MeGroup reports fiscal first half net profit dropped 64 percent on year-ago gain, lower margin

Malaysia five-ringgit noteMalaysia five-ringgit note

Malaysian auto dealership operator MeGroup reported on Wednesday that its fiscal first half net profit dropped 64 percent on-year to 2.7 million ringgit, despite a surge in revenue.

That was due in part to the absence of a year-earlier one-time gain of 4.8 million ringgit from the Malaysian government as compensation for the compulsory land acquisition for the country’s mass rapid transit system, it said. It also pointed to increased selling and distribution expenses and higher administrative and finance expense.

Revenue for the six months ended 30 September jumped 121.5 percent on-year to 115.8 million ringgit, mainly on the opening of a Honda dealership in September 2017, which boosted the volume of cars sold, it said in a filing to SGX on Wednesday.

MeGroup owns and operates dealerships for new automobiles under the Honda, Mazda and Peugeot brands in Malaysia.

In addition to the auto dealerships, MeGroup also manufacturers noise, vibration and harshness (NVH) components and non-NVH components, mainly for the automotive industry in Malaysia.

The manufacturing business revenue fell by 800,000 ringgit on-year to 17.7 million ringgit in the fiscal first half, largely on a decline in NVH component sales volume as it phased out production of NVH components for an automobile model since September 2017, the filing said.

However, revenue from the dealership business rose by 64.3 million ringgit on-year to 98.1 million ringgit in the fiscal first half, it said.

The gross profit margin in the fiscal first half dropped to 9.7 percent from 17.8 percent in the year-ago period, it said.

“This decrease was largely due to an increase in car sales, which has lower gross profit margins as opposed to after-sales services, from the dealership business,” MeGroup said.

“Gross profit margin from the manufacturing business also decreased and was largely attributable to lower gross profit margins from the sale of NVH components for a new car model as compared to higher gross profit margins from the sale of NVH components for the phased-out model,” it added.

In its outlook, the company noted that the Malaysian government plans a new National Automotive Policy (NAP), with an emphasis on electric vehicles and new technologies and a potential third national car.

“If these plans under the new NAP are formalised, it could present opportunities to the group in terms of supplying NVH components for new electric vehicles and the third national car, as well as potential dealership opportunities down the road,” MeGroup said.

Wong Cheong Chee, executive chairman and CEO of MeGroup, said, “we hope to be able to be a part of Malaysia’s third national car project, which will boost our portfolio of customer brands.”

Wong added that the company was happy with the growth of its dealership business.

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