Of Mega First’s rapid response to douse dividend payout disappointment

WHEN Mega First Corp Bhd (MFCB) unveiled its proposed share split exercise alongside a record net profit on both the quarterly and yearly basis last Friday (Feb 26), some of its shareholders were apparently taken aback with its meagre dividend payout of 6.5 sen/share.

While some shareholders stoutly stood by hydro power operator with regard to the need to conserve cash or having to utilise the company’s cash to pare its debt, some vented their disappointment as can be sighted on the i3investor.com platform.

What ensued was instead of MFCB’s stock price skyrocketed because of the good news, it skidded instead by 31% or 3.87% to RM7.69 with 1.14 million shares traded on Friday.

The counter further headed south on Monday and yesterday, shedding 33 sen altogether to close at RM7.36.

Things didn’t look up with the stock drifted further south today to hit an intraday low of RM7.10 during the morning session.

This was presumably when the MFCB’s investor relations team swiftly took action “to douse the fire” as evident by its response shared by a shareholder who goes by the pseudonym “linjie” on the i3investor.com portal:

“I am sorry to hear that you are disappointed by the dividend pay-out. Please know that the management has put in a lot of effort into balancing the funding requirements of the company against the dividend payout to shareholders.

For your information, the company is not storing cash reserves for no reason – RM190 mil of cash received in 2020 was used to settle the amount owing to the EPCC (engineering, procurement, construction and commissioning) contract; RM98 mil went into repayment of borrowings and interest and RM66 mil of capex expenditure went into the investment in the solar, packaging and plantation division.

After payment of RM59 mil dividend (12.5 sen for FY2020), the company is actually left with not much cash to pay any further dividend.

On your question on the company’s next steps, it has been growing year on year and intends to continue to grow moving forward.

We are growing and expanding all our existing businesses with a particular focus on the renewable and green energy space.

As we informed you before, we are working on the fifth turbine – however, COVID-19 has disrupted these plans and construction can only start at the end of the year (2021) assuming travel restrictions are relaxed.

We have also bid on the LSS4 (Large Scale Solar 4) project and are waiting for the results. As for our C&I (commercial and industrial) Solar venture is concerned, we have secured 15 megawatt (MW) projects to date with 12MW coming on-stream in 2Q 2021.

We expect to keep growing the C&I solar space in the coming years.

I hope my explanation above suffices. MFCB is still a growing business with many opportunities on the horizon and thus we cannot commit to a specific dividend payout policy – it really depends on the funding requirements of the company at a particular time.

However, we will be looking to increase the dividend payout as the company grows.

Please be assured that the chairman and management is and always will continue to look out for all shareholders interest.”

At today’s close, MFCB price saw a recovery, adding 6 sen or 0.82% at RM7.42 with 2.3 million shares traded, thus valuing the company at RM3.67 bil. – March 3, 2021

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