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Meanwhile, another RM42 million or 30.8% of the total proceeds will be used for capital expenditures for existing plantation lands, the upkeep of the existing palm oil mill, the refurbishment of staff housing quarters, and the expansion of the electricity supply.
The group will also allocate RM33 million or 22% of the proceeds for loan repayments, and the remaining RM13.4 million or 9.8% for working capital and listing expenses.
M&A Securities is the adviser, underwriter and placement agent for the IPO. Kenanga Investment Bank is the joint writer and joint placement agent, while AmInvestment Bank is also the joint placement agent.
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 (refer to https://i.postimg.cc/vZWWskv4/MKH-EBIT.png) 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.
Over the past few years, MKH performance was boosted by the plantation performance. But its core is still property development. So I would peg its performance with those of the property sector. Over the past 12 years, the mean ROE of the large Bursa property companies averaged 7% as per https://www.i4value.asia/2021/06/will-malaysian-property-industry-turn.html#more. MKH average ROE over the same period was 8%. I think the plantation sector helped to give it a better performance.
