This article first appeared in Capital, The Edge Malaysia Weekly on September 30, 2024 - October 6, 2024

THE 1997/98 Asian financial crisis (AFC), which led to severe currency devaluation and a bloodbath in the region’s stock markets, bankrupted many businesses and investors. It was a painful lesson that deeply scarred Asian investors and many have since shied away from the stock market.

But as the saying goes, crisis creates opportunity. During the stock market crash in September 1998, it was easy to find bargains, including blue chips, at ridiculously low prices.

Some 26 years on, those who were brave enough to pick up the hammered stocks when the herd was fleeing the local bourse, then known as the Kuala Lumpur Stock Exchange, would have made a killing.

The Edge looks at the stocks that would have made millionaires, if not billionaires, of those who held on to their investments for more than two decades.

Dialog Group Bhd (KL:DIALOG) tops the list of stocks that have outperformed since September 1998. The Edge’s computation shows that if one had invested RM100,000 in the oil and gas (O&G) company at the peak of the AFC, the investment would have ballooned to a whopping RM24.1 million, including dividends.

Investors would have enjoyed a compound annual growth rate (CAGR) of 23.4% on returns over the 26 years.

It may come as a surprise to some that Dialog is at the top of the list, considering the volatile nature of the O&G industry and the fact that the cycle has become shorter in recent years. As such, few would have associated O&G firms with steady returns.

But the company’s track record says it all. Since 1998, Dialog has paid 26 consecutive years of cash dividends while growing its business.

The company has also rewarded shareholders with seven bonus issues — two in 2000, and one each in 2001, 2002, 2004, 2010 and 2021 — and distributed stock dividends thrice — in 2006, 2009 and 2014.

Its trailing 12-month dividend yield ranged from a low of 0.99% in FY2014 to a high of 6.6% in FY2005 and averaged 2.4% during the 26 years.

Since its inception in 1984, ­Dialog has diversified from an integrated technical service provider into an owner and operator of strategically located oil storage facilities.

Its emphasis has never been on growing revenue at all costs; instead, it is selective about high-margin work. This strategy, combined with a strong recurring cash flow, enabled the company to venture into the tank storage segment.

In 2009, it decided to go big at Pengerang Deepwater Terminals (PDT) in Johor, which have been operational since 2014. The strategic shift in business model shielded Dialog from oil price volatility.

During the 2014-2020 oil down cycle, while others were facing margin compression and had to write off assets, Dialog was able to grow its net profit for six consecutive years until 2020.

The company’s share price saw two major break moments. The first was in 2010-2014 when oil traded around US$110 a barrel, during which Dialog’s share price rallied four times. The share price then doubled between 2017 and 2020.

CIMB Group Holdings Bhd (KL:CIMB) went through several iterations from 1998 before assuming its current form.

Its shares have generated a return of 8,679%, or a CAGR of 18.7%, over the 26-year period. Since 1998, the bank — formerly known as Commerce-Asset Holdings Bhd, or CAHB — has made two bonus share issues, in 2002 and 2010.

It has also paid uninterrupted cash dividends every year and that has added to the exponential gain.

The banking group’s trailing 12-month dividend yield ranged from a low of 1.1% in FY1999 to a high of 8% in FY2008 and averaged 4.4% throughout the 26 years.

It was one of the five anchor banks named when Bank Negara Malaysia announced an industrywide consolidation, before the list was expanded to 10.

The post-AFC merger of Bank of Commerce (M) Bhd with Bank Bumiputera Malaysia Bhd resulted in the formation in 1999 of Bumiputra-Commerce Bank Bhd, then the country’s second largest bank.

In the new millennium, CAHB expanded regionally, driven by its major shareholder Khazanah Nasional Bhd, in a move to turn government-linked companies into regional champions. It ventured into emerging markets such as Indonesia (through a 51% stake in PT Bank Niaga), Thailand (BankThai pcl) and the Philippines.

On the local front, the banking group hit the headlines when it made a bid for public-listed Southern Bank Bhd, one of the 10 anchor banks. Shareholders of Southern Bank then included its CEO Datuk (now Tan Sri) Tan Teong Hean, Sultan Sharafuddin Idris Shah of Selangor, and Hard Rock Cafe Malaysia owner Datuk (now Tan Sri) Syed Mohd Yusof Syed Nasir, who was its chairman.

The three were shareholders of Ramuda Sdn Bhd, which as at April 2005 had a deemed interest of 18.77% in Southern Bank.

In the stockbroking space, CIMB Group bought into Singapore-based GK Goh Securities in 2005 to expand its regional presence. This was followed by the acquisition of Royal Bank of Scotland’s Asia-Pacific equity and corporate finance unit in 2012, and later, Thai brokerage SICCO Securities.

CIMB Group’s revenue has topped RM10 billion since 2009. By 2018, its international footprint had grown to cover all 10 Asean countries as well as other Asian nations such as India, China and South Korea.

It may not be an exaggeration to describe United Plantations Bhd (KL:UTDPLT) as among the bluest blue chips in the oil palm plantation sector.

The company does not generate much news flow that can make headlines and drive its share price movements.

Still, its shareholders have enjoyed hefty gains since Sept 1, 1998. If one had invested RM100,000 in the Perak-based plantation group then, that investment would have grown to nearly RM7 million, including dividend payments.

The stock has generated a return of 6,897%, or a CAGR of 17.7%, over the 26 years.

Since 1998, United Plantations has made only one bonus issue, in 2020, with cash dividends forming most of the entitlements. Its trailing 12-month dividend yield ranged from a low of 5.9% in FY2007 to 31.7% in FY1999, and averaged 12.3% throughout the 26 years.

One of the company’s business moats is its higher-than-industry oil extraction rate largely due to its superior seedling technology, prudent replanting planning and mini railway transport system, which spans 150km. This has resulted in not only lower transport costs, but also ensured the quality of its fresh fruit brunches — the prerequisite of high-quality crude palm oil.

As one of the pioneer oil palm planters in Malaysia with a history that can be traced back to 1926, United Plantations has the know-how and strong customer relationships. It is also one of the most environmentally friendly planters and commits to agricultural practices with a strong social and environmental focus.

Its share price saw three major break moments, which coincided with periods when the palm oil price rallied and/or was high — 2002-2008, 2009-2014 and 2022-2024. It more than tripled in the first two periods, and doubled in the last.

In terms of plantation acreage, United Plantations’ 50,845ha is considerably smaller than SD Guthrie Bhd’s (KL:SDG) 568,323ha and FGV Holdings Bhd’s (KL:FGV) 344,472ha.

The plantation group has proved that the size does not matter; what matters is the efficiency level.

Gamuda Bhd (KL:GAMUDA) was unlikely to have been a top choice of investors when the local stock market crashed in September 1998 simply because it was considered a second-tier builder.

That said, those who put their money in the construction company at the height of the AFC have been well rewarded as Gamuda has grown into a regional player with property and infrastructure projects in Singapore, Vietnam, Taiwan and Australia. At one time, it also owned stakes in highway concessions, which were later sold to Amanat Lebuhraya Rakyat Bhd.

Since Sept 1, 1998, Gamuda shares have generated a return of 6,621%, or a CAGR of 17.5%. This means that an investment of RM100,000 in Gamuda at an adjusted closing price of 12.2 sen (or an unadjusted price of RM1.20), would now be worth RM6.7 million inclusive of dividends received.

Few may have noticed that Gamuda pays consistent dividends annually, except for the financial year ended July 31, 2021 (FY2021) during Covid-19 pandemic.

Its trailing 12-month dividend yield ranged from a low of 1.8% in FY2024 to 18.6% in FY2008 and averaged 5.9% over the 26 years.

It undertook two bonus issues in 2000 and 2007. And on Sept 26, the company announced a one-for-one bonus issue. Analysts believe the construction giant is poised to become a constituent of the FBM KLCI in the coming review in November.

Besides regular dividends, Gamuda has been profitable since 1998.

When public infrastructure rollouts slowed down locally, the company managed to secure major infrastructure projects overseas to fill the gap.

Nevertheless, the company twice dropped bombshells that caused panicked selldowns of its shares during the 26-year period.

The first was in June 2000, when it announced the RM68 million acquisition of a 43.87% stake in Dyna Plastics Sdn Bhd, a maker of polymer lithium ion rechargeable batteries. Three years later, it wrote off the battery business.

The second occurred in February 2008, when then managing director Datuk Lin Yun Ling trimmed his stake to 1.73% from 5.23%. That dragged down the share price by 23% within a month.

As the saying goes, the rest is history. Notably, Lin exercised his share options under an Employees’ Share Option Scheme to acquire 1.2 million shares at RM2.55 each in June.

Gamuda’s share price saw three major upward movements during the period. The shares tripled in 2007, and more than doubled between January 2010 and June 2017. In addition, the stock has outperformed the market since January 2022, more than tripling during the two years.

IOI Corp Bhd (KL:IOICORP) has never been the largest in terms of plantation acreage but the group has outperformed its peers in terms of investment return.

If an investor had put RM100,000 into IOI Corp in September 1998 during the local market crash triggered by the AFC, the return of the investment would have been 4,502%, or a CAGR of 15.8%, over the 26 years.

In short, the return would have been RM46 million, including dividend payments.

IOI Corp was a good proxy for the commodity boom between 2002 and 2008 when CPO prices leaped to RM4,000 per tonne. And that made it the biggest company in terms of market cap for a brief period in October 2007.

During this period, its price-­earnings multiple was re-rated upwards from five times to 14 times, as the company’s net profit jumped almost five times from about RM350 million to RM1.48 billion.

The re-rating could be attributed largely to IOI Corp’s move to further integrate its business as it had ventured into the refinery and oleochemical area for a natural hedge against adverse CPO price movements and to climb the value-added chain.

The group is not content with just harvesting oil palm fruits and selling crude palm oil, and has made a concerted effort to expand its downstream business.

When IOI Corp acquired Loders Croklaan in 2002, some commented it might have bitten more than it could chew. Some 14 years later, IOI Corp announced its takeover of Cremer Oleo GmbH & Co KG, which was seen as a natural move.

For long-term IOI Corp shareholders, one exciting moment was probably the attempted hostile takeover of Palmco Holdings Bhd by the then Sime Darby Bhd in 2001.

IOI Corp, which already owned a 32.96% stake in Palmco, managed to accumulate more than 50% equity interest to keep Palmco (now IOI Oleochemical) within the group. The oleochemical firm was taken private in 2005, and shareholders were given the option of either a full cash settlement or cash plus IOI Corp shares.

Since Sept 1, 1998, Petronas Dagangan Bhd’s (KL:PETDAG) shares have generated a return of 6,208%, or a CAGR of 17.2%.

During the period, the petrol station operator made just one bonus issue in 2005, but has declared regular dividends to reward its shareholders. Its trailing 12-month dividend yield ranged from a low of 2.9% in 2022 to 21.2% in 2002 and averaged 8.6% throughout the 26 years.

Petronas Dagangan is the largest fuel retailer in Malaysia with more than 1,000 petrol stations and about 30% market share. It is also the leader in commercial fuel supply (about 60% market share) and liquefied petroleum gas (LPG) distribution (about 50% market share).

The company’s strengths are its extensive supply and distribution infrastructure such as fuel and aviation terminals, bunkering facilities, LPG bottling plants and pipelines.

This has allowed Petronas Dagangan to grow largely in line with Malaysia’s demand for refined petroleum products over the years.

From January 2009 to December 2013, the stock staged a massive rally to hit an all-time high of RM31.78 (unadjusted share price). Inclusive of dividends, returns amounted to nearly 500%. This period was in tandem with an upward trend in oil price.

Whoever bought Hong Leong Bank Bhd’s (KL:HLBANK) shares in September 1998 might have thought they had made a bad investment given that the bank was in a vulnerable position after Bank Negara announced the initial list of five anchor banks to kick-start consolidation in the industry.

However, Hong Leong Bank made it to a list of 10 anchor banks following negotiations, together with a few of its peers, with the central bank. The list was finalised in February 2000.

The return of over 10,000%, or a CAGR of 19.5%, over 26 years, is proof that the investment decision wasn’t wrong.

An investment of RM100,000 in September 1998 would be worth RM10.31 million now, inclusive of dividend payments.

Since 1998, the bank has made just one bonus issue in 2000 but it has been generous with dividend payments. Hong Leong Bank has declared cash dividends over 26 consecutive years.

Its trailing 12-month dividend yield ranged from a low of 2% in FY2021 to 14.7% in FY2004 and ­averaged 4.6% over the 26 years.

Hong Leong Bank was known for its prudent business practices as showcased by its 19-year average non-performing loan (NPL) ratio of about 1.39%, which is lower than the industry average. It has a strong anchor in retail loans, mostly collateralised property loans.

On top of organic growth, it has undertaken two major merger and acquisition exercises, namely the acquisition of a 20% stake in Bank of Chengdu in 2008 and the merger with EON Bank Group in 2011.

From June 2009 to January 2013, its share price nearly tripled, likely due to the accretive acquisitions and the up cycle in Malaysia’s property sector. During this period, the bank’s P/B ratio increased from 1 times to 1.4 times.

The bank staged another steep 62% rally from January 2017 to February 2019, as its asset quality improved another notch, where its NPL ratio was consistently below the 1% mark. Its P/B ratio increased from 1 times to 1.2 times.

An investment of RM100,000 in the shares of Hong Leong Bank’s holding company, Hong Leong Financial Group Bhd (KL:HLFG), would be worth RM3.87 million today, including dividends. This represents a 26-year CAGR of 15%.

Since 1998, HLFG, which holds the commercial bank, insurance arm and investment banking operations, housed under Hong Leong Capital Bhd (KL:HLCAP), and asset management arm, has made just one bonus issue in 2002.

HLFG wanted to take Hong ­Leong Capital private in 2013, but failed. The company remains listed with a narrow public spread.

It has paid 26 consecutive years of cash dividends. The trailing 12-month dividend yield ranged from a low of 0.7% in FY2021 to 7.9% in FY2004 and averaged 3.9% over the 26 years.

In 2010, through a strategic partnership with Mitsui Sumitomo Insurance Company Ltd, HLFG merged its general insurance business with MSIG Insurance (Malaysia) Bhd to create Malaysia’s second largest general insurance company by gross written premium.

From January 2009 to November 2014, the company’s shares rose 350% as Malaysia’s economy moved into a higher consumption mode, with household debt per capita rising from 48.7% to 67.9%. During this period, the P/B ratio for the financial holding company increased from 0.6 times to 1.3 times.

The company was originally known as Digi.Com Bhd prior to its merger with Axiata Group Bhd’s local mobile service operation, Celcom Axiata Bhd.

Digi.Com was the first to introduce prepaid mobile services to Malaysians. The move, which changed the mobile service landscape, enabled it to capture a fair share of the market. Prepaid is a more lucrative business as the cash collection upfront eliminates the problem of non-collectible debt faced by the postpaid model.

In 2001, Telenor International AS became Digi.Com’s major shareholder. Leveraging the major shareholder’s experience, Digi.Com introduced many firsts in terms of services to Malaysia’s mobile phone users.

Telenor was Digi.Com’s second foreign major shareholder. Swisscom AG held a substantial stake before Telenor came into the picture.

Since Sept 1, 1998, CelcomDigi Bhd’s (KL:CDB) shares have generated a return of close to 7,000%, or a CAGR of 17.7%.

Digi.Com only started to pay cash dividends in 2006. The telco has since paid 18 consecutive years of dividends.

Its trailing 12-month dividend yield ranged from a low of 3.7% in FY2021 to 20.7% in FY2007 and averaged 8% throughout the 18 years. The company has not undertaken any bonus issue but did a 1-for-10 stock split in 2011.

Digi.Com’s shares saw two major break moments. From January 2003 to May 2007, its share price rose 12-fold, as its earnings grew at a four-year CAGR of 67%. Between January 2010 and February 2015, the stock tripled and reached an all-time high of RM6.65 on Feb 2, 2015. During this period, its price-earnings multiple expanded from eight times to 17 times, while earnings grew at a five-year CAGR of 15%.

Public Bank Bhd is regarded as a sure bet, especially for long-term investors, given its solid track record on dividend payment and earnings.

Nevertheless, that might not have been the case in the 1990s when it was smaller in size. There were more than 40 banks in the country before the consolidation in 2000.

Despite the harsh operating environment during the AFC when provisions shot up nearly 10 times, Public Bank remained profitable in FY1998 and FY1999. Indeed, it has always been profitable over the past 26 years and has declared dividends every year.

The bank’s trailing 12-month dividend yield ranged from a low of 1.8% in FY1999 to 22% in FY2004 and averaged 7.4% over the 26 years.

On top of that, it made four bonus share issuances — in 2001, 2002, 2003 and 2021 — and distributed stock dividends twice — first in 2009 and then in 2010. In 2004, the banking group conducted a two-to-one share consolidation exercise after bonus issues in three consecutive years.

According to The Edge’s computation based on Bloomberg data, an investment of RM100,000 in Public Bank shares would be worth RM8.39 million today, representing a 26-year CAGR of 18.5%.

However, the banking group made a cash call in 2014.

Public Bank is well known for its loan asset quality, with the NPL ratio for the last 18 years averaging a superior 0.73%. A large portion of 65% of its loan book is made up of retail loans, where the majority are property loans with collateral.

Its large deposit base, which provides a low cost of funds, helps to maintain its profitability too. 

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