Recently, Muar Ban Lee Group Berhad (MBL, 5152), a Malaysian palm kernel expeller manufacturer, announced laudable financial performance with sustained growth in both revenue and profit. Before delving into MBL's latest financial results, let's briefly understand the company's background.

As the name suggests, MBL originated in Muar, Johor, specializing in palm oil machinery and oil seed crushing machinery. Moreover, the company provides a comprehensive "One Stop Service," encompassing initial design and fabrication of palm kernel crushing plants to the installation and commissioning of machinery.

Over the decades, MBL has undergone significant growth and diversification, reaching a crucial milestone by being listed on the main board of Bursa Malaysia. Today, MBL operates in four main business segments: Manufacturing, Oil Milling, Automotive, and Plantation.

According to the company's 2022 annual report, the Manufacturing segment constitutes a significant portion of the company's revenue, accounting for approximately 38.54%. As mentioned earlier, this segment primarily offers palm oil machinery, oil seed crushing machinery, and comprehensive engineering solutions.

Next, the Oil Milling segment contributed around 33.30% of the total revenue in the 2022 fiscal year. MBL's Oil Milling division is involved in palm kernel recovery and direct crushing of palm kernel seed to extract crude palm kernel oil. However, in November 2022, MBL sold its Indonesian subsidiary, PT Serdang Jaya Perdana, responsible for operating this business. Therefore, the Oil Milling segment will no longer contribute to revenue.

On the other hand, MBL's Automotive segment contributed approximately 28.15% of the revenue in the fiscal year 2022. In fact, MBL is one of the dealerships for Malaysia's national car, Proton. Currently, the company operates three automotive branches located in Muar (4S), Kulai (1S), and Langkawi (3S). Notably, the 4S branch offers comprehensive services, including sales, maintenance, spare parts, and spray painting for Proton cars.

Lastly, the Plantation segment has not yet contributed significantly to the revenue. For your information, MBL owns an oil palm plantation in Kelantan and a durian plantation in Muar, Johor, it has a durian plantation featuring high-quality species such as Musang King and Black Thorn. The durian plantation is expected to mature and contribute substantial revenue starting from 2025.

Revenue Comparison (YoY -44.59%, QoQ +9.51%)

As of September 30, the company's revenue is approximately RM74.58 million, a decrease of around 44.59% compared to the same period last year (RM134.60 million). This decline is mainly attributed to the sale of its Indonesian subsidiary, PT Serdang Jaya Perdana, resulting in the loss of revenue from the Oil Milling business.

From the quarterly report, about RM51.97 million in revenue is derived from the Manufacturing segment, showing a slight increase of approximately 0.83% compared to the previous year. Approximately RM28.18 million in revenue comes from the Automotive segment, experiencing a YoY decline of around 19.41%. Management attributes the decrease in Automotive division revenue to reduced market demand for the Proton X-series models.

Compared to the previous quarter, the company's revenue increased by about RM6.48 million or 9.51%, primarily due to increased revenue in the Manufacturing segment.

Net Profit Comparison (YoY -46.47%, QoQ +64.18%)

Due to the Oil Milling division no longer contributing any revenue, the company's net profit decreased by approximately 46.47% to around RM4.86 million year-on-year.

However, driven by strong income from the Manufacturing division, the company's net profit increased by approximately RM1.96 million or 64.18% quarter-on-quarter.

It is noteworthy that MBL remains a net cash company, holding a total of approximately RM66.73 million in cash for this quarter.

Outlook

Given the robust backlog of orders in the Manufacturing segment and an optimistic view of the business environment, the management expresses confidence in the company's performance for the fiscal year ending on December 31, 2023.

So, dear readers, what are your thoughts on MBL, currently trading at a P/E ratio of approximately 2.09?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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