue dropped 26% q-o-q & 26% y-o-y to RM194 million. Despite the drop in revenue by RM66.7 million, the profit before tax for the current quarter of RM27.4 million was higher compared to the immediate preceding quarter of RM17.0 million mainly due to improvement in loss before tax to RM0.4 million in the current quarter as compared to immediate preceding quarter loss before tax of RM12.8 million from the plantation division with lower average production cost and absence of biological assets written off of RM4.8 million. The lower revenue was mainly due to lower revenue from the property and construction division as the new development phases namely, Pinang and The Palm in Hill Park Shah Alam still at the preliminary stage of development.

Note: MKH's latest result was released on February 28, 2018.


Table: MKH's last 8 quarterly results


Graph: MKH's last 20 quarterly results

Future Prospect

In a recent article in The Edge Daily entitled"A Year of Harvest for MKH", MKH's Executive Chairman Tan Sri Alex Chen spoke about its palm oil estate achieving bumper harvest for current financial year as the palm oil trees reach their productive age, with projected output of 28 tonnes per hectare. In addition, its property development segment is expected to do well as it will be launching more projects with total GDV of RM1.15 billion. This will add to its total unbilled sales of RM903.5 million as at 31/12/2017.

Financial Position

MKH's financial position as at 31/12/2017 is deemed adequate with current ratio at 1.66 times and total liabilities to total equity at 1.07 times.

Valuation

MKH (closed at RM1.53 last Friday) is now trading at a trailing PER of 6.9x (based on last 4 quarters' EPS of 22.16 sen). Dividend yield of 3.3% is still respectable despite heavy investment in the plantation segment.

Technical Outlook 

MKH has declined substantially from its peak at RM3.50 in June 2014. Currently it seems to have found good support at the horizontal line at RM1.50. If this strong support failed, its next strong support is at RM1.00.


Chart: MKH's monthly chart as at Mar 16, 2018 (Source: Shareinvestor.com)

Conclusion

Based on satisfactory financial performance, attractive valuation and positive technical outlook, MKH is a good stock to consider for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.