Building Resilience Annual Report 2021
Cover Rationale Building Resilience Our Annual Report 2021 cover depicts the transformation to thenewnormal andemphasising on business resilience. The COVID-19 pandemic has made it more challenging to manage different stakeholders’ interests. MKH has embraced the challenges by building resilience across our businesses. Becoming more resilient not only help our Group and our valuable employees get through difficult circumstances, but it also empower us to grow, accept changes and adapt to the new normal. 42nd Annual General Meeting will be held fully virtual through live streaming, details as follows: Date : 9 March 2022 Time : 10:00 a.m. Broadcast Venue : Emerald Ballroom, 1st Floor, RHR Hotel @ Kajang, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan, Malaysia.
2 003 Vision, Mission and Core Value 005 Corporate Milestone 007 Company Profile 009 Awards and Achievements 010 FY2021 Highlights 011 5 Years Group Financial Highlights 013 Corporate Information 014 Corporate Structure 017 Chairman’s Statement 023 Management Discussion and Analysis Report 029 Sustainability Report 041 Directors’ Profile 044 Profile of Key Senior Management 1CORPORATE INFORMATION 2 046 Corporate Governance Overview Statement 065 Audit Committee Report 073 Statement on Risk Management and Internal Control 078 Additional Compliance Information CORPORATE GOVERNANCE 3 079 Financial Statements OTHER CORPORATE INFORMATION 237 List of Properties 246 Analysis of Shareholdings 249 Directors’ Shareholdings 250 Notice of Forty-Second Annual General Meeting 256 Statement Accompanying Notice of Forty-Second Annual General Meeting Form of Proxy FINANCIAL CONTENTS
MKH Berhad 3 Vision Mission To be a leading corporation in delivering sustainable growth. To lead the market by continually developing and innovating quality products and projects that meet and exceed market expectations. To be responsive to market trends and customer needs. To provide conducive working environment that will encourage the application of creative energy that is guided by best industry practices. To be a good and responsible corporate citizen. Toprovidea sustainable return toshareholders. Vision & Mission
4 Annual Report 2021 Grounded by the promise of DELIVERING VALUE, we take pride in living by a set of shared core values that defne our culture and business operations, thus helping us to create value for our clients, our people and our organisation. Core Value STABLE We use our expertise, business acumen andfnancial resources toprovideaholistic value to all stakeholders and customers. DYNAMIC We are always enthusiastic in looking out for new opportunities and delivering innovative products into the market. RESPONSIVE We proactively engage with the community to understand their needs and concerns with the aim of delivering solutions for betterment of the situations. FRIENDLY We greet our colleagues, customers and stakeholders in an approachable manner with a smile and are considerate for each other’s feeling. RELIABLE We utilise our experience and fnancial strength to deliver on our promises and complete all projects on time or earlier. PROFESSIONAL We deal with our stakeholders and customers in an efficient, knowledgeable and responsive manner.
MKH Berhad 65 Corporate Milestone Guided by visionary leadership, we have forged a strong foundation through successful diversification of businesses that empowers the creation of true value for our stakeholders. We are committed to continually refine our business models to ensure long-term success. 1979 • Established as private limited company: Srijang Bena Sdn. Bhd. • Built first landed residential development: Taman Bukit Indah 1983 • Established building materials trading division: Metro Kajang Trading Sdn. Bhd. 1993 • B uilt frst joint venture development with Selangor state government: B andar Teknologi Kajang • Built frst high-rise development in Kajang 1994 • Established property investment sector • B ulit frst shopping complex in Kajang: Plaza Metro Kajang 1995 • S rijang Bena Sdn. Bhd. rebranded: Metro Kajang Holdings Berhad • Officially listed on Bursa Malaysia as “MKH” under stock code “6114” 2000 • Established Furniture Manufacturing Division in China: Vast Furniture Manufacturing (Kunshan) Co. Ltd
7 Annual Report 2021 6 Corporate Milestone 2007 • Built second shopping complex in Kajang: Metro Point Complex 2008 • Established oil palm plantation sector • Acquired PT Maju Kalimantan Hadapan 2011 • Metro Kajang Holdings Berhad rebranded: MKH Berhad 2014 • Metro Kajang Trading Sdn. Bhd. rebranded: MKH Building Materials Sdn. Bhd. 2017 • PT Maju Kalimantan Hadapan achieved Indonesian Sustainable Palm Oil certifcation 2020 • P T Maju Kalimantan Hadapan received Gold Award for Best Foreign Owned Company
MKH Berhad 7 Company Profile Established in 1979, MKH Berhad (“MKH”) is a Malaysian public listed company originating from Kajang, Selangor that has established a prominent brand presence in Selangor, Kuala Lumpur and East Kalimantan, Indonesia. As a distinguished property developer involved in transforming Kajang, our property portfolio comprises well-planned landed residentials, townships and integrated high rises in the Klang Valley. As part of our diversifcation with an aim to create and deliver sustainable value to our stakeholders, we ventured into oil palm cultivation in East Kalimantan, Indonesia in 2008. The Group’s other businesses include property investment, building materials trading and furniture manufacturing. To deliver value creation to homebuyers, MKH continuously embark on new ways to enhance liveability standards for our homebuyers. Eco-friendly features are incorporated into our houses and apartments and many of our developments are strategically located close to the KTM commuter or MRT station. We innovate homes that are suitable for multi-generational living. Our oil palm plantation comprises of 2 estates in East Kalimantan held under PT Maju Kalimantan Hadapan (“PT MKH”) and PT Sawit Prima Sakti (“PT SPS”) totalling 18,338 hectares (45,438 acres) together with a 90 MT per hour CPO mill. The estates recorded good fresh fruit bunches (“FFB”) yield averaging 28 to 30 MT/hectare per year. For the fnancial year 2021 (“FY2021”), the crude palm oil (“CPO”) production was 89,000 MT. CORE BUSINESS Building Materials Trading Property Investment Property Development and Construction Plantation
8 Annual Report 2021 Company Profile We established our property investment division in 1996. This division is anchored by our 2 eco-friendly solar panel equipped shopping malls – Plaza Metro Kajang and Metro Point Complex, which are strategically located in Kajang town centre and offer extensive range of groceries, leisure and eatery conveniences for the community. For MKH Building Materials Sdn. Bhd., this division was originally established as a purchasing arm to support our property development division in 1983. To generate long-term sustainable growth, it evolved into a reputable supplier of quality products to contractors and property-related businesses, with nearly 4 decades in the trading industry. Guided by its core values and beliefs, MKH is mindful of the need to have a sustainable growth strategy and supports it by taking into account sustainable practices in economic, environmental and social aspects. Throughmeaningful social investment andcommunityengagement, we aspire to foster stable relationships with our key stakeholders as well as the greater community, and we are driven by determination in our journey forward towards a sustainable future. The Company’s roots can be traced back to its establishment in Listed on the Main Market of Bursa Malaysia Securities Berhad in 1979 1995 MKH Berhad headquarters
MKH Berhad 9 Awards & Achievements FY2021 Plantation Plantation Property In FY2021, MKH ranked 13th among Top 30 Property Developers in Malaysia at The Edge Malaysia Top Property Developer’s Awards 2021 with high scores in innovation & creativity for development projects that create value for our homebuyers and investors. PT Maju Kalimantan Hadapan was awarded by the Provincial Government of East Kalimantan the Zero Accident Award for the period of 1 June 2017 until 31 December 2020. PT Maju Kalimantan Hadapan received the Gold Award for COVID-19 Prevention Program at Workplace from the Provincial Government of East Kalimantan.
10 Annual Report 2021 FY2021 Highlights Achieved Group Revenue of RM913.6 million Achieved Proft Before Tax of RM161.1 million Contributed approximately RM664,033 through community engagement that supported a total of 50 beneficiaries which included education institutions, local authorities and non-proft organisation PT Maju Kalimantan Hadapan is planted with 14,877 hectares of oil palm trees aged between 10 and 13 years old, while PT Sawit Prima Sakti is planted with 1,531 hectares of trees aged between 4 and 10 years old • MKH Ganjaran Raya 2021 – 21 residential and commercial projects • MKH Super Saver Merdeka – 22 residential and commercial projects Achieved fresh fruit bunches (“FFB”) production of 441,000 MT with average FFB yield of 28 MT per hectare Developer in Malaysia during the The Edge Malaysia Top Property Developers Awards 2021 Launched three (3) property developments which contributed 57% of the total FY2021 new sales of RM417.5 million PT Maju Kalimantan Hadapan donated 50 units of Oxygen Regulators to hospital in East Kalimantan • Work From Home • Air Purifier units at common areas in the office • Undergo a Covid-19 self-test every two weeks • Established strict SOPs as per Ministry of Health guidelines Home Ownership Campaign 2020/2021 Monitored employees’ health and safety Top 13th
MKH Berhad 11 * With the Companies Act 2016 (“New Act”) coming into effect on 31 January 2017, the credit standing in the share premium account has been transferred into the share capital account pursuant to the transitional provisions set out in Section 618 (2) of the new Act. @ Attributable to the equity holders of the Company. The fnancial statements for FY2021 to FY2018 (Restated) are prepared in accordance with Malaysian Financial Reporting Standards (MFRSs). The fnancial statements of the previous fnancial years (FY2017) was prepared in accordance with Financial Reporting Standards (FRSs) in Malaysia. 2021 2020 2019 2018 2017 RM’000 RM’000 RM’000 RM’000 RM’000 (Restated) INCOME STATEMENT Revenue 913,572 911,926 1,121,657 1,081,701 1,068,834 Proft before taxation 161,054 116,476 158,373 128,232 193,592 Profit After Taxation 102,708 66,267 97,477 76,613 124,843 Profit Attributable to Shareholders 80,435 41,737 82,561 70,865 128,207 of the Company BALANCE SHEET Issued and Paid up Capital 654,459* 654,459* 654,459* 654,459* 613,315* Shareholders’ Equity 1,706,069 1,632,609 1,615,885 1,552,635 1,476,995 RATIOS Single Tier Dividend Per Share (sen) 3.50 3.00 4.00 3.50 5.00 Net Earnings Per Share (sen) 13.93 7.22 14.25 12.19 24.18 Net Assets Per Share (RM) 2.95 2.83 2.79 2.67 2.62 Debt/Equity ratio (%) 32.2 40.0 42.4 43.3 52.3 Return on Shareholders’ Equity (%) 4.7 2.6 5.1 4.6 8.7 5 Years Group Financial Highlights @
12 Annual Report 2021 5 Years Group Financial Highlights Revenue (RM’000) Pro t Attributable to Shareholders of the Company (RM’000) Profit before taxation (RM’000) Shareholders’ Equity (RM’000) 2019 2019 2018 2018 2017 2017 2020 2020 2021 2021 1,068,834 128,207 193,592 1,476,995 1,081,701 70,865 128,232 1,552,635 1,121,657 82,561 158,373 1,615,885 911,926 41,737 116,476 1,632,609 913,572 80,435 161,054 1,706,069 2019 2019 2018 2018 2017 2017 2020 2020 2021 2021
MKH Berhad 13 Corporate Information BOARD OF DIRECTORS Y. Bhg. Tan Sri Dato’ Chen Kooi Chiew @ Cheng Ngi Chong Group Executive Chairman Y. Bhg. Tan Sri Datuk Chen Lok Loi Group Managing Director Y. Bhg. Datuk Chen Fook Wah Deputy Managing Director En. Jeffrey bin Bosra Senior Independent Non-Executive Director Y. Bhg. Datuk Mohammad bin Maidon Independent Non-Executive Director Y. Bhg. Dato’ Lim Hong Shuan Independent Non-Executive Director Audit Committee Jeffrey bin Bosra (Chairman) Y. Bhg. Datuk Mohammad bin Maidon (Member) Y. Bhg. Dato’ Lim Hong Shuan (Member) Nomination Committee Jeffrey bin Bosra (Chairman) Y. Bhg. Datuk Mohammad bin Maidon (Member) Y. Bhg. Dato’ Lim Hong Shuan (Member) Remuneration Committee Y. Bhg. Datuk Mohammad bin Maidon (Chairman) Jeffrey bin Bosra (Member) Chief Financial Officer Kok Siew Yin (MIA 15343) Group Company Secretary Tan Wan San (MIA 10195) (SSM Practicing Certifcate No. 201908001048) External Auditors Deloitte PLT (AF 0080) Level 16, Menara LGB 1, Jalan Wan Kadir Taman Tun Dr. Ismail 60000 Kuala Lumpur Tel No : (603) 7610 8888 Fax No: (603) 7726 8986 Panel Solicitors Khaled Mutang Chan & Lim Ling & Theng Book Markiman & Associates Michael Chen & Co. Steven Tai, Wong & Partners Principal Bankers • Affin Bank Berhad • A l Rajhi Banking & Investment Corporation (Malaysia) Bhd • AmBank (M) Berhad • AmBank Islamic Berhad • Bank of China (Malaysia) Berhad • Bank Islam Malaysia Berhad • B ank Muamalat Malaysia Berhad • CIMB Islamic Bank Berhad • Hong Leong Bank Berhad • H ong Leong Islamic Bank Berhad • HSBC Bank Malaysia Berhad • H SBC Amanah Malaysia Berhad • I ndustrial and Commercial Bank of China (Malaysia) Berhad • Malayan Banking Berhad • Maybank Islamic Berhad • OCBC Bank (Malaysia) Berhad • OCBC Al-Amin Bank Berhad • RHB Bank Berhad • RHB Islamic Bank Berhad • U nitedOverseasBank (Malaysia) Berhad • United Overseas Bank Limited Registrar Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Tel No : (603) 2783 9299 Fax No: (603) 2783 9222 Registered Office Suite 1, 5th Floor Wisma MKH, Jalan Semenyih 43000 Kajang Selangor Darul Ehsan Tel No : (603) 8737 8228 Fax No: (603) 8736 5436 Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock Code : MKH Stock No : 6114 Corporate Website www.mkhberhad.com
14 Annual Report 2021 Corporate Structure PROPERTY AND CONSTRUCTION DIVISION NON-PROPERTY DIVISION • Achieve Acres S/B (85%) • Aliran Perkasa S/B (100%) • Amona MKH Ventures S/B (100%) (f.k.a. MKH IHS Precast S/B) • Budi Bidara S/B (100%) • Danau Saujana S/B (51%) • Dapat Jaya Builder S/B (100%) Rimbunan Melati S/B (45%) • Europixel S/B (100%) • Everland Asia Development S/B (100%) • Gabung Wajib S/B (100%) Alif Mesra S/B (65%) Amona Metro Development S/B (60%) Temara Pekeliling S/B (84%) • Gerak Teguh S/B (100%) • GK Resort Berhad (100%) PNSB-GK Resort S/B (70%) • Intelek Kekal (M) S/B (100%) • Intra Tegas (M) S/B (100%) • Kajang Resources Corporation S/B (100%) MKH Property Ventures S/B (51%) Panasonic Homes MKH Malaysia S/B (49%) • Kumpulan Indah Bersatu S/B (100%) Palga S/B (100%) Hiliran Juara S/B (100%) • MKHOil Palm (East Kalimantan) S/B (100%) (f.k.a. MKH Global Plantation S/B) PT Maju Kalimantan Hadapan (95%) PT Nusantara Makmur Jaya (100%) • Global Landscape Creation S/B (51%) • MKH Plantation S/B (100%) PT Sawit Prima Sakti (75%) • Intelek Murni (M) Berhad (100%) • Juda Universe S/B (60%) • Metro Kajang (Oversea) S/B (100%) Vast Furniture Manufacturing (Kunshan) Co. Ltd. (100%) • Metro Nusantara S/B (100%) • Metro Readymix S/B (100%) • Metro Tiara (M) S/B (100%) • Metro K.L. City S/B (100%) • Metro Kajang Construction S/B (100%) • MKH Development S/B (100%) • MKH Land (Aust) Pty Ltd (100%) • Nexus Starship S/B (100%) Quantum Density S/B (50.0004%) • Pelangi Binaraya S/B (100%) • Pelangi Semenyih S/B (100%) • Pelangi Seri Alam Development S/B (100%) Hillpark Resources S/B (100%) • Perkasa Bernas (M) S/B (100%) Daksina Harta S/B (40%) • Petik Mekar S/B (100%) • Serba Sentosa S/B (100%) • Serentak Maju Corporation S/B (100%) • Srijang Kemajuan S/B (99.99%) • Stand Allied Corporation S/B (100%) • Sumber Lengkap S/B (100%) • Suria Villa S/B (100%) • Vista Haruman Development S/B (55%) • MKH Building Materials S/B (100%) Sunway MKH Marketing S/B (49%) • MKH Credit Corporation S/B (100%) • MKH Food S/B (100%) • MKH Management S/B (100%) • MKH Resources S/B (100%) • Srijang Indah S/B (100%) Laju Jaya S/B (100%) Maha Usaha S/B (100%) Metro Emart S/B (100%) Hexapace S/B (100%) Mercu Jasakita S/B (100%)
Property Development & Construction As a property developer that started out in Kajang, we built our first residential township in 1979, followed by our first high-rise development in 1993, and Kajang’s first shopping complex in 1994. While our products have evolved over the past few decades to meet the ever-changing needs of the people, our brand promise remained the same - to deliver value to our stakeholders in the aspects of quality, affordability and practicality, and it is on the same principle that we stood by in our exploration and establishment of new business opportunities. Total Segment Profit Before Tax Contribution Contribution To Total Group Revenue 22% 56%
MKH Berhad 17 Chairman’s Statement Artist’s impression of Nexus @ Kajang Station, our freehold project strategically situated near Kajang Mass Rapid Transit (“MRT”) and KTM Komuter Train Integrated Station It has been another challenging year due to the COVID-19 pandemic which continue to impact the economy and life of everyone both locally and abroad. Despite the challenges, our Group recorded a commendable performance building on our strong vision and resilience. For FY2021, the Group’s proft before tax (“PBT”) increased by 38% to RM161.1 million (FY2020: RM116.5 million). A more detailed review of the Group’s performance is covered under the section on “Management Discussion and Analysis Report” in this Annual Report. Malaysia’s gross domestic product (“GDP”) is expected to grow between 5.5% and 6.5% in 2022 after a 4.5% contraction in the third quarter of 2021. The various stimulus packages implemented by the Government is expected to have spill over effects and provide additional boost to the economy in 2022. The Group continues to leverage on strong demand for affordable housing emphasising on affordable pricing, good location and the right product mix. For FY2021, thePropertyDevelopment andConstruction Division recorded a lower revenue and PBT of RM509.0 million and RM36.2 million respectively Dear Shareholders, On behalf of the Board of Directors and the management, it is my great pleasure to present to you the Annual Report of MKH Berhad (“MKH” or “the Group”) for the financial year ended 30 September 2021 (“FY2021”). mainly due to the temporary disruption of physical construction work for ongoing development projects arising from the Movement Control Order (“MCO”). In line with the good demand for transit-oriented urban development model (“TOD”), MKH has been developing TOD projects that are well-located along the Klang Valley transit system such as Nexus @ Taman Pertama in Cheras, MKH Boulevard 2 in Kajang, Nexus @ Kajang Station, MIRAI Residences @ Kajang 2 Precinct 1 (ongoing service apartment projects) and the new service apartment project known as TR2 Residence @ Jalan Tun Razak, Kuala Lumpur. The Group has been actively carrying out marketing activities through digital and social media platforms to widen our market reach and increase engagement with potential buyers, pacing new property launches and synergizing with the extension of the well-received Home Ownership Campaign (“HOC”).
18 Annual Report 2021 Chairman’s Statement As at 30 September 2021, the Group recorded an unbilled sales value of RM947.2 million that was mainly attributable to new and ongoing property development projects namely Hillpark Shah Alam, Inspirasi @ Mont Kiara, Kajang East Precinct 1, MKH Boulevard 2, Nexus @ Kajang Station, Bandar Teknologi Kajang Shops, Hillpark 3 Phase 1B Shops, Kajang East Avenue Shops, MIRAI Residences @ Kajang 2 Precinct 1 and Nexus @ Taman Pertama. For FY2021, the Plantation Division recorded a substantially higher revenue and proft before tax of RM294.5 million and RM101.9 million respectively mainly due to higher average crude palm oil (“CPO”) selling price and inclusion of unrealised foreign exchange gains of RM8.0 million. The announcement by the Indonesian Government on the shifting of the administrative capital of Indonesia to East Kalimantan have a positive effect as it will accelerate the economic and infrastructure development in East Kalimantan where our plantation is located. In recognising the importance of innovation in value creation for our businesses, our oil palm plantation located in East Kalimantan, Indonesia continues to expand on the use of mechanicalassisted collection of fresh fruits bunches (“FFB”) and the use of software apps for monitoring. The Plantation Division also utilises drones to enhance good agriculture practices and monitoring. The combined program assists management to analyse feld condition and palm growth; conduct palm census; monitor road access and water flows which contribute towards good estate management. We will continue to focus on our efforts to maximise CPO production and operation efficiency. The Plantation Division is operating as usual albeit with added biosecurity measures against COVID-19. To date, our plantation was able to ensure an uninterrupted business operation for continued sustainability and revenue generation. Part of our corporate social responsibilities (“CSR”) initiative included continued education of biosecurity measures for our employees and the general public, reinforced with donation of 100,000 masks to communities identifed to be at risk from the pandemic. Unloading of fresh fruit bunches from our plantation estate to our CPO mill
MKH Berhad 19 Chairman’s Statement Artist’s impression of landscape at Kajang 2 Precinct 2 Our Building Materials Trading Division has also established its own ironmongeries trademarked EGON and sanitary fttings, CASCADA to ft the aesthetically needs of modern residential and commercial projects that can enhance the prestige of the property. At our Hotel and Property Investment Division, the Group extended support to our tenants at Plaza Metro Kajang and Metro Point Complex by giving rental rebates for eligible tenants to ease their fnancial burdens during the Movement Control Order. During the fnancial year, the Group contributed approximately RM664,000 in community engagement that beneftted 50 educational institutions, community clubs and charitable organisations. MKH’s sustainability progress is further detailed in the section on “Sustainability Report” of this Annual Report, from page 29 to page 40. Group have contributed approximately RM664,000 to educational institutions community clubs charitable organisations
20 Annual Report 2021 Chairman’s Statement For FY2021, a frst interim dividend of 3.5 sen per ordinary share amounting to approximately RM20.2 million was declared on 29 November 2021 and paid on 7 January 2022. This represents a distribution of approximately 25.1% of the Group’s net proft attributable to shareholders. Moving forward, we are confdent that the Group is well positioned to create sustainable businesses with our TOD model. While the Klang Valley residential market in general is foreseen to remain challenging, we are confdent that our strategy of building affordable housing at good location with TOD concept will continue to receive good take up rate. With the on-going vaccination programme by the Government and with more than 97% of adult Malaysians fully vaccinated, we can increase our engagement with potential buyers to visit our sales gallery and promoting our new property launches in addition to our digital marketing campaign. We are also optimistic that crude palm oil (“CPO”) price will remain well supported in 2022 with the current CPO price trading above RM4,000/MT (net of export levy and duty) in Indonesia. This is due to continued good demand and a tighter global palm oil stocks, due to wet weather impact and labour constraints arising from the COVID-19 pandemic. On behalf of the Board of Directors, I would like to express our sincere appreciation and thanks to our valued shareholders, customers, bankers, business associates and regulatory authorities for their continued support towards the Group. I would also like to extend my heartfelt gratitude to my Board members, management team and all employees for their commitment and teamwork towards the Group’s success. I believe that MKH Berhad is well positioned to achieve greater success in year 2022 with the continued support from all of our stakeholders. Thank you. Tan Sri Dato’ Alex Chen Kooi Chiew Group Executive Chairman Implementation of mechanical-assisted collection of FFB has signifcantly improved in feld mobility and productivity at our oil palm plantation Artist’s impression of Nexus @ Taman Pertama, another TOD project near MRT Taman Pertama
Plantation Oil Palm Plantation MKH Berhad (“MKH” or “The Group”) ventured into oil palm plantation in 2008. The Group has 18,338 hectares (45,438 acres) of plantation land in East Kalimantan, about 75km from Kota Samarinda, Indonesia. Total Segment Profit Before Tax Contribution Contribution To Total Group Revenue 63% 32%
MKH Berhad 23 Management Discussion and Analysis Report This Report provides a discussion and analysis of the Group’s financial performance for the financial year ended 30 September 2021 (“FY2021”), including explanations for significant fluctuations over the previous financial year. The Group’s principal business segments, which remained unchanged from the preceding year, comprise Property Development and Construction; Plantation; Hotel and Property Investment; and Others. The segment “Others” comprises Trading, Manufacturing, Investment Holding and other nonreportable operations. FY2021 FINANCIAL HIGHLIGHTS The Group’s revenue and proft before tax for the fnancial year under review and the preceding year are summarised as follows: For the fnancial year ended 30 September 2021, the Group’s revenue and proft before tax (“PBT”) increased by 0.2% and 38.3% to RM913.6 million (FY2020: RM911.9 million) and RM161.1 million (FY2020: 116.5 million) respectively mainly due to the contribution from Plantation Division as a result of higher average selling price of CPO. In addition, the Group recorded unrealised foreign exchange gains of RM8.0 million as compared to the preceding year unrealised foreign exchange losses of RM13.9 million mainly from the Plantation Division following the strengthening of Indonesian Rupiah against its borrowings in United States (“US”) Dollar (30-09-2021: USD1: Rp14,307; 30-09-2020: USD1: Rp14,918). Excluding the unrealised foreign exchange gains of RM8.0 million (FY2020: unrealised foreign exchange losses of RM13.9 million), the Group’s PBT was higher by 17.4% at RM153.1 million (FY2020: RM130.4 million) which was mainly due to higher gross proft from Plantation Division as a consequence of higher average CPO price of RM2,945/MT (FY2020: RM2,227/MT), lower loss on changes in fair value of investment properties totalling RM5.0 million (FY2020: RM12.2 million) and the absence of fair value losses from transfer of inventories to investment properties (FY2020: RM5.2 million) coupled with lower interest expense from unwinding of discount on landowners’ entitlement of RM7.6 million (FY2020: RM19.0 million) from the Hotel and Property Investment Division and the Property Development and Construction Division respectively. 2021 2020 Changes RM’000 RM’000 (%) Group Revenue 913,572 911,926 0.2 Segments • Property 508,985 561,833 (9.4) Development and Construction • Plantation 294,458 250,453 17.6 • Hotel and Property 23,949 25,036 (4.3) Investment • Others 86,180 74,604 15.5 Group Profit 161,054 116,476 38.3 Before Tax Segments • Property 36,222 73,839 (50.9) Development and Construction • Plantation 101,903 26,192 289.1 • Hotel and Property 955 (7,994) 111.9 Investment • Others 21,974 24,439 (10.1) Artist’s impression of MKH Boulevard 2, a 42-storey high-rise development situated next to Kajang Mass Rapid Transit (“MRT”) and KTM Komuter Train Integrated Station
24 Annual Report 2021 Management Discussion and Analysis Report Further details of the Group’s fnancial performance are discussed in the segments below. LIQUIDITY AND CAPITAL RESOURCES For FY2021, the cash and cash equivalents of the Group increased signifcantly by RM49.7 million to RM412.1 million as at 30 September 2021 (FY2020: decreased slightly by RM9.4 million to RM359.5 million as at 30 September 2020), which was culminated from the following cash flows activities: For FY2021, the Group recorded higher cashflows generated from operating activities following the contribution from Plantation Division and ongoing project developments. The cashflows used in fnancing activities increased signifcantly following a net repayment of bank borrowings totalling RM105.7 million in FY2021 via surplus funds from completed property development projects, prepayments of some bank loan installments by PT Maju Kalimantan Hadapan in view of the good cashflows generated from its operation as compared to a net repayment of bank borrowings totalling RM41.5 million in FY2020 and the set off of proceeds from issuance of shares by subsidiaries to non-controlling interests totalling RM24.3 million (FY2020: RM Nil). The Group’s capital resources comprise primarily of cash flows generated from operating activities, cash and cash equivalents, term deposits, fxed income funds and available lines of credit. As at 30 September 2021, the Group’s net gearing improved to 0.07 times (FY2020: 0.17 times). The Group continues to maintain a prudent approach towards managing its capital resources to ensure adequacy in meeting operational requirements and capital expenditure from time to time. Net cash generated 2021 2020 Changes from/ (used in) RM’000 RM’000 (%) Operating activities 206,664 119,502 72.9 Investing activities (57,382) (57,733) 0.6 Financing activities (99,548) (71,214) (39.8) (Decrease)/Increase in cash and cash equivalents 49,734 (9,445) 626.6 Artist’s impression of Nexus @ Taman Pertama which offers elevated amenities and suitable for live-work-play lifestyles Artist’s impression of Kajang East Precinct 2 residential development with luxurious and harmonious ambience
MKH Berhad 25 Management Discussion and Analysis Report SEGMENT RESULTS AND ANALYSIS Property Development and Construction This division achieved lower revenue and PBT of RM509.0 million (FY2020: RM561.8 million) and RM36.2 million (FY2020: RM73.8 million) respectively following the completion of Kajang 2 Precinct 2 Phase 3 and Phase 4, Kajang East Precinct 1 (Phase 2 and Phase 4) and TR Residence in the current year as well as temporary disruption in the construction work due to the Movement Control Order (“MCO”). As at 30 September 2021, the Group has lockedin unbilled sales value of RM947.2 million (FY2020: RM1.02 billion) which was mainly contributed from the ongoing development projects namely Hillpark Shah Alam (RM101.0 million), Inspirasi @ Mont Kiara (RM90.9 million), Kajang East Precinct 1 (RM16.3 million), MKH Boulevard 2 (RM89.2 million), Nexus @ Kajang Station (RM249.0 million), Bandar Teknologi Kajang Shops (RM1.7 million), Hillpark 3 Phase 1B Shop (RM1.5 million), Kajang East Avenue Shops (RM16.7 million), MIRAI Residences @ Kajang 2 Precinct 1 (RM267.9 million) and Nexus @ Taman Pertama (RM113.0 million). These attributed sales revenue and profts will be recognised progressively as development percentage of completion progresses. Both newly launched projects MIRAI Residences @ Kajang 2 Precinct 1 and Nexus @ Taman Pertama are still at the preliminary stage of development. However, the Movement Control Order (“MCO 3.0”) started from 1 June 2021 and ended on 16 July 2021 disrupted the physical construction works of the ongoing property development projects which comprise MKH Boulevard 2, Nexus @ Kajang Station and the above mentioned newly launched projects. The Group is well positioned to unlock the value of its current development landbank for the transit-oriented development projects which are strategically located in Kuala Lumpur, Kajang and Cheras. MIRAI Residences @ Kajang 2 Precinct 1 Phase 1 which was launched in 30 September 2020 with Hotel and Property Investment For FY2021, this division recorded a lower revenue of RM23.9 million (FY2020: RM25.0 million) and a turnaround with a proft before tax of RM1.0 million (FY2020: loss before tax of RM8.0 million) due to inclusion of lower loss on changes in fair value of investment properties totalling RM5.0 million in FY2021 (FY2020: RM12.2 million). The property investment segment has granted approximately RM2.0 million rental rebates as compared to the preceding year (FY2020: approximately RM3.1 million rent free and rental rebates) during MCO to assist the tenants. the GDV of approximately RM236.8 million has achieved take up rate of approximately 88% while MIRAI Residences @ Kajang 2 Precinct 1 Phase 2 which was launched in February 2021 with the GDV of approximately RM245.1 million has achieved take up rate of approximately 31%. Nexus @ Taman Pertama with GDV of approximately RM261.2 million launched in November 2020 has achieved take up rate of approximately 43%. Iris @ Hillpark Shah Alam with roughly RM125.7 million GDV which was launched in September 2021 has achieved 37% of take up rate. Paired with good product design and strategic location with vital lifestyle facilities, our ongoing projects recorded a good average take up rate of 82%. RHR Hotel @ Kajang is strategically located in the heart of Kajang city
26 Annual Report 2021 Production for Estate (MT) FY2021 FY2020 FY2019 Fresh Fruit Bunches (“FFB”) 441,000* 477,000* 459,000* Crude Palm Oil (“CPO”) 89,000* 100,000* 100,000* Average CPO Price RM2,945 RM2,227 RM1,856 Oil Extraction Rate (“OER”) 19.45% 21% 21% PT MKH – FFB Yield/hectare 28 MT 30 MT 29 MT Management Discussion and Analysis Report Note: Figures exclude CPO purchased from outside parties for resale. *rounded up to nearest thousand Plantation The following table summarises the performance of the division for the past three (3) years: For FY2021, the Plantation Division recorded a higher revenue by 17.6% to RM294.5 million (FY2020: RM250.5million) mainly attributable to higher average CPO price of RM2,945 per metric ton (MT) in FY2021 as compared to RM2,227 per MT in FY2020. This division’s PBT was signifcantly higher by 288.9% to RM101.9 million (FY2020: RM26.2 million) mainly due to higher average CPO selling price. This division recorded unrealised foreign exchange gains of RM8.0 million in FY2021 (FY2020: unrealised foreign exchange losses of RM14.1 million) following the strengthening of Indonesian Rupiah against its borrowings in US Dollar. Excluding the unrealised foreign exchangegains or losses, this division recorded signifcant increase in PBT by 133.0% to RM93.9million as compared to RM40.3 million in FY2020 due to the above mentioned factors. As with other commercial crops, prolong drier or wetter weather will result in lower crop production. The Kalimantan region in Indonesia including at our oil palm plantation in East Kalimantan has generally been experiencing above average rain fall resulting in lower FFB production and higher fruit moisture content leading to lower oil extraction rate (“OER”). Our plantation division continuously take proactive steps such as enhancing our water management system and also fne tuning the harvesting Standard Fresh Fruit Bunches (“FFB”) Harvester loading ripe fresh fruit bunches (“FFB”) Operating Procedures (“SOP’s”) to mitigate the effect of higher average rain fall. Thanks to our mitigating efforts, the reduction in our FFB and CPO production for FY2021 was relatively small and this has enabled our Plantation Division to capitalise on the higher CPO price resulting in a commendable 288.9% increase in proft before tax to RM101.9 million for FY2021 for the Plantation Division. We expect the weather to improve in the coming months and as the weather normalise, the production of FFB and OER will increase. As at 30 September 2021, the total area planted for this division was about 16,408 hectares (FY2020: 16,408 hectares) with 16,081 hectares (FY2020: 16,081 hectares) have reached the mature age for harvest. PT Maju Kalimantan Hadapan is planted with 14,877 hectares of oil palm trees aged between 10 and 13 years old, while PT Sawit Prima Sakti is planted with 1,531 hectares of trees aged between 4 and 10 years old.
The Housing Credit Guarantee Scheme announced by the Government in Budget 2022 which will provide up to RM2 billion guarantees to the banks to assist gig workers, small scale entrepreneurs and farmers to acquire homes and the Home Ownership Campaign (“HOC”) introduced in Budget 2021 to stimulate real estate industry with stamp duty exemptions for Instruments of Transfer and Loan Agreement augurs well for the property industry. The reduction of Real Property Gains Tax from 5% to 0% for individual who disposes property in the sixth year or thereafter will further help to improve the property market sentiment. Moving forward, we continuously explore joint ventures and identify new good landbanks for development to ensure sustainability and growth. MKH Berhad 27 PROSPECTS The Board is optimistic and expect to achieve satisfactory results for fnancial year ending 30 September 2022 (“FY2022”) amid the current challenging business environment due to the prolonged COVID-19 pandemic impact on the economy and businesses in Malaysia and globally. Management Discussion and Analysis Report Property Development and Construction With the unbilled sales of RM947.2 million as at 30 September 2021 (FY2020: RM1.02 billion), the Group is well positioned for FY2022 with new and ongoing developments such as MIRAI Residences @ Kajang 2 Precinct 1, Nexus @ Taman Pertama, Hillpark @ Shah Alam North, Inspirasi @ Mont Kiara, Kajang East Precinct 1, MKH Boulevard 2, Nexus @ Kajang Station, Bandar Teknologi Kajang Shops, Hillpark 3 Phase 1B Shop, Kajang East Avenue Shops. The unbilled sales of the Group will provide sustainable income recognition for the next two (2) years. In addition, the new project launches which are strategically located in Kuala Lumpur, Cheras and Kajang will further contribute to the unbilled sales. Our FY2022 planned launches with total estimated Gross Development Value of RM942.1 million are in line with the Government’s encouragement for more affordable residential projects and transit-oriented development (“TOD”) which will be phased according to the prevailing market sentiments. It comprises mainly of the transit-oriented service apartment development namely TR2 Residence @ Jalan Tun Razak, MIRAI 2 @ Kajang 2 Precinct 2, landed residential development namely Zenia @ Hillpark Shah Alam and Akina @ Kajang 2 Precinct 3. Artist’s impression of TR2 Residence @ Jalan Tun Razak which provides convenience living with generous facilities and a spectacular Kuala Lumpur city view
28 Annual Report 2021 Plantation Our Plantation Division is expected to achieve satisfactory results and continue to contribute positively to the Group’s future earnings. We foresee the CPO price to remain well supported in 2022 due to the continued good demand and tight global supply of CPO. CPO prices have been trading strongly with the current price trading above RM4,000/MT (net of export levy and duty) in Indonesia which augurs well for the Plantation Division. The Plantation Division which is operating as usual albeit with added biosecurity measures, has taken various initiatives to ensure daily operations are running smoothly including strict enforcement of COVID-19 prevention standard operating procedures (“SOP”), ongoing COVID-19 vaccination for our workers and family members and good estate management practices. The Group will continue to expand on the use of mechanical assisted collection of fresh fruit bunches (“FFB”) and maximising the utilisation of the CPO mill to further capitalise on the higher CPO price. Property Investment This division is expected to sustain the occupancy rate by maintaining an average rental yield of approximately 3% to 4% per annum based on fair values of the properties as at 30 September 2021. This division has also benefted from the stimulus packages announced by the Government from time to time such as wage subsidy programme and electricity bill discounts. The retail activities have since picked up after the rollout of the vaccination programme and the reopening of the economy. Management Discussion and Analysis Report Plaza Metro Kajang is the frst shopping complex in Kajang town Loading of CPO to tanker trucks at our CPO mill for transportation to our jetty
MKH Berhad 29 Sustainability Report The content of this Sustainability Report (“Report”) narrates MKH’s sustainability efforts from1 October 2020 to 30September 2021, illustrates our various endeavours to build up the Economic, Environmental and Social (“EES”) and encompass the Group’s operations in Malaysia and Indonesia, which are the locations of the Group’s key businesses. Through this Report, the Group demonstrates our commitment in integrating sustainability practices across all facets of its businesses. This Report was prepared in accordance with the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa”), sets out what the Board considers as material sustainability risks and opportunities, collectively known as Material Sustainability Matters, that impact the way the Group’s operations are carried out as well as how much Material Sustainability Matters are managed. In preparing this Report, the Board has considered the Sustainability Reporting Guide and its accompanying toolkits, issued by Bursa. SUSTAINABILITY GOVERNANCE In MKH Berhad, we hold firmly to the principles of ethical conduct to ensure our business is conducted with integrity through good governance, in line with the best industry practices as well as the applicable rules and regulations. Our business operating units are guided by the Group’s policies and its respective standard operating procedures. The Board of Directors and the senior management meet regularly including via virtual meetings to ensure that the planning, decision-making and execution of the Group’s business operations are carried out professionally. We have an internal Audit Division to undertake an independent and systematic assessment of the Group’s system of risk management and internal controls as established by management in addressing the principal business risks faced by the Group. Full disclosure on our Corporate Governance Report is available for reference on www.mkhberhad.com. Economic An organisation’s impact on the economic conditions of its stakeholders and on economic systems at local, national, and global levels. It does not focus on the financial condition of the organisation. Social The impact an organisation has on the social systems within which it operates. Environmental An organisation’s impact on living and non-living natural systems, including land, air, water and ecosystems. Note: These may include the organisation’s usage of energy and water, discharge of emissions, or loss of biodiversity, etc. Note: These may include the organisation’s relationships with communities, employees, consumers, etc. Note: These may include the organisation’s procurement practices, or community investment.
30 Annual Report 2021 Sustainability Report ORGANISATIONAL STRUCTURE FOR SUSTAINABILITY COMMITTEE MKH’s Sustainability Committee, led by the Group Managing Director Tan Sri Datuk Chen Lok Loi, oversees the planning and execution of sustainability strategies to ensure that our sustainability matters are implemented throughout our business operations. Together, the Sustainability Committee identifies, evaluates, monitors, and manages risks as well as opportunities in our business operations relating to Economic, Environmental and Social aspects. •Group Managing Director •Key Senior Management Board of Directors of MKH • R eview the Group’s sustainability matters and provide advice and direction on sustainability for the Group as and when necessary. • Approve sustainability report. Group Managing Director of MKH • L ead and drive the sustainability initiatives in the Group. • D iscuss, review and monitor progress of sustainability matters regularly. • R eport to the Board of Directors on sustainability matters. Sustainability Committee • R esponsible for assessing and identifying sustainability matters. • O versees the implementation of sustainability-related strategies and initiatives. • U ndertake actions as and when necessary to address sustainability concerns. MKH Berhad’s Sustainability Committee comprises: The functions of the key management members are defined in sustainability management.
MKH Berhad 31 Sustainability Report MKH’S SUSTAINABILITY GOALS MKHdefines andaligns its key topics andcoreprincipleswith reference to theUnitedNation’s 17Sustainable Development Goals (“SDGs”) enacted in 2015 by the United Nation General Assembly. We share our responsibilities in supporting the efforts of tackling the EES challenges through the implementation of sustainable practices as follows: Toprovideahealthy, safeandempoweringenvironmental that encourages the health, growth and productivity of our employees and communities. To support education for the community and employees with the provision of education aid or access to better learning environment towards academic excellence. To drive economic, growth and innovation by using our resources efficiently to create value for shareholders via sustainableplanning,decision-makingandimplementation of business processes. To responsibly utilise resources with emphasis on recycling waste and energy savings, as well as to initiate continuous development of environmentally-friendly initiatives. To operate transparently in compliance with ethical codes of conduct and adopt shared values approach in business and social collaborations that bring positive impact towards internal and external communities. To foster a diversity and social inclusion by creating an environment where employees are valued without discrimination against gender, race and religion.
32 Annual Report 2021 Sustainability Report MKH’S MATERIALITY MATRIX The key sustainability matters most relevant to our business operations relating to the economic, environmental, and social aspects as well as to our internal and external stakeholders, is illustrated below: We believe these 16 key material matters are keys to creating value for all our stakeholders, building mutual trust and allowing better insight on community needs as well as market trends in our journey towards a sustainable future. STAKEHOLDER ENGAGEMENT We engage our stakeholders regularly to develop a deeper understanding of how we can address their needs while further carrying our corporate mission. Maintaining a good relationship, recognising and valuing each of them such as our business partners and understanding their interest and needs are vital aspects that ensure our business success. Our stakeholder universe consists of shareholders, investors, customers, employees, community members, regulators, financial institutions, industry group, business associates, consultants, suppliers and the media. Working with stakeholders improves our ability to address priorities. In line with our corporate core values, we strive to engage with our stakeholders, respectfully in an efficient, knowledgeable and responsive manner in our journey to deliver holistic value. We listen to and engage with our stakeholders. We also provide stakeholders with accurate information so that they can understand our actions and intentions with greater clarity. Community Investment Economic & Business Performance Governance, Ethics & Integrity Brand Management Stakeholders Engagement Energy Consumption Green Development Innovation Responsible Marketing Risk Management Customer Satisfaction Occupational Health & Safety Assurance & Certification Employee Engagement & Retention Traceability & Sustainable Procurement High Low High Important to MKH Berhad Important to Stakeholders Waste & By-product Management
MKH Berhad 33 No. STAKEHOLDERS TYPE OF ENGAGEMENT FREQUENCY OF ENGAGEMENT 1 Customers • Written, Social Media & Email Communication • Centralised Sales Galleries • Customer Feedback Management • Outreach Events/Roadshow/Open Day • Daily • Daily • Daily • Ad hoc 2 Employees • Employee Engagement Activities • Written Communications • Departmental Meetings/Virtual Meetings • E mployeeDevelopment Trainings,Workshops & Webinars • Regular • Regular • Regular • Regular 3 Government Agencies/ Local Authorities • Reports • Written Communications • Formal Meetings/Virtual Meetings • Regular • Regular • Ad hoc 4 Industry Group • Formal Meetings/Virtual Meetings • Written Communications • Regular • Regular 5 Investors/Analysts/Fund Managers/Private Equity Firms • Formal Meetings/Briefing/Virtual Meetings • Written Communications • Ad hoc • Ad hoc 6 Financial Institutions • Formal Meetings/Virtual Meetings • Written Communications • Regular • Regular 7 JV Partners/Business Associates • Formal Meetings/Virtual Meetings • Written Communications • Regular • Regular 8 Local Communities/ Residents’ Associations/Joint Management Bodies • Formal Meetings/Virtual Meetings • Written Communications • Regular • Regular 9 Media • Press Releases • Written Communications • Networking Sessions • Regular • Regular • Ad hoc 10 Shareholders • Written Communications • Quarterly Financial Report • Annual General Meeting • Regular • Quarterly • Annual 11 Vendors/Suppliers/ Contractors/Consultants • Formal Meetings/Virtual Meetings • Project Tender • Written Communications • Regular • Regular • Regular The followinggroups arekey stakeholderswhohave thegreatest impact onour organisationandwithwhomweengage regularly: Sustainability Report
34 Annual Report 2021 SUSTAINABILITY EFFORTS At MKH, we are guided by the best industry practices in our business operations to produce and deliver quality products to our customers, while also being cognisant of the EES aspects of our communities. To-date, MKH’s diverse property portfolio comprises: that are strategically located within Kajang and across the Klang Valley. Towards the Economy With more than 40 years in the property industry, the Group actively engage with various chamber associations and professional groups to gain the latest insight on industries which are relevant to our business operations. In FY2021, the Group conducted sales campaign during festive season namely MKH Ganjaran Raya 2021 (campaign period 1 May 2021-31 July 2021) which offer incentives to 21 residential and commercial projects in line with the Home Ownership Campaign (“HOC”) 2020/2021. In addition, MKH Super Saver Merdeka (campaign period 1 August 2021-30 September 2021) offering incentives to 22 residential and commercial projects. The HOC is a Malaysian Government initiative offered to stimulate the property market with incentive such as stamp duty exemption and 10% discount on selected residential properties to homebuyers. Our adaption of Industrialised Building System (“IBS”) in property development accentuates our expertise in creating values for our homebuyers through the building of affordable yet quality housing. 28 9 10 5 8 6 landed and high-rise residential developments commercial developments boutique serviced apartments townships mixed developments transit-oriented developments (“TOD”) Sustainability Report
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