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Muar Ban Lee’s Growth Prospects Positive Amid El Nino Concerns

KUALA LUMPUR: Muar Ban Lee Group Bhd (MBL) is poised to navigate the challenges the looming El Niño poses with strategic business diversification plans.

The company is adopting technological advancements in palm kernel oil processing and ventures into the biogas sector, showcasing its resilience and potential as a critical player in the evolving market.

The expected rise in palm oil prices allows MBL to increase revenue from its core operations.

The company’s involvement in biogas aligns with the global trend towards renewable energy and offers an alternative application for palm oil, potentially reducing production risks associated with El Niño.

“MBL’s investment in modern technology is a game-changer, enhancing our efficiency and yield in palm kernel oil processing.

“This strategic move positions us to maximise our resources and maintain a competitive edge, especially in times of reduced production,” MBL’s top management representative said in a statement.

Further, the spokesperson said the anticipated global upswing in palm oil demand, driven by biogas, positions MBL favourably.

As biogas gains prominence in the energy sector, MBL’s involvement could lead to new revenue streams and market opportunities.

MBL’s venture into biogas marks a strategic move, aligning with the global shift towards renewable energy.

By converting palm oil production waste into energy, MBL addresses environmental concerns and taps into a burgeoning market.

This diversification also provides a buffer against the volatility of palm oil prices and production levels.

Furthermore, MBL’s strategic divestiture of a 51.0 per cent stake in Indonesia-based PT Serdang Jaya Perdana for RM11.0 million has streamlined its financial portfolio, boosting cash flow and overall financial stability.

By shedding a low-yield asset, this divestment refocuses the company’s efforts on more lucrative ventures.

Post-divestment, MBL’s revenue normalised to RM74.58 million in the third quarter (Q3) FY23, with its core manufacturing business contributing RM51.97 million.

Meanwhile, profit after tax jumped 62.5 per cent quarter-on-quarter (QoQ) to RM4.98 million, driven by heightened demand in its manufacturing division.

Regarding the business outlook, a substantial order book and a favourable business climate could boost earnings in the near term.

MBL’s success is underpinned by its diverse product and service offerings in the palm oil industry, notably its commitment to sustainability.

Initiatives like the empty fruit bunch (EFB) biogas plants and palm oil mill effluent (POME) water treatment systems exemplify MBL’s dedication to environmental stewardship, turning waste products into energy and managing wastewater efficiently.

The shift towards renewable energy is crucial to MBL’s robust earnings growth prospects.

This transition aligns with global environmental goals and presents lucrative opportunities for the company.

“A deliberate and strategic shift in our asset portfolio has not only strengthened our financial footing but also allowed us to channel our resources towards more profitable and sustainable ventures,” a senior executive at MBL said.

Aside from the growth potential, MBL’s diversified revenue streams enhance its earnings resilience and stability.

MBL’s automotive division, for instance, contributed approximately RM28.18 million in revenue during Q3.

Additionally, MBL’s plantation segment, though in its early stages with an immature durian plantation yet to yield revenue, represents a promising avenue for long-term growth.

From an investment perspective, MBL presents an attractive valuation.

The company’s net asset per share, at 95 sen, is significantly higher than its current share price of around 45 sen.

Before the COVID-19 pandemic, MBL had a strong track record of dividend payouts, suggesting potential future dividends as business normalises.

However, challenges loom on the horizon, particularly concerning the impact of El Niño.

This climatic phenomenon risks palm oil production, potentially affecting supply and prices.

MBL must navigate these uncertainties, which could affect production volumes and revenue.

The company’s response to these challenges will be crucial in maintaining its growth trajectory and fulfilling its commitments to shareholders and clients.

“We are acutely aware of the challenges ahead. Our strategy is to stay nimble, adapt quickly, and leverage our technological and market strengths to weather these uncertainties,” the senior executive said.

While MBL is positioned for success with its diversified business model, technological advancements, and commitment to sustainability, it must remain vigilant and adaptive to overcome the challenges posed by El Niño and other market fluctuations.

This proactive approach will be vital in sustaining its growth and upholding its reputation in the industry.

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