SINGAPORE (Dec 12): MeGroup, the Catalist-listed Malaysian car dealership and automotive parts manufacturer, reported earnings of RM2.7 million ($0.88 million) for 1H19 ended Sept, 64% lower compared to the earnings of RM7.4 million reported in 1H18.

MeGroup launches IPO today at 23 cents per share; to list on Oct 31

The decrease was mainly due to the absence of a one-time gain of RM4.8 million that the group received in 1H18 from the Malaysian government for the compensation of a compulsory land acquisition for the country’s MRT system. In addition, there was an increase in selling and distribution expenses as well as admin and finance expenses.

Revenue in 1H19 more than doubled to RM115.8 million from RM52.3 million a year ago as sales from the group’s dealership business increased by RM64.3 million to RM98.1 million due to the opening of the Honda dealership in Cheras in Sept 2017 where the group saw an increase in the volume of cars sold.

Revenue from the group’s manufacturing business decreased by RM0.8 million to RM17.7 million in 1H19 due to a decrease in the volume of NVH (noise, vibration and harshness) components supplied, as the group phased out the production of NVH components for an automobile model from Sept 2017.

The group’s gross profit margin for 1H19 was 9.7% compared to 17.8% in 1H18. This decrease was largely due to an increase in car sales, which has lower gross profit margins as opposed to aftersales services, in the dealership business. Gross profit margin from the manufacturing business also decreased largely due to lower gross profit margins from the sale of NVH components for a new car model compared to higher gross profit margins from the sale of NVH components for the phased‐out model.

As announced on Nov 28, the group has commenced operations of a New Honda 3S dealership in Kuala Selangor, Malaysia. Looking ahead, the Malaysian government plans to unveil its new National Automotive Policy (NAP) in the first quarter of next year which reportedly has an emphasis on electric vehicles and new technologies, as well as a potential third national car in Malaysia.

“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,” says MeGroup.

Year to date, shares in MeGroup have fallen 2 cents to close at 2o cents on Wednesday.