Analysis: MKH a new player to the oil palm game

KUCHING: MKH Oil Palm Bhd (MKH) intends to raise RM136.4 million from its upcoming initial public offering (IPO) mainly to fund its expansion of landbank for oil palm plantation, upgrading works and the setup of palm oil crushing facility.

Analysts at RHB Investment Bank Bhd (RHB Research) saw that MKH’s young topographical profile should boost its fresh fruit bunch (FFB) output, propelling its three-year earning cumulative annual growth rate (CAGR) of 25 per cent from financial year 2024 (FY24) to FY2426.

“As at last practicable date (LPD), the group’s average age is at 11.5 years, with roughly 95 per cent in prime mature stage (10-16 years), while the remaining will soon enter peak production.

“As such, we expect no replanting activities to be done in the next few years, and should not pose any hindrance towards production.

“Moving forward, we see that the prospects of FFB production will be driven by this age distribution, as well as normalisation of weather, with FFB growth range of four to six per cent for FY24-FY26.”

Currently, MKH has developed a custom mobile application,

RondaApp, to record the growth conditions of its oil palm and update the progress of FFB collection and evacuation.

This technology allows workers to effectively address any issues faced regarding road conditions, unhealthy oil palm or pest attacks.

Additionally, the implementation of hydraulic lifting arms into powered wheelbarrows and the usage of all-terrain vehicles (ATVs) for FFB collection minimises transportation time of FFB collection to palm oil mills, as opposed to crawler dumpers, which have lower manoeuvrability.

The increased productiveness helped the group to maintain higher CPO yield versus the national average, almost by two times.

“As at LPD, the group is sitting on a net cash of RM73 million and has a negligible amount of debt at RM2 million,” RHB Research said.

“We believe that it will continue remain in a net cash post-IPO as it has adequate IPO proceeds for capex and working capital expenses, along with sufficient retained earnings.

“This also leaves MKH with no restrictions to continue maximising shareholders’ return.”