Keck Seng’s 4Q profit more than doubles, lifted by impairment reversal and lower cost of sales

• For its property-related businesses, the group remained vigilant in the timing of the new launches and challenges associated with sales, in view of the global geopolitical conflicts and the macroeconomic inflationary impacts on construction, material, and labour costs.

KUALA LUMPUR (Feb 27): Keck Seng (M) Bhd’s net profit more than doubled for the fourth quarter ended Dec 31, 2023 (4QFY2023) from the preceding quarter, despite lower revenue, due largely to a reversal of impairment loss recognised on an overseas hotel, lower cost of sales, and lower foreign currency translation losses.

Net profit for 4QFY2023 jumped to RM94.53 million from RM42.29 million in 3QFY2023, the group’s stock exchange filing on Tuesday showed. Quarterly revenue was down 7.9% to RM344.81 million from RM374.36 million.

For the full year, Keck Seng's net profit grew 19.4% to RM240.69 million from RM201.57 million in FY2022, despite revenue falling 25% to RM1.37 billion from RM1.83 billion.

Besides the reversal of the impairment loss on the overseas hotel, its hotel business also recorded better occupancy and average room rates in FY2023 from the three overseas hotels it owns, which boosted its profit before tax (PBT) to RM88.90 million from RM53.73 million in FY2022.

Its property development business also posted a higher PBT of RM77.24 million compared with RM45.87 million previously, due to higher number of residential properties sold and at higher average selling prices. Its 'others' segment also saw an increase in PBT to RM43.28 million from RM38.62 million.

These gains offset the lower PBT achieved in its plantation business, which dropped to RM12.56 million from RM17.94 million, and its manufacturing segment, where PBT fell to RM26.71 million from RM90.47 million.

Looking ahead, the group expects an increase in production from young mature oil palms but a decline from mature areas due to the extreme dry weather last year.

While it is anticipating its fresh fruit bunch (FFB) production for FY2024 will be similar to that of FY2023, it cautioned against the uncertainties in FFB prices that could impact its financial performance.

“The extreme dry weather in 2023 is expected to result in a decrease in FFB production nationwide in 2024. This will lead to increased competition for available FFB in the open market and could potentially result in lower intake volumes by the mill as compared to 2023,” it said.

“For refinery, tight refining margins are expected to continue into 2024 due to anticipated stagnation in global palm oil production and growing demand for biodiesel usage, leading to supply constraints,” it added.

For its property-related businesses, the group remained vigilant in the timing of the new launches and challenges associated with sales, in view of the global geopolitical conflicts and the macroeconomic inflationary impacts on construction, material, and labour costs.

As for its hospitality business, the group remained upbeat on the prospects of its overseas hotels — the Springhill Suites Midtown Manhattan in New York, the Doubletree Alana-Waikiki Beach in Hawaii, and the Delta Hotels by Marriott-Toronto Airport in Canada.

“The ongoing Russian-Ukraine war, the Middle East conflict, geopolitical tensions, global warming, volatility in international currencies, high-interest rates, and rising costs are expected to impact the group's performance in 2024,” it added.

At Tuesday’s close, the counter saw its share price fall nine sen or 1.55% to RM5.71, valuing the group at RM2.06 billion.

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