MFCB-Shareholders' Meeting Summary

This online shareholders' meeting took about 2 hours, and most of the time was spent answering questions. The management always answered questions, and the transparency was quite good. I actually didn't have much expectations for the results that were released after 5 o'clock. The results were mainly supported by hydroelectric power generation, but they were dragged down by Edenor's oleochemical business.

Basically, all kinds of information given by management are quite positive about the future. Currently, it is mostly about planning for the next few years. I believe these layouts will show obvious gains in 2026.

Currently, MFCB can be considered a comprehensive enterprise, covering a wide range of areas of business. Because the cash flow is strong, as long as the IRR of the project is good and you happen to meet a good partner, the MFCB will run to plug in and test the water temperature. The downside is that the market often doesn't value conglomerates too high. If it grows bigger and stronger in the future, it is also possible to spin-off and go public.

MFCB's business strategy is mainly to provide capital through shareholding and deepening the field with high-quality partners. Each business has exclusive partners and experts in related fields. For MFCB, the company values the people behind it more than the business, especially when choosing a partner.

✍️ Q&A
✅ What was the reason for the acquisition of CSCAH?
A: Investing in CSCAH will significantly strengthen Food Security's business. Food security will be an issue the world will face in the future, and Malaysia cannot stand alone. Cooperation with CSCAH management will enable MFCB to become the leading supplier of vegetables and fruits in Malaysia.

CSCAH is mainly engaged in the cultivation and sale of fruits and vegetables. It operates and manages approximately 1,100 acres of farmland in Johor and Pahang. Currently, CSCAH has developed and planted 600 acres of crops, including durian, coconut, chempedak, nangka, rose apple, pink guava, lime, stinky beans, lemongrass, curry leaves, and leafy vegetables.

Major crops will mature over the next 24 months. The Group has also launched the Clean Leafy Vegetables modern greenhouse cultivation pilot project on a 12-acre site in Johor, with initial success. In the future, management plans to gradually expand the investment portfolio and area for greenhouse cultivation.

✅ The profitability of CSCAH?
A: CSCAH's revenue for the last 8 months was RM56.2million, EBITDA was RM1.9million, and profit before tax was RM0.004million. As the Group gradually expands its greenhouse cultivation portfolio and major crops mature one after another, management expects CSCAH's profit contribution to gradually increase.

✅ Oleochemical company Edenor suffered significant capacity losses and recorded losses in fiscal year 2023 due to large-scale upgrade projects. What is the current situation?
A: Edenor's capacity utilization rate for FY2023 was only 72%, which is less than the ideal 90%. Entering 2024, Edenor experienced an unexpected shutdown in March-April, causing the capacity utilization rate to drop further to 65%. Currently, the issue was resolved in mid-May.

The biggest challenge for Edenor is maintaining the efficiency and stability of production capacity. Currently, global demand for oleochemical products has increased, so management expects Edenor's profit to recover in the second half of the year.

✅ The 26Sept2023 fire incident at one of the plastic packaging plants led to the Group's provision of RM26.9million. Will this ratio be recorded in the 2024 fiscal year revenue statement after insurance compensation?
A: The insurance claim of RM28.6million was approved on 13 May 2024, and RM20.6m was also distributed on the same day at the same time. In other words, there will be a one-time profit of RM28.6m in the 2024 fiscal year.

✅ Food security: For coconut plantations, management mentioned that coconut nectar syrup will be a key target for product expansion, and this will sacrifice the fruit of the coconut. Why?
A: After management's research on downstream coconut products, the team found that coconut nectar syrup is relatively in a niche market, and there is relatively little competition.

As for many of the other questions, they are related to the future of the group's big cake painting, so I'm lazy to ask them. Overall, solar energy, plastic packaging and food security will be the three major businesses the Group will focus on in the future. Among these, the expansion of the plastic packaging factory will be completed in June-July of this year. Mr. Goh expects the business to contribute up to RM100m in profit in the future.

Meanwhile, Food Security Division, which was originally expected to contribute to profits only in 2026, believes it can start contributing to profits in 2025.

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Company Profile: MFCB can be thought of as a holding company with multiple businesses, but currently the biggest source of profit is the Don SaHong Hydropower Plant hydroelectric power plant in Laos. MFCB owns 95% of the 325MW hydroelectric plant and a 25-year franchise (2020-2045), and enjoyed tax exemptions for the first 5 years.

Currently, the four main businesses are:
1. Renewable energy (325MW hydro & 92.5MW solar) - accounts for 88% of profit before tax
2. Packaging and labelling - accounting for 7% of profit before tax
3. Lime products - account for 5% of profit before tax
4. Food security - will only start contributing to profits in 2025

Other investments include oleochemistry, automotive testing equipment, hospitals, etc.

Simply put, MFCB is a steady and stable growth stock. Future growth plans are still relatively realistic, but there are certain systemic risks. Of course, investing is the same as doing business. There is no such thing as making a profit package; investing must involve certain risks, so it depends on how much you are willing to pay based on these risks.

Stock Price: RM4.88
PE: 12.57
ROE: 11.98%
DY: 1.69%
Market Capitalization: 4.82 billion (Rank 76)