ANNUA L R E P OR T 20 22 WHERE MATTER PEOPLE
03 Our Annual Report 2022 cover depicts the relationship between MKH and our communities. At MKH, people are at the core of our business. We are thankful for the continued support of our esteem shareholders, directors, management, staff, customers, bankers, business associates, regulatory authorities and other stakeholders that has enabled us to continue to prosper and contribute to the communities through our corporate social responsibilities (“CSR”) initiatives. At MKH, people matter to us. Where People Matter will be held fully virtual through live streaming, details as follows: Date Time Broadcast Venue : : : 16 March 2023 10:00 a.m. Emerald Ballroom, 1st Floor, RHR Hotel @ Kajang, Jalan Semenyih, 43000 Kajang, Selangor Darul Ehsan, Malaysia. 43rd Annual General Meeting
Contents 01 CORPORATE INFORMATION 003 005 007 009 0 1 0 0 1 1 0 1 3 0 1 4 0 1 7 023 03 1 045 048 Vision, Mission and Core Value Corporate Milestone Company Profile Awards and Achievements FY2022 Highlights 5 Years Group Financial Highlights Corporate Information Corporate Structure Chairman’s Statement Management Discussion and Analysis Report Sustainability Report Directors’ Profile Profile of Key Senior Management 03FINANCIAL 081 Financial Statements 226 233 236 237 243 List of Properties Analysis of Shareholdings Directors’ Shareholdings Notice of Forty-Third Annual General Meeting Statement Accompanying Notice of Forty-Third Annual General Meeting Form of Proxy OTHER CORPORATE INFORMATION 02CORPORATE GOVERNANCE 050 068 075 080 Corporate Governance Overview Statement Audit Committee Report Statement on Risk Management and Internal Control Additional Compliance Information
03 What we aspire to be OUR V I S I ON 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. To provide a sustainable return to shareholders. Who we are, What we do OUR M I S S I ON MKH Berhad
04 Annual Report 2022 Who we believe in Grounded by the promise of DELIVERING VALUE, we take pride in living by a set of shared core values that define our culture and business operations, thus helping us to create value for our clients, our people and our organisation. We use our expertise, business acumen and financial resources to provide a holistic value to all stakeholders and customers. STABLE We are always enthusiastic in looking out for new opportunities and delivering innovative products into the market. DYNAMIC We proactively engage with the community to understand their needs and concerns with the aim of delivering solutions for betterment of the situations. RESPONSIVE We greet our colleagues, customers and stakeholders in an approachable manner with a smile and are considerate for each other’s feeling. FRIENDLY We utilise our experience and financial strength to deliver on our promises and complete all projects on time or earlier. RELIABLE We deal with our stakeholders and customers in an efficient, knowledgeable and responsive manner. PROFESSIONAL Property Development and Construction Plantation Property Investment Building Materials Trading
MKH Berhad 05 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. 2017 2014 2011 2008 2000 1983 1993 1994 1995 2007 1979 2020 2022
06 Annual Report 2022 PT Sawit Prima Sakti achieved Indonesia Sustainable Palm Oil certification 2017 PT Maju Kalimantan Hadapan achieved Indonesian Sustainable Palm Oil certification 2014 Metro Kajang Trading Sdn Bhd rebranded: MKH Building Materials Sdn Bhd 2011 Metro Kajang Holdings Berhad rebranded: MKH Berhad 2008 Established oil palm plantation sector Acquired PT Maju Kalimantan Hadapan 1995 Srijang Bena Sdn Bhd rebranded: Metro Kajang Holdings Berhad Officially listed on Bursa Malaysia as “MKH” under stock code “6114” 2007 Built second shopping complex in Kajang: Metro Point Complex 2000 Established Furniture Manufacturing Division in China: Vast Furniture Manufacturing (Kunshan) Co. Ltd 1994 Established property investment sector Bulit first shopping complex in Kajang: Plaza Metro Kajang 1993 Built first joint venture development with Selangor state government: Bandar Teknologi Kajang Built first high-rise development in Kajang 1983 Established building materials trading division: Metro Kajang Trading Sdn Bhd 1979 Established as private limited company: Srijang Bena Sdn Bhd Built first landed residential development: Taman Bukit Indah 2020 PT Maju Kalimantan Hadapan received Gold Award for Best Foreign Owned Company
MKH Berhad 07 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 diversification 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. MKH Berhad Headquarters
08 Annual Report 2022 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 crude palm oil (“CPO”) mill. The estates recorded good fresh fruit bunches (“FFB”) yield averaging 24 to 30 MT/hectare per year. For the financial year 2022 (“FY2022”), the CPO production was 75,000 MT. 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. Through meaningful social investment and community engagement, 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. MKH Berhad Headquarters
PROPERTY PLANTATION 1. 2. 09 MKH Berhad In FY2022, MKH ranked 11th among Top 30 Property Developers in Malaysia at The Edge Malaysia Top Property Developers Awards 2022 with high scores in qualitative overall and value creation. PT Sawit Prima Sakti had been awarded with a 5-year certification of Indonesia Sustainable Palm Oil (“ISPO”) certification. PT Maju Kalimantan Hadapan received the Platinum Award for its excellent engagement in COVID-19 Prevention Program at Workplace from the Provincial Government of East Kalimantan.
Achieved Group Revenue of RM 968.1 million Achieved Profit Before Tax of RM 171.3 million Contributed approximately through community engagement that supported a total of beneficiaries which included education institutions, local authorities and non-profit organisation RM597,009 32 Developer in Malaysia during the The Edge Malaysia Top Property Developers Awards 2022 Top 11th 10 Annual Report 2022 benefited from MKH Pandai @ Schools Program to improve their academic performance through online learning 60 students Developed new apps namely to track evacuation of FFB from field to the mill and Contractor Management System to monitor contractors' trucks for a more efficient FFB crop evacuation Plantation & Mill Management System
11 MKH Berhad 2018 RM’000 INCOME STATEMENT 1,081,701 Revenue 128,232 Profit Before Taxation 76,613 Profit After Taxation 70,865 2019 RM’000 1,121,657 158,373 97,477 82,561 2020 RM’000 911,926 116,476 66,267 41,737 2021 RM’000 913,572 161,054 102,708 80,435 2022 RM’000 968,126 171,254 128,747 112,413 Profit Attributable to Shareholders of the Company RATIOS 3.50 Single Tier Dividend Per Share (sen) 12.19 Net Earnings Per Share (sen) 2.67 Net Assets Per Share (RM) 43.3 4.00 14.25 2.79 42.4 3.00 7.22 2.83 40.0 3.50 13.93 2.95 32.2 4.00 19.47 3.13 23.3 Debt/Equity Ratio (%) 4.6 5.1 2.6 4.7 6.2 Return on Shareholders’ Equity (%) BALANCE SHEET 654,459 Issued and Paid up Capital 1,552,635 Shareholders’ Equity 654,459 1,615,885 654,459 1,632,609 654,459 1,706,069 654,459 1,807,541 @ Attributable to the equity holders of the Company @
12 Annual Report 2022 Revenue (RM’000) 968,126 1,081,701 1,121,657 911,926 913,572 2022 2021 2020 2019 2018 Profit Attributable to Shareholders of the Company (RM’000) 112,413 70,865 82,561 41,737 80,435 2022 2021 2020 2019 2018 Shareholders’ Equity (RM’000) 1,807,541 1,552,635 1,615,885 1,632,609 1,706,069 2022 2021 2020 2019 2018 171,254 128,232 158,373 116,476 161,054 Profit Before Taxation (RM’000) 2022 2021 2020 2019 2018
MKH Berhad 13 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 Ms. Hoon Shat Mei En. Je rey 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 Non-Independent Non-Executive Director ------- ------------------------------------------ ------------------------------------------------- ------------------------------------- ------------------------------------------------- ------------------------------------------------------------------- --------------------------------------------------------------- Audit Committee Ms. Hoon Shat Mei (Chairperson) Y. Bhg. Datuk Mohammad bin Maidon (Member) Y. Bhg. Dato’ Lim Hong Shuan (Member) En. Jeffrey bin Bosra (Member) Panel Solicitors Khaled Mutang Chan & Lim Ling & Theng Book Markiman & Associates Michael Chen & Co. Steven Tai, Wong & Partners 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 O ce Suite 1, 5th Floor, Wisma MKH, Jalan Semenyih 43000 Kajang, Selangor Darul Ehsan Tel No : (603) 8737 8228 | Fax No: (603) 8736 5436 Principal Bankers Affin Bank Berhad Al Rajhi Banking & Investment Corporation (Malaysia) Bhd AmBank (M) Berhad AmBank Islamic Berhad Bank of China (Malaysia) Berhad Bank Islam Malaysia Berhad Bank Muamalat Malaysia Berhad CIMB Islamic Bank Berhad Hong Leong Bank Berhad Hong Leong Islamic Bank Berhad HSBC Bank Malaysia Berhad HSBC Amanah Malaysia Berhad Industrial 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 United Overseas Bank (Malaysia) Berhad United Overseas Bank Limited Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock Code: MKH Stock No: 6114 Corporate Website www.mkhberhad.com Nomination Committee Y. Bhg. Datuk Mohammad bin Maidon (Chairman) Y. Bhg. Dato’ Lim Hong Shuan (Member) Remuneration Committee Y. Bhg. Datuk Mohammad bin Maidon (Chairman) Y. Bhg. Dato’ Lim Hong Shuan (Member) Chief Financial O cer Kok Siew Yin (MIA 15343) Group Company Secretary Tan Wan San (MIA 10195) (SSM Practicing Certificate 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
14 Annual Report 2022 MKH Oil Palm (East Kalimantan) Berhad (100%) PT Maju Kalimantan Hadapan (94.33%) Metro Tiara (M) S/B (100%) Laju Jaya S/B (100%) Maha Usaha S/B (100%) Metro Emart S/B (100%) Sunway MKH Marketing S/B (49%) NON-PROPERTY DIVISION Metro Nusantara S/B (100%) PT Sawit Prima Sakti (75%) Global Langscape Creation S/B (100%) Intelek Murni (M) Berhad (100%) MKH Plantation S/B (100%) PT Nusantara Makmur Jaya (100%) Restu Mesra S/B (100%) Vast Furniture Manufacturing (Kunshan) Co. Ltd. (100%) PT Maju Kalimantan Hadapan (0.67%) Metro Kajang (Oversea) S/B (100%) 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%) MKH Building Materials S/B (100%) Achieve Acres S/B (85%) Aliran Perkasa S/B (100%) Amona MKH Ventures S/B (50.00001%) Budi Bidara S/B (100%) Dapat Jaya Builder S/B (100%) Everland Asia Development S/B (100%) Gabung Wajib S/B (100%) Rimbunan Melati S/B (45%) PROPERTY AND CONSTRUCTION DIVISION Temara Pekeliling S/B (84%) Gerak Teguh S/B (100%) GK Resort Berhad (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%) Pelangi Binaraya S/B (50.0002%) Pelangi Semenyih S/B (100%) Pelangi Seri Alam Development S/B (100%) Perkasa Bernas (M) S/B (100%) 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%) PNSB-GK Resort S/B (70%) Intelek Kekal (M) S/B (100%) Intra Tegas (M) S/B (100%) Kajang Resources Corporation S/B (100%) Kumpulan Indah Bersatu S/B (100%) MKH Property Ventures S/B (51%) Panasonic Homes MKH Malaysia S/B (49%) Alif Mesra S/B (65%) Amona Metro Development S/B (60%) Danau Saujana S/B (100%) Palga S/B (100%) Hiliran Juara S/B (100%) Quantum Density S/B (50.0004%) Hillpark Resources S/B (100%) Daksina Harta S/B (40%)
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. 38% Total Segment Profit Before Tax Contribution 56% Contribution To Total Group Revenue
MKH Berhad 17 MKH Berhad Headquarters 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 2022 (“FY2022”). It has been another commendable year for MKH. We emerged more resilient and reinvigorated and this is reflected in our numbers and also in the trust that our stakeholders have placed in us. I am grateful to our shareholders, customers, joint venture partners, business associates, bankers and other stakeholders for their continuous support to make this happen. For FY2022, despite the challenging business environment, the Group’s turnover increased by 6.0% to RM968.1 million and profit before tax increased by 6.3% to RM171.3 million. We did this by aligning our vision and strategy, focusing on sustainable growth and maintaining strong operational diligence. This is a testament to the unwavering determination and effort from our directors, management and staff. 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 moderate in 2023 weighed down by spillover from tighter global financial conditions after registering a strong growth of 14.2% in the third quarter of 2022 underpinned by continued expansion in domestic demand. Central banks, especially in advanced economies, have quickened the increase in interest rate to contain inflation leading to spillover to emerging market economies.
18 Annual Report 2022 Inspirasi Mont' Kiara applies a minimalist concept which features 46 storey residential towers that provide a modern yet holistic living environment Artist’s impression of Kajang 2 Precinct 2 The Group continues to leverage on strong demand for affordable housing emphasising on affordable pricing, good location and the right product mix. For FY2022, the Property Development and Construction Division’s revenue increased by 5.8% to RM538.5 million (FY2021: RM509.0 million) and profit before tax (“PBT”) increased by 78.7% to RM64.7 million (FY2021: RM36.2 million). In line with the good demand for transit-oriented development (“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 II 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 campaign through digital and social media platforms to widen our market reach and increase engagement with potential buyers namely MKH Super Saver Chinese New Year 2022 and MKH Super Saver Raya Deal 2022, which offered incentives to 22 residential and commercial projects. In addition, MKH Big Saver 2022 offered incentives to 4 residential projects such as TR2 Residence @ Jalan Tun Razak, MIRAI Residences, Nexus @ Kajang Station (Tower B) and Kajang 2 Precinct 3 (Akina). As at 30 September 2022, the Group recorded an unbilled sales value of RM906.2 million that was mainly attributable to the ongoing property development projects namely Hillpark Shah Alam, MKH Boulevard II, Nexus @ Kajang Station, Kajang East Avenue Shops, MIRAI Residences @ Kajang 2 Precinct 1, Nexus @ Taman Pertama, TR2 Residence @ Jalan Tun Razak and Akina @ Kajang 2 Precinct 3. Artist’s impression of Inspirasi Mont' Kiara
MKH Berhad 19 For FY2022, the Plantation Division recorded a higher revenue by 7.3% to RM315.8 million (FY2021: RM294.5 million) mainly attributable to higher average crude palm oil (“CPO”) price of RM3,847 per metric ton (MT) in FY2022 as compared to RM2,945 per MT in FY2021. This division’s PBT decreased by 24.8% to RM76.6 million (FY2021: RM101.9 million) mainly due to higher average production cost incurred as a result of lower production of fresh fruit bunches (“FFB”) arising from the La-Nina wet weather effect and higher fertiliser cost. 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 mechanical assisted collection of FFB and the use of software apps for monitoring. The Plantation Division has also developed new apps namely Plantation & Mill Management System to track evacuation of FFB from field to the mill and Contractor Management System to monitor contractors' trucks for a more efficient FFB crop evacuation. The Plantation Division also utilises drones to enhance good agriculture practices and monitoring. The combined program assists management to analyse field 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 Indonesian Government has commenced the construction of the new administrative capital of Indonesia (Ibu Kota Negara) Nusantara in East Kalimantan. This augers well for us as it will accelerate the economic and infrastructure development in East Kalimantan where our plantation is located. Our Building Materials Trading Division has also established its own 2 trademarked ironmongeries EGON and sanitary fittings, CASCADA to fit the aesthetically needs of modern residential and commercial projects that can enhance the prestige of the property. Maintaining its success in the trading industry, our Building Materials Trading Division also supply ready-mix concrete to our MKH Boulevard II and MIRAI Residences projects. As a responsible and caring corporate citizen, MKH holds Corporate Social Responsibility (“CSR”) close to its heart. During the financial year, the Group contributed approximately RM597,009 in community engagement that benefited 32 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 31 to page 44. For FY2022, a first interim dividend of 4.0 sen per ordinary share amounting to approximately RM23.1 million was declared on 29 November 2022 and paid on 6 January 2023. This represents a distribution of approximately 20.6% of the Group’s net profit attributable to shareholders. Moving forward, we are confident that the Group is in a better position to create sustainable businesses with our TOD model. While the Klang Valley residential market in general is foreseen to remain challenging, we are confident that our strategy of building affordable housing at good location with TOD concept will continue to receive good take up rate. Bountiful harvested FFB being transported by lorries to our CPO mill FFB being transferred from the powered wheelbarrow to the collection bin to be transported to our CPO mill
20 Annual Report 2022 We are also optimistic that CPO price will remain well supported in 2023 with the current CPO price trading at approximately RM3,400/MT (net of export levy and duty) in Indonesia. This is due to continued good demand as countries open up their economies and adapting to COVID-19 as endemic and tighter global palm oil stocks, due to wet weather impact. 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 2023 with the continued support from all of our stakeholders. Thank you. Tan Sri Dato’ Alex Chen Kooi Chiew Group Executive Chairman Aerial view of our CPO mill, management office, guest house and workers’ accommodation
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. 45% Total Segment Profit Before Tax Contribution 33% Contribution To Total Group Revenue
MKH Berhad 23 The Group’s principal business segments, which remains unchanged from the preceding year, comprises of Property Development and Construction; Plantation; Hotel and Property Investment; and Others. The segment “Others” comprises of Trading, Manufacturing, Investment Holding and other non-reportable operations. This Report provides a discussion and analysis of the Group’s financial performance for the financial year ended 30 September 2022 (“FY2022”), including explanations for significant fluctuations over the previous financial year. The Japanese theme lake garden at Kajang 2 Precinct 2 Double Storey Terrace housing project known as Hiroki and Midori
24 Annual Report 2022 The Group’s revenue and profit before tax for the financial year under review and the preceding year are summarised as follows: For the financial year ended 30 September 2022, the Group’s revenue and profit before tax (“PBT”) increased by 6.0% and 6.3% to RM968.1 million (FY2021: RM913.6 million) and RM171.3 million (FY2021: RM161.1 million) respectively mainly due to the contribution from Property Development and Construction Division which recorded higher turnover and profit recognition from ongoing projects, namely MIRAI Residences @ Kajang 2 Precinct 1, TR2 Residence @ Jalan Tun Razak, Iris @ Hillpark Shah Alam and Nexus @ Kajang Station and higher turnover from Plantation Division as a result of higher average selling price of crude palm oil. The Group recorded unrealised foreign exchange gains of RM4.7 million for FY2022 as compared to the preceding year of RM8.0 million from the Plantation Division mainly due to the strengthening of the Indonesian Rupiah (“IDR”) against Ringgit Malaysia (“RM”) based on exchange rate of RM1: IDR3,281 as at 30 September 2022 as compared to RM1: IDR3,419 as at 30 September 2021. Excluding the unrealised foreign exchange gains of RM4.7 million (FY2021: RM8.0 million), the Group’s PBT was higher by 8.8% at RM166.6 million (FY2021: RM153.1 million) which was mainly due to higher profit recognition from Property Development and Construction Division’s ongoing projects, gain on changes in fair value of investment properties totalling RM2.4 million (FY2021: loss on changes in fair value of investment properties of RM5.0 million) coupled with lower interest expenses on loan and borrowings of RM18.2 million (FY2021: RM22.3 million). FY2022 FINANCIAL HIGHLIGHTS Management Discussion & Analysis Report Segments Changes (%) 2022 RM’000 2021 RM’000 Group Revenue 968,126 6.0 913,572 Property Development & Construction 538,450 508,985 5.8 315,817 294,458 7.3 Plantation 30,034 23,949 25.4 Hotel & Property Investment 83,825 86,180 (2.7) Others Segments Group Profit Before Tax 171,254 6.3 161,054 Property Development & Construction 64,723 36,222 78.7 76,623 101,903 (24.8) Plantation 10,472 955 996.5 Hotel & Property Investment 19,436 21,974 (11.6) Others Aerial view of our Plantation Estate Metro Point Complex in Kajang town Artist's Impression of TR2 Residence @ Jalan Tun Razak
25 LIQUIDITY AND CAPITAL RESOURCES The cashflows used in financing activities increased significantly following a net repayment of bank borrowings totalling RM130.3 million in FY2022 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 RM105.7 million in FY2021, dividend paid to non-controlling interests of RM27.9 million (FY2021: RM Nil) and the set off of proceeds from issuance of shares by subsidiaries to non-controlling interests totalling RM5.1 million (FY2021: RM24.3 million). The Group’s capital resources comprise primarily of cash flows generated from operating activities, cash and cash equivalents, term deposits, short-term placements and available lines of credit. As at 30 September 2022, the Group’s net gearing improved to 0.02 times (FY2021: 0.07 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. For FY2022, the Group recorded higher cashflows generated from operating activities following the contribution from ongoing project developments and Plantation Division. For FY2022, the cash and cash equivalents of the Group decreased by RM24.9 million to RM390.0 million as at 30 September 2022 (FY2021: increased by RM49.7 million to RM412.1 million as at 30 September 2021), which was culminated from the following cash flows activities: Changes (%) 2021 RM’000 2022 RM’000 Net cash generated from/ (used in) 15.8 239,419 Operating Activities 206,664 Investing Activities (74.1) (99,927) (57,382) Financing Activities (65.1) (164,352) (99,548) (Decrease)/Increase in cash and cash equivalents (150.0) (24,860) 49,734 MKH Berhad Artist's impression of TR2 Residence @ Jalan Tun Razak with a spectacular Kuala Lumpur city view Management Discussion & Analysis Report
26 Annual Report 2022 Property Development and Construction This division achieved higher revenue and profit before tax of RM538.5 million and RM64.7 million for the current year as compared to the preceding year of RM509.0 million and RM36.2 million respectively mainly due to the higher profit recognition from ongoing projects and sale of completed development properties and land held for property development; lower interest expenses of RM33.7 million (FY2021: RM42.6 million), coupled with the turnaround of the share of results of associates from a loss of RM2.4 million in the preceding year to a profit of RM1.4 million in the current year. The ongoing property development projects namely Nexus @ Taman Pertama (launched in November 2020), Iris @ Hillpark Shah Alam (launched in September 2021) and TR2 Residence @ Jalan Tun Razak (launched in November 2021) still at the preliminary stage of development. As at 30 September 2022, the Group has locked-in unbilled sales value of RM906.2 million from which attributed sales revenue and profits will be recognised progressively as their development percentage of completion progresses and were mainly contributed from the ongoing development projects namely Hill Park Shah Alam (RM120.5 million), MKH Boulevard II (RM30.4 million), Nexus @ Kajang Station (RM109.1 million), Kajang East Avenue Shop (RM11.4 million), MIRAI Residences @ Kajang 2 Precinct 1 (RM271.1 million), Nexus @ Taman Pertama (RM120.7 million), TR2 Residence @ Jalan Tun Razak (RM184.2 million) and Akina @ Kajang 2 Precinct 3 (RM58.8 million). TR2 Residence @ Jalan Tun Razak which was launched in November 2021 (Block A - 454 units of apartments) with Gross Development Value ("GDV") of approximately RM253.0 million and in June 2022 (Block B - 464 units of apartments) with GDV of approximately RM251.5 million had collectively achieved take up rate of approximately 40%. Akina @ Kajang 2 Precinct 3 Phase 1 which was launched in September 2022 with the GDV of approximately RM194.2 million has achieved take up rate of approximately 30%. Paired with good product design and strategic location with vital lifestyle facilities, our ongoing projects recorded a good average take up rate of 62%. Plaza Metro Kajang shopping complex in Kajang town Management Discussion & Analysis Report
27 The following table summarises the performance of the division for the past three (3) years: Note: Figures exclude CPO purchased from outside parties for resale. *rounded up to nearest thousand. MKH Berhad Plantation FY2020 FY2022 Production for Estate (MT) FY2021 Fresh Fruit Bunches (“FFB”) 383,000* 477,000* 441,000* Crude Palm Oil (“CPO”) 75,000* 100,000* 89,000* Average CPO Price / MT RM3,847 RM2,227 RM2,945 18.51% Oil Extraction Rate (“OER”) 21% 19.45% PT MKH – FFB Yield/hectare 24 MT 30 MT 28 MT For FY2022, the Plantation Division recorded a higher revenue by 7.3% to RM315.8 million (FY2021: RM294.5 million) mainly attributable to higher average CPO price of RM3,847 per metric ton (MT) in FY2022 as compared to RM2,945 per MT in FY2021. This division’s PBT decreased by 24.8% to RM76.6 million (FY2021: RM101.9 million). The lower PBT was mainly due to higher average production cost incurred as a result of lower production of FFB arising from the La-Nina wet weather effect and higher fertiliser cost. This division recorded unrealised foreign exchange gains of RM4.7 million in FY2022 (FY2021: RM8.0 million). The unrealised foreign exchange gains were mainly due to strengthening of IDR against the RM. Excluding unrealised foreign exchange gains, this division recorded PBT of RM71.9 million in the current year as compared to the preceding year of RM93.9 million. The prolonged wet weather had resulted lower crop production throughout the financial year. Our oil palm plantation in East Kalimantan region has generally been experiencing above average rain fall resulting in lower FFB production and higher fruit moisture content leading to lower OER. Our plantation division continuously take proactive steps such as enhancing water management system and also fine tuning the harvesting Standard Operating Procedures (“SOP’s”) to mitigate the effect of higher average rain fall. 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 2022, the total area planted for this division was about 16,408 hectares (FY2021: 16,408 hectares) with 16,408 hectares (FY2021: 16,081 hectares) have reached the mature age for harvesting. PT Maju Kalimantan Hadapan is planted with 14,877 hectares of oil palm trees aged between 11 and 14 years old, while PT Sawit Prima Sakti is planted with 1,531 hectares of trees aged between 5 and 11 years old. Management Discussion & Analysis Report Ripe fresh fruit bunches ready for harvesting
04 Annual Report 2022 Hotel and Property Investment For FY2022, this division recorded a higher revenue of RM30.0 million (FY2021: RM23.9 million) and profit before tax of RM10.5 million (FY2021: RM1.0 million) mainly due to inclusion of fair value gain of investment properties of RM2.4 million in the current year as compared to fair value loss of investment properties of RM5.0 million in the preceding year and an increase in revenue and gross profit from the hotel division with average occupancy rate of 55% in the current year as compared to the preceding year of 17% (lower due to Movement Control Order) following the resumption of economic activities. Artist's Impression of TR2 Residence @ Jalan Tun Razak with transit-oriented development concept Management Discussion & Analysis Report 28
29 MKH Berhad The Board is optimistic and expects to achieve satisfactory results for financial year ending 30 September 2023 (“FY2023”) as we continue to carry out steps to mitigate the current challenging business environment due to the rising interest rates and inflationary pressures. With the unbilled sales of RM906.2 million as at 30 September 2022 (FY2021: RM947.2 million), the Group is well positioned for FY2023 with the ongoing developments such as Hill Park Shah Alam, MKH Boulevard II, Nexus @ Kajang Station, Kajang East Avenue Shop, MIRAI Residences @ Kajang Precinct 1, Nexus @ Taman Pertama, TR2 Residence @ Jalan Tun Razak, and Akina @ Kajang 2 Precinct 3. 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 FY2023 planned launches with total estimated GDV of RM340.0 million comprising of retail shops development in MIRAI Residences @ Kajang 2 Precinct 1, landed retail shops development known as Kajang East Avenue 2, and MKH Avenue 2 Phase 1, landed residential development known as Akina @ Kajang 2 Precinct 3 Phase 2 and Kajang East Precinct 1 Phase 3B (final phase) which will be phased according to the prevailing market sentiments. Moving forward, we continuously explore joint ventures and identify new landbanks for development to ensure sustainability and growth. Property Development and Construction Artist's Impression of central green space at Kajang 2 Precint 3 Double Storey Terrace housing project known as Akina Management Discussion & Analysis Report
30 Annual Report 2022 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 2023 due to the continued good demand and tight global supply of CPO due to La-Nina wet weather and the latest mandate in Indonesia in terms of increasing biodiesel content from B30 to B35. The current CPO price is trading at approximately RM3,400/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 enhanced 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 FFB, the use of our enhanced new Plantation & Mill Management System to track FFB evacuation process from the field to our CPO mill and maximising the utilisation of our CPO mill. 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 2022. The retail activities have since picked up after our country transited into the COVID-19 endemic phase in April 2022 followed by the relaxation of SOP effective from May 2022 onwards. Plantation Hotel and Property Development Artist’s impression of TR2 Residence @ Jalan Tun Razak facilities deck Harvester using powered wheelbarrow to evacuate the FFB from the field Management Discussion & Analysis Report
MKH Berhad 31 Sustainability Report Transportation of FFB to our CPO Mill for processing The content of this Sustainability Report (“Report”) narrates MKH’s sustainability efforts from 1 October 2021 to 30 September 2022, illustrates our various endeavours to build up the Economic, Environmental and Social (“EES”) efforts 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.
32 Annual Report 2022 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. Note: These may include the organisation’s procurement practices, or community investment. Economic 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. Social The impact an organisation has on the social systems within which it operates. Note: These may include the organisation’s relationships with communities, employees, consumers, etc. 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. Sustainability Report Artist’s impression of the lake park at Hillpark Shah Alam North
33 MKH Berhad 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. ORGANISATIONAL STRUCTURE FOR SUSTAINABILITY COMMITTEE The functions of the key management members are defined in sustainability management. MKH Berhad’s Group Managing Director Key Senior Management Sustainability Committee comprises: Sustainability Committee Responsible for assessing and identifying sustainability matters. Oversees the implementation of sustainability-related strategies and initiatives. Undertake actions as and when necessary to address sustainability concerns. Group Managing Director of MKH Lead and drive the sustainability initiatives in the Group. Discuss, review and monitor progress of sustainability matters regularly. Report to the Board of Directors on sustainability matters. Board of Directors of MKH Review the Group’s sustainability matters and provide advice and direction on sustainability for the Group as and when necessary. Approve sustainability report. Sustainability Report
34 Annual Report 2022 MKH defines and aligns its key topics and core principles with reference to the United Nation’s 17 Sustainable 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: 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 drive economic, growth and innovation by using our resources efficiently to create value for shareholders via sustainable planning, decision-making and implementation of business processes. To provide a healthy, safe and empowering environmental that encourages the health, growth and productivity of our employees and communities. To foster a diversity and social inclusion by creating an environment where employees are valued without discrimination against gender, race and religion. To support education for the community and employees with the provision of education aid or access to better learning environment towards academic excellence. Sustainability Report
35 MKH Berhad 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 17 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. Waste & By-product Management Energy Consumption Community Investment Stakeholders Engagement Responsible Marketing Brand Management Green Development Innovation Assurance & Certification Traceability & Sustainable Procurement Governance, Ethics & Integrity Risk Management Employee Engagement & Retention Customer Satisfaction Economic & Business Performance Climate Change Related Risks Occupational Health & Safety High High Low Important to MKH Berhad 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. STAKEHOLDER ENGAGEMENT Sustainability Report
36 Annual Report 2022 FRUEQUENCY OF ENGAGEMENT TYPE OF ENGAGEMENT STAKEHOLDERS Customers • Written, Social Media & Email Communication • Centralised Sales Galleries • Customer Feedback Management • Outreach Events / Roadshow / Open Day • Daily • Daily • Daily • Ad hoc 1 Local Communities / Residents’ Associations / Joint Management Bodies • Formal Meetings / Virtual Meetings • Written Communications • Regular • Regular 8 Employees • Employee Engagement Activities • Written Communications • Departmental Meetings / Virtual Meetings / Hybrid Meetings • Employee Development Trainings, Workshops & Webinars • Regular • Regular • Regular • Regular 2 Government Agencies / Local Authorities • Reports • Written Communications • Formal Meetings / Virtual Meetings • Regular • Regular • Ad hoc 3 Media • Press Releases • Written Communications • Networking Sessions • Regular • Regular • Ad hoc 9 Shareholders • Written Communications • Quarterly Financial Report • Annual General Meeting • Regular • Quarterly • Annual 10 Vendors / Suppliers / Contractors / Consultants • Formal Meetings / Virtual Meetings / • Project Tender • Written Communications • Regular • Regular • Regular 11 Investors / Analysts / Fund Managers / Private Equity Firms • Formal Meetings / Briefing / Virtual Meetings • Written Communications • Ad hoc • Ad hoc 5 Industry Group • Formal Meetings / Virtual Meetings • Written Communications • Regular • Regular 4 Financial Institutions • Formal Meetings / Virtual Meetings • Written Communications • Regular • Regular 6 JV Partners / Business Associates • Formal Meetings / Virtual Meetings • Written Communications • Regular • Regular 7 Hybrid Meetings The following groups are key stakeholders who have the greatest impact on our organisation and with whom we engage regularly: Sustainability Report
37 MKH Berhad 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 property portfolio strategically located within Kajang and across the Klang Valley comprises of: MKH’s projects are master-planned to provide integrated living space and amenities that comprises of quality housing, variety of facilities, ample greenery, convenient public transport and more. Boutique Serviced Apartments Landed & High-rise Residential Developments Mixed Developments Commercial Developments Transit-oriented Developments (“TOD”) Townships Artist’s impression of TR2 Residence @ Jalan Tun Razak, comes with eco-concept development and natural ventilation Sustainability Report
e are guided by the best industry practices in our business operations to produce and deliver oducts to our customers, while also being cognisant of the EES aspects of our communities. MKH’s property portfolio strategically located within Kajang and across the Klang Valley of: 38 Annual Report 2022 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. Our Property Development and Construction Division has developed a wide range of successful property products to include integrated townships, TOD and affordable homes incorporating green and transport friendly concept for the community. In FY2022, the Group conducted sales campaign during festive season namely MKH Super Saver Chinese New Year 2022 (campaign period 1 January 2022-31 March 2022) and MKH Super Saver Raya Deal 2022 (campaign period 1 April 2022-31 May 2022) which offer incentives for 22 residential and commercial projects. In addition, MKH Big Saver 2022 (campaign period 19 August 2022-30 September 2022) offer incentives to 4 residential projects such as TR2 Residence @ Jalan Tun Razak, MIRAI Residences, Nexus @ Kajang Station (Tower B) and Kajang 2 Precinct 3 (Akina). MKH offers homebuyer more housing choices in different locations with its impressive portfolio of developments. Our adaption of Industrialised Building System in property development accentuates our expertise in creating values for our homebuyers through the building of aff rdable yet quality housing. In keeping up with the latest trends, we innovate sustainable homes for multi-generational living, incorporating green living. Our newly launched 2 storey terrace house project known as Akina in Kajang 2 Precinct 3, is conveniently located near SILK Highway, LEKAS Highway, PLUS Highway, Persiaran Bangi flyover, and the public transport hub, Kajang 2 KTM Station and Kajang MRT-KTM Integrated Station that cater for greater mobility and access. For the year 2022, Building Materials Trading Division managed to deliver its two trademarked products namely EGON ironmongeries and CASCADA sanitary fittings to Kajang East Precinct 1 development. Our Building Materials Trading Division also supplied ready-mix concrete to MKH Boulevard II and MIRAI Residences projects. The software application (“app”) namely RondaApp is being continuously implemented and improved to suit our Plantation Division current practices. RondaApp enabled the plantation management team to monitor and take timely steps to mitigate or resolve matters such as maintenance and repair work to roads and workers quarters. In FY2022, a new app namely Plantation & Mill Management System has been developed to include tracking of Fresh Fruit Bunches (“FFB”) evacuation from the field to the mill. Sustainability Report We constantly explore joint-venture opportunities to expand our land bank whic enable the Group to carry out development with relatively lower upfront financial commitment. Partnering to develop projects also enable our Property Development and Construction Division the opportunity to adopt new specialised knowledge in the construction industry, which further enhances our product offerings for the greater community. Our joint venture project with Panasonic namely MIRAI Residences at Kajang 2 Precinct 1 applying the Japanese Inspired Living is proud to be the first residential property in Malaysia to provide Panasonic Energy Recovery Ventilator (“ERV”) system in Kajang 2. The system provides healthy indoor air circulation and creates a peaceful and pleasant living at our residence.
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