Poor earnings growth for Bursa listed companies (6)

In my previous postings about this subject I used the FBMKLCI, the 30 heavyweights, based on market cap.

Another index is the MSCI Malaysia Index: "With 43 constituents, the index covers about 85% of the Malaysian equity universe.".

The EPS of this index is pretty similar to the numbers I gave for the FBMKLCI, with the exception that it peaked in 2012 instead of 2014:

One explanation could be that there were quite a few multi-billion RM rights issues in the last few years, which bolstered the profits for the companies (which I measured in the previous postings), but not necessarily on a per-share basis (as detailed in the above table).

Growth has been steady between say 2002 and 2012, about 10% yoy, but after that have clearly declined, with 2016 being most likely another poor year.

The index has lagged the emerging markets index over the last 15 years:

However, that doesn't mean the Malaysian shares are much more cheaper than those of other emerging countries, in the contrary:

Both on a PE and a P/BV basis Malaysia is actually more expensive, only the dividend yield is somewhat higher.

As one keen observer (of emerging markets and Malaysia particularly) put it:


I think the key factor underpinning Malaysia's  higher valuation multiples is the 'support'  from government-linked investment companies (GLICs - EPF,  Khazanah,  KWAP etc) who  consistently purchase Malaysian equities, and notably support them during market sell-offs.

This support has historically made the Malaysian market less volatile/lower beta vs. regional markets in the past.

While M'sia's P/E may seem unjustifiably high  relative to EM, its economy (c. 4-5% GDP growth, current account surplus, benign inflation etc) isn't  in too bad shape relative to the much of the rest of  EM- especially China, South Africa, Turkey, Russia,  Brazil etc.

Also, corporate governance is probably above average for an EM  - and better than those markets mentioned above.

The cost of capital - driven by lower bond yields - is also lower than the average EM - c.  10% vs. mid-teens or higher for some EMs, which should translate into higher P/Es.

All  these  factors should translate into above-average valuations for the M'sian market relative to EM.

That being said, earnings growth amongst the larger caps has been disappointing over the past few years.

Dufu directors, only a fine and reprimand?

Article from the Securities Commission:

Yong Poh Yow, former Executive Director and Chief Executive Officer of Dufu, was found to have made remittances totalling US$1,010,041 to foreign parties in the United States between January 2013 and October 2014 without authorisation from Dufu’s Board. The monies were then used to purchase several assets which were registered under his own name. This is a breach of section 317A(1) of the Capital Markets and Services Act 2007 (CMSA).  He was reprimanded and fined RM200,000.

Lee Hui Ta, also known as Li Hui Ta, former Executive Director and Chief Financial Officer of Dufu, was reprimanded and fined RM150,000 for abetting Yong by approving payment vouchers for the said unauthorised remittances. Lee is currently the Executive Chairman of Dufu.

While a breach of section 317A(1) of the CMSA carries upon conviction, a minimum imprisonment term of two years up to a maximum of 10 years and a fine not exceeding RM10 million, the SC had imposed administrative sanctions on both Lee and Yong after taking into consideration that Yong had fully repaid the amount of US$1,010,041 to Dufu.


The punishment looks extremely mild, is this really a proper deterrent? I strongly doubt it.

The company has not yet published the above on the announcement's website of Bursa, surely this is material information for investors in Dufu.

AirAsia: were all parties at the EGM equally informed? (2)

Announcement from AirAsia:


" ..... that the Company and the Subscriber have entered into a third supplemental letter dated 27 September 2016 in respect of the Subscription Agreement to extend the Cut-off Date of 27 September 2016 for a further period of sixty (60) days and expiring on 26 November 2016, or such longer period as the Parties may mutually agree in writing."

The first announcement about this share placement was on April 1st, 2016, about half a year ago.

Basically what the founders of AirAsia have received is a free call option on 559 Million AirAsia shares.

With AirAsia not paying any dividend (in other words no loss by buying the shares later) and the Cut-off Date being extended several times (saving interest charges, at least a few Million RM per month), it looks like a rather sweet deal for the founders of AirAsia.

I wrote before about this placement.

Poor earnings growth for Bursa listed companies (5)

Quick update on the earnings of the Top 30 listed companies on Bursa:

The companies with year end in December still have to report two quarterly earnings results, companies with year end in January have completed their 2016 results already and have started reporting their 2017 earnings.

At the moment it looks like that the earnings will come in around RM 53 Billion, lower than the 2012 results, about 12% lower than the 2014 results.

Counted in USD (for foreign investors), the results will be worse.