This article first appeared in Capital, The Edge Malaysia Weekly on October 7, 2024 - October 13, 2024

The long-term shareholders of Press Metal Aluminium Holdings Bhd (KL:PMETAL) have reason to smile as the aluminium smelter has generated the highest returns among super big-cap blue chips since the stock market crash in September 1998.

The Edge’s computation based on Bloomberg data shows that if one had invested RM100,000 in the stock — which was initially listed on the former Second Board — at the peak of the Asian financial crisis (AFC), the investment would have ballooned to a whopping RM40.42 million, including dividends.

Investors would have enjoyed a compound annual growth rate (CAGR) of 25.9% on returns over the past 26 years.

Besides regular annual dividends over 26 consecutive years, the company has also rewarded shareholders with free shares via several bonus issues. There have been five bonus issues since 1998. Nevertheless, the smelting giant also made two cash calls to raise fresh capital for expansion.

Press Metal was founded by the Koon brothers during the deep recession in 1986. It started as a small outfit doing aluminium extrusion in Puchong, Selangor. Currently, it is the leading aluminium smelter in Asia, in terms of capacity.

The company had the foresight to venture into upstream activities as the extrusion business faced low entry barriers. In 2007, it went big and invested about RM1 billion to set up Malaysia’s first aluminium smelting plant in Mukah, Sarawak.

Press Metal’s smelting capacity stands at 1.08 million tonnes, while its extrusion capacity is 230,000 tonnes a year.

Leveraging its proximity to its major East Asian customers, competitive electricity costs and the timely opening of new smelters, Press Metal had grown into the largest integrated aluminium producer in Southeast Asia in 2016.

Analysts believe its share price still has room to run given that 13 out of the 14 analysts covering the company are recommending that investors buy Press Metal shares.

Most consider the company as a proxy for the aluminium industry in Malaysia with its solid fundamentals, strong environmental, social and governance credentials and self-sufficiency in raw material production. Its Samalaju Phase 3 smelter is expected to support new demand.

Note: With reference to our article titled “Stocks you wish you had bought in September 1998” (Sept 30, 2024), we would like to clarify that Press Metal topped the list of super big-cap stocks that generated the highest returns.

Among big-cap stocks with a market cap of between RM1 billion and RM10 billion, RCE Capital Bhd (KL:RCECAP) has outperformed its peers in terms of investment returns since September 1998 (see table).

The Edge’s computation shows that if one had invested RM100,000 in the civil servants’ personal finance service provider at the 1998 stock market nadir, the investment would have grown to RM41.13 million, including dividends.

Investors would have enjoyed a CAGR of 26% on returns over the 26 years.

RCE Capital had enjoyed impressive growth from 2003 to 2012 on its civil servants’ personal loan venture. However, the growth hit a speed bump when Bank Negara Malaysia decided to lower the maximum tenure of personal financing from 25 years to 10 years in July 2013. This forced RCE Capital to revalue its loan book and make impairments accordingly.

Nevertheless, after the loan book cleaning-up exercise, RCE Capital resumed its growth trajectory. From January 2014 to September 2024, the company posted 11 consecutive growth cycles in its net profit. During this period, share price returns inclusive of dividends amounted to about 18 times.

Given its stronger financial footing, RCE Capital resumed its dividend payments in 2008 and has since paid dividends for 17 consecutive years. Its trailing 12-month dividend yield ranged from a low of 0.64% in FY2018 to a high of 44.2% in FY2016 (a capital repayment occurred that year) and averaged 5.3% during the 17 years.

The company has also rewarded shareholders with five bonus issues — in 2003, 2006, 2012, 2022 and 2024 — and distributed stock dividends once in 2021. In terms of share-based adjustments, RCE Capital made a 1-for-10 stock split in 2004, and a 4-to-1 share consolidation in 2016.

After divesting its broadcasting business in 2003, RCE Capital’s focus pivoted to the provision of personal loan financing to civil servants. Customer repayments are facilitated via direct monthly salary deductions, so collection risks are minimised.

Due to its niche nature, the company enjoys a higher net interest margin of about 5% to 8% compared with the banking sector average of about 2.5%. RCE Capital gains during an interest rate cutting cycle, as all its loan assets are on fixed rates, while funding costs have a mixture of fixed and floating rates.

During the interest rate cutting cycle from March 2020 to September 2024, RCE Capital’s shares staged a massive rally of about four times, where its valuation expanded from a price-to-book (P/B) ratio of 0.5 times to 2.7 times.

Analysts think RCE Capital’s current valuation of a P/B ratio of 2.7 times is rich — higher than the banks’. There are one “sell” and three “hold” ratings on the stock. Nevertheless, civil servants’ salary hikes of 7% to 15% are accretive to its business and the stock’s dividend yield now is nearly 5%.

Mah Sing Group Bhd (KL:MAHSING) would have made millionaires of investors who put their money in the property giant when its shares were beaten down to barely two sen (adjusted price) during the AFC in 1998 and remained invested to this day.

This speaks well of the leadership of founder Tan Sri Leong Hoy Kum, who controls 35.11% of Mah Sing.

Leong made the bold move of venturing into property development in 1994. During the property boom between 2003 and 2013, it rose to the ranks of Malaysia’s largest property developers by adopting a fast turnaround business model that minimised land carrying cost and capital requirements.

From January 2003 to May 2013, Mah Sing’s share price staged a strong rally, giving a total return of 37 times, inclusive of dividends, or a 10-year CAGR of 42%. The stock’s valuation expanded from a P/B ratio of 0.6 times to 1.2 times. Fundamentally, the company’s net profit grew for 13 consecutive years from 2003 to 2015.

Since Sept 1, 1998, Mah Sing shares have generated a whopping return of 9,567%, or a CAGR of 19.2%. An investment of RM100,000 in the stock would have grown to RM9.6 million — likely a more handsome return compared with the purchase of a property.

Over the decades, the property developer has rewarded shareholders with five bonus issues — in 2004, 2007, 2010, 2013 and 2015. It also made a 1-for-2 stock split in 2007.

However, it did ask for more capital from shareholders, mainly for working capital and paring down borrowings. Mah Sing has made five rights issues since 1998 — two times in 2004, and once each in 2007, 2013 and 2015 —as it grew its land bank.

Mah Sing halted dividend payments in the aftermath of the AFC from 1999 to 2001. However, since 2002, it has rewarded shareholders with regular dividends every year.

Its trailing 12-month dividend yield ranged from a low of 0.06% in FY2003 to a high of 7.1% in FY2018, and averaged 2.8% during the 22 years.

Over the years, the entrepreneurial property developer has focused on the Klang Valley and priced its products affordably. It has also been aggressive at growing its land bank to ensure an uninterrupted pipeline of projects.

Bloomberg data shows that of the 13 analysts covering the counter, 12 have “buy” calls and one “hold”, with a consensus target price (TP) of RM2.08. Currently, Mah Sing’s key draw is its expansion into the data centre space.

The company has earmarked 150 acres of land in Southville City for a data centre.

Sparked by optimism over the data centre news flow, Mah Sing’s share price tripled from September 2022 to August 2024, while valuation jumped from a P/B ratio of 0.4 times to 1.2 times.

According to RHB Research’s note dated Sept 2, Mah Sing is now in advanced negotiations over the next plot of land in the Southville data centre hub, which will have a capacity of 90MW. “Following the 100MW from Bridge Data Centre in Johor, about 42.5 acres of land in Meridin East could be up for sale to a data centre player as well. Substantial land sale gain could be booked in FY2025F,” says RHB Research.

Yinson Holdings Bhd (KL:YINSON) was unlikely to be popular with investors when the stock market experienced a heavy selldown during the AFC. That’s because its transport and logistics business was neither very attractive nor well known.

But its venture into floating production storage and offloading (FPSO) vessels in Vietnam in 2011 was a game changer. The new kid on the block then survived the severe prolonged industry downturn when crude oil prices crashed below the US$40 level in 2015. And it has since emerged as one of the world’s leading FPSO operators as many others went belly up during the downturn.

If one did invest in the stock at the peak of the AFC, the returns would have been good — the second highest in the oil and gas industry, after Dialog Group Bhd.

Shareholders were rewarded with free new shares thrice via bonus issues in 2003, 2007 and 2022. Meanwhile, given the capital expenditure (capex)-intensive nature of the FPSO operations, Yinson made four rounds of rights issues in 2003, 2012, 2014 and 2022 to raise fresh capital.

On top of that, the company also needs to gear up to take on new contracts, many of which are front-loaded. As at July 31, 2024, Yinson had total borrowings of RM19.6 billion and perpetual securities worth RM1.9 billion.

The company has declared dividends for 26 consecutive years since 1998. Its trailing 12-month dividend yield ranged from a low of 0.01% in FY2000 to a high of 2.2% in FY2017, and averaged 0.39% during that period.

Yinson was founded in 1984 by Lim Han Weng, who is now its group executive chairman, as a humble transport and logistics company in Johor Bahru, Malaysia,.

In 2019, it diversified into renewables and within a year, had acquired its first operational renewables asset — the 175MW (DC) Bhadla solar plants in India.

Analysts who cover Yinson like it for several factors: First, its strong FPSO order book with multiple major FPSO jobs in the conversion stage, which will provide significant earnings growth in the coming years; second, its good project execution track record, which positions it to benefit from the expected strong structural demand for FPSO contractors in the coming years; and third, its position as one of the first local oil and gas firms to invest in green technology companies such as those in solar and e-mobility.

Kossan Rubber Industries Bhd (KL:KOSSAN) may not be the largest glove maker in Malaysia in terms of capacity. However, its emphasis on sustainable growth and prudent expansion has rewarded its shareholders handsomely.

In fact, Kossan Rubber has been listed for longer than its bigger peers — Top Glove Corp Bhd (KL:TOPGLOV) and Hartalega Holdings Bhd (KL:HARTA). It was listed on the Second Board in 1996.

Since 1998, anyone who invested in Kossan Rubber shares would have seen a total return of 18,173% (inclusive of dividend payments), or a CAGR of 22.1%.

The company has also rewarded shareholders with six bonus issues.

Kossan Rubber has declared dividends over 26 consecutive years. Its trailing 12-month dividend yield ranged from a low of 0.01% in FY1999 to a high of 18.4% in FY2022 and averaged 1.5% during the 26 years.

Starting as a cutless bearings manufacturer for the marine industry, Kossan Rubber ventured into rubber glove manufacturing in 1988. Its founder Tan Sri Lim Kuang Sia once said he preferred earnings to improve at a steady pace instead of making big swings.

Kossan Rubber’s business prudence was evident during the pandemic super boom as it decided not to expand capacity, unlike its peers.

As such, the company is now able to maintain a high utilisation rate to keep unit costs relatively lower. The supernormal profits during the Covid-19 pandemic that generated a huge cash pile — now representing about 40% of Kossan Rubber’s market value — provide plenty of dry powder for the company to undertake its next growth strategy or simply earn interest.

Kossan Rubber has been profitable for the past 26 years. Before the pandemic, during which glove makers earned unprecedented bumper profits, Kossan Rubber’s earnings grew at a CAGR of 12.3% between 1998 and 2019. Its share price increased at a 21-year CAGR of 24.1% during the same period.

This represents a total return of 97 times, inclusive of dividends over, the 21 years before pandemic.

Its price valuation grew from a single-digit price-earnings ratio (PER) to more than 20 times as the market rerated the sector upwards, in view of the defensive consumption pattern of gloves.

Currently, most analysts are positive about the glove maker’s prospects, with 11 out of the 18 covering the stock having a “buy” rating. Some of reasons cited were demand recovery from customers’ restocking cycles, margin improvement on better plant utilisation and stabilising input costs.

Some see the structural tailwind from the US’ tariff hike on China’s medical-grade gloves as creating meaningful demand for Malaysian-made gloves, which could see Kossan Rubber’s profitability surpassing the pre-pandemic level in 2026.

Had an individual parked RM100,000 in Mega First Corp Bhd (KL:MFCB) stock in September 1998, that sum would be worth RM7.05 million now, inclusive of dividend payments, representing a total CAGR of 17.7%.

After 1998, the diversified group of companies with three main divisions — renewable energy, resources and packaging — did not issue stock dividends or bonus issues, although it did issue a one 1-for-2 stock split in 2021, and one rights issue in 2016.

In fact, Mega First only started to pay cash dividends in 2002, and has done so every year since. Its trailing 12-month dividend yield ranged from a low of 0.2% in FY2019 to a high of 2.5% in FY2012 and averaged 1.4% during the 22 years.

Incorporated in Malaysia under the name Mega (Chemicals) Sdn Bhd on April 25, 1966, the company was subsequently renamed Mega Chemicals Bhd in April 1970. It was listed on the Kuala Lumpur Stock Exchange (KLSE) in August that year.

Its main earnings contributor is the renewable energy division. It owns and operates Don Sahong Hydropower Plant in Laos, which commenced operation in January 2020 and generates about 2,028GWh a year.

Mega First also runs a limestone quarry in Keramat Pulai, near Ipoh. On top of that, it has a packaging business and a coconut and macadamia plantation business spanning 6,420ha in Mondulkiri, Cambodia.

At the RM4.349 level last week, shares in the diversified group are not far from their all-time high of RM4.99 in late June this year amid a rally on Bursa Malaysia. Year to date, the stock has climbed 18.3% and has a market capitalisation of RM4.1 billion.

Of the six analysts covering the stock on Bloomberg, three have “buy” calls while another three have” hold” calls, with a consensus TP of RM4.99.

Public Investment Bank Bhd in a research report dated Sept 3 says it expects Mega First to see stronger growth in the second half of 2024.

This is in anticipation of a higher energy availability factor of 98% to 99% from the Don Sahong Hydropower Plant during the wet period and a normalised margin from the resources segment.

In addition, a new power purchase agreement and concession agreement that encompass all five turbines are expected to be concluded by year end.

Another counter worth noting is Sarawak-based poultry and retailing business, CCK Consolidated Holdings Bhd (KL:CCK). Had one invested RM100,000 in the company when it was beaten down to the three sen level during the AFC, that sum would have grown to nearly RM6.29 million today, including dividend payments.

Over the 26 years since the 1997/98 AFC, the stock has generated a return of 6,196%, or a CAGR of 17.2%. The company, which has never been in the red since it was listed, has also rewarded shareholders with four bonus issues — in 2001, 2008, 2016 and 2018 — and distributed stock dividends twice — in 2009 and 2012.

It also undertook a share split twice in 2008 and 2018.

CCK Consolidated only started to pay cash dividends in 1999, and continued to do so for 25 consecutive years. Its trailing 12-month dividend yield ranged from a low of 0.06% in FY2019 to a high of 4.2% in FY2023 and averaged 1.3% during the 25 years.

CCK was listed on the Second Board of the KLSE on Dec 10, 1997. Its businesses are now carried out primarily in Sarawak, Sabah, and Jakarta and Pontianak in Indonesia.

Shares in the company, which have risen steadily over the years, climbed from the 82 sen level at the start of the year to RM1.62 on May 28 following news of private equity firm Creador’s proposed acquisition of a 40% stake in CCK’s Indonesian unit PT Adilmart for RM170.3 million.

On Sept 12, Creador cemented the deal, albeit at a slightly lower investment of RM163.1 million.

Analysts who are bullish about CCK’s prospects are hopeful that the investment will boost CCK’s penetration into the Indonesian market over the long term. Until further details of the company’s plans are made known, the rise in CCK’s share price would indicate investors’ optimism in the group’s steady growth in the Bornean markets.

Year to date, the counter has risen 107.3% to close at RM1.70 last Wednesday. At RM1.70, CCK is trading at a PER of 12.7 times, based on earnings per share of 13.35 sen in the last financial year ended Dec 31, 2023.

MBM Resources Bhd (KL:MBMR) is a good proxy for the country’s car sales, especially the national cars that dominate the domestic market.

The company’s 20% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is seen as its crown jewel. UMW Holdings Bhd made a failed attempt to buy the stake in 2018.

Perodua overtook Proton in 2006, capturing the lion’s share of the local car market.

Since trading at an adjusted closing price of nine sen in September 1998, MBM Resources’ shares have generated a return of 6,670%, or a CAGR of 17.5%, based on last Wednesday’s closing of RM5.88.

The company has rewarded shareholders with two bonus issues in 2002 and 2012. It also made a rights issue in 2012.

Since 1998, MBM Resources has declared dividends over 26 consecutive years. Its trailing 12-month dividend yield ranged from a low of 0.5% in FY1999 to a high of 15.5% in FY2023 and averaged 4.1% during the 26 years.

Year to date, shares in MBM Resources have risen 42% to close at RM5.92 last Wednesday. In August, it announced a better-than-expected second quarter net profit, which climbed 30.26% to RM67.64 million, lifting the first-half total to RM147.89 million. The company also declared a first interim dividend of six sen per share, along with a special dividend of 10 sen per share.

Seven analysts covering the counter have “hold” calls, while three have “buy” calls, and one, “sell”, with a consensus TP of RM5.76. The majority of analysts appear to be cautious on upside for the stock amid broader concerns over demand for big-ticket purchases amid rising cost-of-living pressures.

However, according to a Kenanga Research report dated Sept 20, MBM Resources stands out as the sector’s top pick for its strong earnings visibility, which is backed by an order backlog of Perodua vehicles of more than 100,000 units, making up almost a third of its CY2024 sales target of  340,000 units.

In addition, the counter is seen to be a good proxy for the “mass market” Perodua brand given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its stake in Perodua. Furthermore, the company’s dividend yield is attractive at about 7%, according to Kenanga Research.

If you had invested RM100,000 in Scien­tex Bhd (KL:SCIENTX) in September 1998 during the local market crash triggered by the AFC, the return on the investment would have been 15,746%, or a CAGR of 21.4% over the 26 years.

The company also rewarded shareholders with three bonus issues in that period — in 2007, 2016 and 2021 — and distributed stock dividends in 2008. It also made a 1-for-2 stock split in 2007.

Since 1998, Scientex has declared dividends each year. Its trailing 12-month dividend yield ranged from a low of 0.07% in FY2000 to 2.7% in FY2023 and averaged 0.8% during the past 26 years.

Established in 1968 by the Lim fami­ly as a manufacturer of synthetic leather and sheeting, the group — which is now managed by the family’s second generation, led by Lim Peng Jin, who joined the company in 1991 — has grown by leaps and bounds. It is now a sizeable manufacturer of industrial and consumer plastic packaging, as well as a developer of affordable housing — a business it ventured into in 1995.

From 2013 to 2022, Scientex spent RM1.34 billion on mergers and acquisitions to grow its plastic packaging division to cater for rising demand. As for property development, strategic land banking and low inventory overhang due to its focus on the affordable segment have been a recipe for success.

Since 1998, Scientex’s annual revenue has grown 23 out of 26 times, with a 26-year CAGR of 13.5%. The company aspires to double its revenue every five years.

From January 2009 to December 2021, its share price has been on an upward trajectory and, inclusive of dividends, total returns amounted to 45 times or 13-year CAGR of 34.3%. During this period, Scientex’s net profit had grown for 12 consecutive years.

Analysts believe that, over the next two years, the company’s property segment will be able to offset any drag in its export-oriented plastic packaging division that is hit by soft demand and strengthening ringgit effects. Scientex’s current unutilised land bank of roughly 6,300 acres provides a potential gross development value of about RM30 billion.

LPI Capital Bhd (KL:LPI) has generated a return of 9,885%, or a CAGR of 19.3%, over the last 26 years. So, an investment of RM100,000 in LPI shares at an adjusted closing price of 13 sen, or an unadjusted price of RM2.96, would now be worth RM9.98 million, inclusive of dividends received.

In the period, the company rewarded shareholders with four bonus issues that it undertook in 1998, 2010, 2015 and 2018. It made only one cash call during the period — a rights issue in 2010.

LPI Capital has been paying its shareholders dividends every year in the last 26 years. Its dividend yield ranged from a low of 1.2% in FY2002 to 6% in FY2020, and averaged 3.3% during the 26 years.

Starting off as an approved insurer in 1963, LPI Capital has grown to become the third-largest general insurance underwriter and largest fire insurer in Malaysia. Its focus on fire insurance has allowed it to enjoy better profit margins than its peers because of the stable nature of such claims.

Sharing a common founder and major shareholder with Public Bank has allowed LPI to leverage the former’s bancassurance business, particularly in fire coverage for properties, which contributes about 24% of the company’s revenue.

Aside from its steady business, LPI is known for its cost-control capabilities, as demonstrated by its consistently lower-than-industry-average expense ratio. The company’s business model of ceding a large portion of its fire insurance to reinsurers has also helped keep net commission expenses — the amount it pays to agents or brokers — low. These, combined with superior underwriting profit, made LPI stand out from its peers.

Not surprisingly, its share price moved in an upward trajectory from January 2001 to August 2018. Inclusive of dividends, returns from the stock amounted to 51 times, or an 18-year CAGR of 25.1%. During this period, LPI grew its net profit for 16 consecutive years. It reported a flat net profit only in FY2017. In the meantime, the insurer’s P/B valuation expanded from 0.5 times to 2.5, as the market re-rated it for its superior asset qualities.

Most analysts are optimistic about the company’s near-term outlook, given upbeat economic growth expectations in Malaysia because of higher infrastructure spending, property development and robust economic activities, which are expected to drive demand for general insurance. On top of that, analysts think the company will be able to gain market share as the industry fully liberalises the pricing of motor and fire insurance tariffs.

Founded in 1981 with the vision of establishing an Islamic insurance company in Malaysia, Syarikat Takaful is now the country’s second-largest family takaful provider and the largest general takaful provider.

According to The Edge’s computation using Bloomberg data, an investment of RM100,000 in Syarikat Takaful Malaysia Keluarga Bhd’s (KL:TAKAFUL) shares in 1998 would be worth RM10.05 million today, representing a 26-year CAGR of 19.3%.

In the period, the company declared dividends each year, with payouts as low as 0.21% in FY1998 to as high as 4.1% in FY2020, to average at 1.7%.

It has also rewarded shareholders with a bonus issue in 2003 and a 1-for-5 stock split in 2015.

Syarikat Takaful has been offering a 15% no-claim rebate on its general and selected family products since 2009, making it the first and only insurer to do so. The company’s pivot to the wakalah fee model has also allowed it to earn fees from managing its customers’ takaful funds.

The takaful provider has also been leve­raging several bank partners to offer banca­takaful products that are largely tied to loan offerings and made up mostly of single-contribution premiums that have higher margins but are lower recurring in nature.

The low life insurance penetration rate among the Muslim population and Malaysia’s vision to become a global Islamic financial centre have created a conducive operating environment for the company.

A look at the past 26 years showed that Syarikat Takaful’s shares climbed significantly from January 2010 to June 2019. The ascent, together with the dividends it paid out, gave total returns that amounted to 37 times, or a 9½-year CAGR of 53.5%. During this period, the company’s valuation expanded from a P/B ratio of 0.3 times to four times, while its net profit grew at a nine-year CAGR of 21.8%.

All nine analysts covering the stock have a “buy” call on it now, with some expecting the takaful operator to record double-digit growths as the under-penetration of life insurance products and medical inflation work in its favour.

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