What leads MDA to prefer net profit over gross profit

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Matrix Concepts group managing director Ho Kong Soon (second from left) receiving the trophy from Deputy Local Government Development Minister Akmal Nasrullah as Star Media Group chief executive officer Alex Yeow (right) and FIABCI-Malaysia president Firdaus Musa (left) look on.

Matrix Concepts group managing director Ho Kong Soon (second from left) receiving the trophy from Deputy Local Government Development Minister Akmal Nasrullah as Star Media Group chief executive officer Alex Yeow (right) and FIABCI-Malaysia president Firdaus Musa (left) look on.

Investors learn more about a company's health through net income

Gross profit and net profit stand as the twin pillars of paramount profitability metrics for any business. That portion of income which remains once production costs have been subtracted from sales is termed gross profit. Revenue, conversely, signifies the monetary outcome of a company's product and service transactions.

For investors, the gross profit can provide a glimpse into the monetary gain generated by a business through the crafting and distribution of its offerings. In contrast, net profit emerges after all expenses and outlays have been subtracted from revenue. Investors keen on evaluating a firm's holistic profitability, indicative of its managerial prowess, often scrutinise its net profit figures.

Delving into the distinction between gross profit and net profit can furnish investors with insights to deduce a company's earning capabilities and identify areas of financial leakage. The rationale behind the Malaysia Developer Awards (MDA) favouring net profit over gross profit is grounded in its emphasis on the company's adeptness in resource management and its potential for enduring success in the long haul.

TOTC quantitative rankings - Net Profit Growth

The Net Profit Growth attribute is based on the company’s performance over three years from 2020 to 2022, with 2019 serving as the base year. Companies that register consistent positive growth over the three years are given preference.

The companies are also assessed on their debt-to-equity ratio and return on equity, with companies scoring a higher percentage given preference. For example, in the RM1bil and above category, Matrix Concepts Holdings Bhd (Matrix Concepts) achieved two consecutive years of positive net profit growth and a positive return on equity of 13.23%. This achievement puts Matrix Concepts as the top ranker for this attribute.

Of the top 10 rankers in the Top-of-the-Chart (TOTC) RM1bil and above category, none of the assessed companies saw three years of positive growth. However, it must be noted that while companies registered negative growths, it did not mean that they were not registering a positive net profit, only that they were earning a lower profit.

Similarly, in the TOTC below RM1bil category, NCT Alliance Bhd topped this attribute with a return on equity of 8.9%. It is the only company to achieve three consecutive years of positive net profit growth for this attribute. This places NCT Alliance in the top spot for this attribute.

NCT Alliance director Sae-Yap Atthakovit giving the thumbs up.

NCT Alliance director Sae-Yap Atthakovit giving the
thumbs up.

Ranking by net profit growth

RM1bil and above tier
1 Matrix Concepts Holding Bhd
2 OSK Holdings Bhd
3 IGB Bhd
4 Mah Sing Group Bhd
5 IOI Properties Group Bhd
6 MRCB
7 IJM Corporation Bhd
8 Sime Darby Property Bhd
9 HCK Capital Group Bhd
10 UEM Sunrise Bhd

Ranking by net profit growth

Below RM1bil tier
1 NCT Alliance Bhd
2 Glomac Bhd
3 LBS Bina Group Bhd
4 Paramount Corporation Bhd
5 JKG Land Bhd

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