MRCB’s 3Q net profit slumps 63% on slower construction progress at its projects

KUALA LUMPUR (Nov 23): Malaysian Resources Corp Bhd (MRCB)’s net profit for the third quarter ended Sept 30, 2020 (3QFY20) slumped 63% to RM920,000 from RM2.52 million a year ago, as it saw slower construction activities at its projects amid the Covid-19 pandemic.

Its revenue for the quarter was down 20% to RM297.63 million from RM372.74 million a year ago, its stock exchange filing today showed. Nevertheless, its 3QFY20 is an improvement over its 2QFY20, when the group recorded a net loss of RM219.61 million. Its 3QFY20 revenue is also 78% more than 2QFY20's RM167.18 million.

Besides slower construction progress due to strict compliance to standard operating procedures and movement restrictions during the conditional movement control order (CMCO) and recovery MCO, MRCB said its 3QFY20 earnings was also affected by the lockdown in Victoria State in Australia, which impacted revenue recognition from its 1060 Carnegie in Melbourne.

For the nine months ended Sept 30, the group sank into the red with a net loss of RM203.04 million, from a net profit of RM17.71 million a year earlier, despite revenue coming in 5% higher at RM890.56 million versus RM847.76 million previously.

The loss incurred was largely due to impairment provisions resulting from the pandemic in the second quarter of 2020, the group said.

"Excluding these provisions, the group would have recorded a profit of RM15 million in the first nine months of 2020, despite the total halt of construction and other disruptions to construction work during the MCO/CMCO in the period," it said in a separate statement.

On prospects for its property development and investment division, the group said outlook for the economy and the property market will remain challenging for the foreseeable future.

“The company’s immediate priorities in 2020 remain on enhancing cashflow by monetising its inventory of unsold completed stocks and focusing on its projects in hand. The group will continue to closely monitor conditions in the broader economy and property market, revising its strategies and financial targets accordingly including reviewing its future launches if conditions dictate,” its filing further read.

The division had total unbilled sales that are expected to deliver RM1.2 billion in revenue over the construction period of its projects, of which about 99% are residential projects.

As for its engineering, construction and environment division, it said the third wave of the Covid-19 pandemic experienced in Malaysia, which led to the reimposition of the CMCO since Oct 22 in the Klang Valley and Selangor, is expected to have an impact on the industry.

Nevertheless, it said the Light Rail Transit 3 project, which is currently 39% completed and well on schedule to meet the targeted 40% completion by end 2020, should see profit recognition pick up in 2021, albeit at a slower pace due to the implementation of stricter standard operating procedures to prevent the spread of Covid-19.

As at Sept 30, the group’s unbilled construction order book stood at RM20.5 billion.

MRCB's share price closed unchanged at 46.5 sen today, valuing the company at RM2.05 billion.

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