PETALING JAYA: MKH Bhd’s focus on developing affordable homes will help the company continue to generate steady earnings despite the slowdown in the local property market.
AllianceDBS Research said in a report yesterday the company’s strong orderbook was testament that there was robust demand for affordable homes.
“Unbilled property sales had reached a record high of RM843mil as at March 2015, representing 1.6 times its 2015 (ending Sept 30) property revenue. We understand property sales had reached RM600mil as at June, and is on track to meet its 2015 target of RM850mil.
“This is largely driven by its focus on affordable homes, which remain popular with buy-to-stay homebuyers.”
The research house said MKH’s property crown jewel is the 220-acre Kajang 2 flagship development, where more projects would be rolled out closer to the completion of the Mass Rapid Transit (MRT) in 2017.
“We conservatively estimate the land alone to be worth over RM300mil,” it said.
AllianceDBS Research added that MKH’s property sales had been resilient over the past two years despite the slower market, thanks to its focus on affordable homes, in which the group has a good track record.
“MKH never employed the Developer Interest-Bearing Scheme when its peers introduced the incentive package in the past few years to attract buyers. This suggests the focus on affordable homes has helped to boost its sales.”
According to the research house, MKH still has about 1,400 acres of land bank, about half of which is located in the booming Kajang-Semenyih growth corridor and spurred by the development of the MRT connectivity.
“The land bank has generated more than RM10bil in gross development value and has underpinned earnings visibility for more than 10 years. However, MKH continues to actively scout for strategic land bank,” it said.
Separately, the research house said the company’s plantation business was already self-sustaining, adding that MKH had started servicing its US$85mil (RM323mil) borrowings since March.
“Thanks to the young tree profile, first-half 2015 fresh fruit bunch volume grew 41% year-on-year and helped to offset the impact of the low crude palm oil (CPO) price.
“A sustainable recovery of CPO prices will be a major catalyst for MKH because of the naturally high operating leverage for the plantation business,” it said.