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MRCB’s net profit surges 346% on lower expenses, higher share of results from associates, JVs

KUALA LUMPUR (Feb 25): Malaysian Resources Corp Bhd (MRCB)’s net profit surged 346% to RM26.89 million for the fourth quarter ended Dec 31, 2020, from RM6.03 million in the previous year’s corresponding quarter.

Revenue for the quarter fell 34% to RM308.92 million, from RM471.63 million.

According to its financial statement, the group recorded lower expenses during the quarter, as well as higher share of results from associates and joint ventures. Income tax expense was also lower.

For the cumulative four quarters, the group posted a net loss of RM176.14 million, versus a net profit of RM23.74 million in the previous year, while revenue declined 9.1% to RM1.19 billion from RM1.32 billion.

In its filing with the bourse, MRCB attributed the full-year net loss to the closure of its construction sites and prolonged restrictions during the movement control order (MCO), conditional MCO (CMCO) and recovery MCO (RMCO).

“Construction work resumed after the CMCO and throughout the RMCO, albeit reduced productivity levels, compared with before the Covid-19 pandemic, due to strict compliance to standard operating procedures (SOPs) and other restrictions imposed on the construction and property industry. 

“Despite stringent adherence to these SOPs, certain project sites were also voluntarily closed down for two weeks at a time, as a precautionary measure when Covid-19 cases were detected,” the group said.

It said revenue was largely contributed by the property development and investment division, which recorded a 12% increase, mainly on account of the commencement of revenue recognition from 1060 Carnegie in Melbourne, although the speed of achieving financial settlement for the units sold was affected by multiple Covid-19 related lockdowns in the Australian state of Victoria.

In the second quarter, the group provided RM197.4 million for the impairment of contract assets, trade and other receivables under its engineering, construction & environment division.

The provision was reduced to RM170.2 million for the financial year, as the group subsequently made recoveries.

Since the resumption of construction activities, MRCB said it saw continued improvements in its profitability, albeit at a slower pace, compared with pre-pandemic levels.

Meanwhile, its 50%-owned LRT 3 project joint venture company MRCB George Kent Sdn Bhd contributed higher profit after tax of RM8.1 million, as construction progress reached 46% as at Dec 30, 2020.

Its 27.94%-owned Sentral REIT and associated company, Sentral REIT Management Sdn Bhd, contributed a combined net profit of RM16 million to the group, versus RM15.9 million in 2019.

MRCB expects the economic outlook and the property market to remain challenging for the foreseeable future, with the group already embarking on austerity and cost cutting measures.

“This concern is further reinforced with the recent wave of increased Covid-19 infections experienced in Malaysia, and the Klang Valley in particular, where most of the company’s ongoing developments are located, and the reinstatement of the MCO on Jan 13 until March 4, with a possibility of further extensions. 

“Nevertheless, construction of the division’s key ongoing property developments continues to progress during this MCO, albeit at lower productivity levels, compared with before the onset of the Covid-19 pandemic,” it said.

The group said its immediate priorities in 2021 remain on enhancing cashflow by monetising its inventory of unsold complete stock. 

However, sales are likely to remain subdued due to the pandemic and closure of borders, which has impacted foreign markets’ access, which is a source of sales for some of its developments.

Meanwhile, MRCB said its engineering, construction & environment division continues to tender for more projects to replenish its order book, although there have been very few new large construction projects put out for tender.

As at end 2020, its external order book stood at RM21.7 billion, which will ensure a steady pipeline of contracts to sustain its business over the long term.

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