MKH’s Earnings Boosted by One-Off Disposal Gain as Property and Plantation Segments Face Headwinds

MKH Bhd reported a significantly higher net profit for the second quarter ended March 31, 2026 (2QFY2026), but the improvement was largely driven by a one-off gain from the disposal of its furniture manufacturing business in China rather than stronger core operating performance.

While net profit increased 58% year-on-year to RM28 million, group revenue declined 32.3% to RM148.6 million, reflecting weaker contributions from both its property development and plantation divisions.

Disposal Gain Masks Weaker Core Earnings

The key contributor to the stronger bottom line was a RM26.3 million gain arising from the disposal of Vast Furniture Manufacturing (Kunshan) Co Ltd to a China-based buyer, completed in January 2026.

Excluding this one-off gain, MKH’s underlying profitability would have been substantially lower. Based on reported figures, profit before tax would have fallen to approximately RM12.4 million compared to RM32.6 million recorded in the corresponding quarter last year.

This suggests that the group’s core businesses are currently facing operational challenges despite the headline profit growth.

Property Development Division Slips into Loss

The most notable weakness came from MKH’s property development segment.

For the first half of FY2026, the division recorded a loss before tax of RM9.8 million compared to a profit before tax of RM12.1 million a year earlier. Revenue from the segment declined 37.3% to RM134.9 million.

The decline was mainly attributed to:

Construction delays at TR2 Residence Jalan Tun Razak due to contractor-related issues.
Slower revenue recognition from newly launched projects that remain in early construction phases.
Lower overall development progress across ongoing projects.

Although earnings recognition has slowed, the projects themselves continue to record sales, providing future revenue visibility.

Strong Unbilled Sales Support Future Earnings

One positive takeaway is MKH’s healthy unbilled sales position of RM443.9 million as of March 31, 2026.

The unbilled sales comprise:

RM154.2 million from TR2 Residence Jalan Tun Razak.
RM167 million from Residensi Naluri.
RM87.3 million from Gaya Residency.
RM22.3 million from Kajang 2 Precinct 3 Avenue.
RM13.1 million from MKH Avenue 2.

These sales have already been secured but will only be recognised as revenue as construction progresses, providing earnings visibility over the coming quarters.

Residential Projects Continue to Perform Better Than Commercial Components

MKH’s project sales performance highlights a continuing trend in the property market, where residential units generally outperform retail and commercial products.

TR2 Residence Jalan Tun Razak

The flagship development achieved a strong 90% take-up rate for its 918 residential units, with a GDV of RM506 million.

Residensi Naluri

Residential units: 66% take-up.
Retail component: Fully sold.

The project carries a combined GDV exceeding RM260 million.

Gaya Residency

Tower C residential units: 57% take-up.
Retail units: Only 8% take-up.

The weak performance of the retail component reflects ongoing caution among investors and businesses towards commercial property purchases.

Kajang 2 Precinct 3 Avenue

The project achieved full take-up for all 33 shop units, demonstrating demand for well-positioned commercial properties in selected locations.

MKH Avenue 2

Launched in March 2026, the project has achieved only 11% take-up for its 50 shop units, suggesting slower demand for newly launched commercial properties.

Overall, the results indicate that buyers remain more comfortable purchasing residential products compared to retail and commercial assets.

Plantation Division Faces Operational Challenges

MKH’s plantation business contributed 43.8% of group revenue, making it the largest revenue contributor during the period.

However, profitability weakened considerably.

Profit before tax from the plantation segment fell 51.9% to RM33.3 million due to several factors:

Lower crude palm oil (CPO) sales volume.
Reduced average selling prices.
Shipment delays that pushed approximately 3,000 metric tonnes of CPO sales into April 2026.
Adverse foreign exchange effects from a weaker Indonesian rupiah.

CPO sales volume declined from 44,919 metric tonnes to 33,807 metric tonnes year-on-year.

The weaker performance was partially offset by stronger crude palm kernel oil sales, which nearly doubled during the period.

Batu Kawan’s Takeover Move Becomes Major Corporate Catalyst

A significant development during the quarter was Batu Kawan Bhd’s proposed acquisition of a controlling stake in MKH through its subsidiary, Whitmore Holdings.

The proposed transactions involve:

Acquisition of a 29.6% stake for RM340.9 million.
Acquisition of an additional 18.1% stake for RM208.9 million.

The combined deal is valued at approximately RM549.8 million and would give Batu Kawan a 47.7% interest in MKH.

Once completed, Batu Kawan will be required to undertake a Mandatory General Offer (MGO) for the remaining shares under Malaysian takeover regulations.

The move represents a major consolidation exercise involving one of Malaysia’s leading plantation groups and could potentially reshape MKH’s long-term strategic direction.

Upcoming Launches Worth RM432 Million

To support future growth, MKH plans to launch projects with a combined GDV of RM432 million during FY2026, including:

Annya Kajang 2 Precinct 3 Phase 3.
Residensi Pinang Hillpark, Shah Alam.
Residensi Naluri Block C.
Gaya Residency Tower B.

Management expects the property division to record moderate expansion supported by stable interest rates and continued economic growth.

Strong Balance Sheet Remains a Key Strength

Despite weaker operating performance, MKH continues to maintain a healthy financial position.

As at March 31, 2026:

Cash and cash equivalents stood at RM613.4 million.
Total borrowings were RM451.2 million.
Net assets per share remained stable at RM3.26.

The strong cash position provides flexibility for future developments, land acquisitions, and potential corporate restructuring following Batu Kawan’s proposed takeover.

Conclusion

MKH’s 2QFY2026 results present a mixed picture. While headline net profit rose sharply, the improvement was largely driven by a one-off disposal gain rather than stronger operating performance. Both the property development and plantation divisions experienced earnings pressure from project delays, lower revenue recognition, weaker CPO sales volumes, and currency headwinds.

However, the group still possesses several positive fundamentals, including RM443.9 million in unbilled sales, a strong balance sheet, ongoing project launches worth RM432 million, and the potential strategic benefits arising from Batu Kawan’s proposed acquisition.

Going forward, investors will likely focus on the recovery of construction progress at TR2 Residence, sales momentum across new launches, plantation performance, and the outcome of Batu Kawan’s takeover exercise as key drivers of MKH’s future growth.