This article first appeared in The Edge Malaysia Weekly on November 3, 2025 - November 9, 2025

ATTRACTIVE investment returns, including share price appreciation and dividends, are crucial to drawing investors to our stock market. As such, maintaining fundamentally sound public-listed companies (PLCs) remains a central focus of regulators the Securities Commission Malaysia (SC) and Bursa Malaysia.

SC executive chairman Datuk Mohammad Faiz Azmi told The Edge early this year that it was looking at removing “bottom-performing companies” to help boost investment returns on the local bourse.

“I need to reduce the number of low-performing counters. This is not rocket science in the sense that other markets have been doing this and it has proven to be quite successful where, at the very least, it’s going to improve the average dividend rate by taking out the outliers,” he emphasised.

In response to The Edge’s queries on the progress in enhancing shareholder value, both the SC and Bursa Malaysia say that “bottom-performing” companies are definitely an area of concern and more details will be unveiled in the Capital Market Masterplan 4 (CMP4), which is set expected to be announced later this year.

The master plan will include a reassessment of the current PN17/GN3 framework and whether it is still fit for purpose. The existing Malaysian Code of Corporate Governance will also be updated to ensure that clear expectations for value creation are set for PLC boards.

“We are cognisant that there are varying reasons that contribute to the poor performance of a PLC, with each having its own unique challenges and potential solutions to remedy/improve the respective situations that they are in.

“This is an area that is being looked into in much more depth as part of the upcoming CMP4 that ultimately aims to improve the Malaysian capital market as a whole,” SC and Bursa say in a joint reply to The Edge.

According to the recent Economic Outlook 2026 report released by the Ministry of Finance, CMP4 will outline “transformative initiatives” to reshape Malaysia’s capital market into a key driver of growth, resilience and inclusivity. It will succeed CMP3, which was launched in 2021 and concludes this year.

While there is no clear definition of “bottom-performing companies”, The Edge’s compilation shows that nine companies have recorded net losses for at least 20 quarters in a row, or five years. Most of them have a market capitalisation of below RM100 million, except for Pos Malaysia Bhd (KL:POS), whose market cap was RM262.2 million as at last Tuesday.

Meanwhile, 24 companies have posted net losses for at least 12 quarters, or three years. They include Revenue Group Bhd (KL:REVENUE), Careplus Group Bhd (KL:CAREPLS), Magma Group Bhd (KL:MAGMA) and Lotte Chemical Titan Holding Bhd (KL:LCTITAN).

A number of underperforming companies have changed their financial year-end.

Pos Malaysia, in which DRB Hicom Bhd (KL:DRBHCOM) has a majority stake of 53.49%, had a negative cash flow of RM1.5 million for FY2024 compared with RM100 million of net cash flow from operating activities for FY2023.

Early this year, The Edge had, quoting sources, reported that DRB may form a partnership with a European party to revive Pos Malaysia’s service division. At the same time, there has been market speculation that Pos Malaysia could be taken private. As at end-June 2025, the company had RM96.3 million in cash and bank balances, but it posted RM64.6 million in negative cash flow from operating activities in the first six months of 2025.

Despite their persistent losses, not all of the poorer-performing companies have accumulated losses. Take office furniture manufacturer AHB Holdings Bhd (KL:AHB), for instance. In 2021, it undertook a share capital reduction exercise that entailed the reduction of RM26 million to offset accumulated losses of RM10 million as at September 2020.

Similarly, DGB Asia Bhd (KL:DGB) recently proposed a capital reduction exercise. The RM197 million arising from the proposed cancellation will be used to offset against accumulated losses of RM198.1 million. The software and engineering solutions company may be on the mend as it recorded positive cash flow of RM14.5 million in FY2024 compared to negative cash flow of RM18.3 million in FY2023, but it needs to turn in more positive results.

DGB Asia is a substantial shareholder of mTouche Technology Bhd (KL:MTOUCHE) with an 8.61% stake. mTouche Technology is yet another company that has incurred net losses for at least 20 quarters. Although it had net cash of RM5 million from its operating activities in FY2024, this was substantially less than the RM17.4 million in FY2023, mainly due to the reversal of an impairment loss on intangible assets in the previous year.

As at end-June this year, mTouche Technology, Pinehill Pacific Bhd (KL:PINEPAC) and Olympia Industries Bhd (KL:OLYMPIA) reported retained earnings of RM23.9 million, RM79 million and RM252.5 million, respectively. mTouche Technology’s retained earnings of nearly RM24 million stem from a RM203 million credit, the result of a capital reduction exercise early this year.

In August this year, Jiankun International Bhd (KL:JIANKUN) proposed a share capital reduction of up to RM61.3 million to reverse its accumulated losses of RM51.37 million as at end-March, while resulting in retained earnings of RM9.93 million.

China Ouhua Winery Holdings Ltd ­(KL:CNOUHUA) and Xidelang Holdings Ltd (KL:XDL) are among a handful of Chinese firms that have retained their listing status on the local bourse. China Ouhua Winery, which has accumulated losses of RM80.7 million, posted a wider net loss of RM28.4 million for FY2024, owing to the stagnant Chinese wine market.

Sports footwear manufacturer Xidelang, on the other hand, managed to accumulate an impressive RM245.6 million in retained earnings as at end-June this year, despite bleeding red ink in the past three years.

Since being embroiled in a boardroom tussle in 2023, Revenue Group has not been in good shape, incurring net losses for 12 consecutive quarters. For the first nine months ended June 30 this year, the electronic and digital payment systems provider recorded a lower net loss of RM6.6 million on RM212 million in revenue.

Once a key beneficiary of the pandemic, Careplus has not been able to recover amid intense competition in the glove industry. After 15 quarters of net losses, it now has accumulated losses of RM16.4 million against RM66.6 million in retained earnings a year ago.

As for Lotte Chemical, a 75.9%-owned unit of South Korea’s Lotte Chemical Corp, it has been a casualty of the petrochemical oversupply glut, with net losses recorded for 13 quarters in a row. Although it still boasted retained earnings of RM1.82 billion as at end-June, its market value has halved over the past three years.

Bursa data shows that 20 financially distressed companies have been classified under PN17 (for the Main Market) and GN3 (for the ACE Market), representing about 2% of the total number of 1,040 companies listed on these two markets.

KNM Group Bhd (KL:KNM), which has been listed for 22 years, will be the latest firm to be delisted from the local bourse on Nov 5 following the withdrawal of its appeal against Bursa’s rejection of its regularisation plan, which the regulator said had failed to prove long-term business sustainability. KNM’s restructuring plan entailed the €270 million (RM1.34 billion) sale of its unit Deutsche KNM GmbH (DKNM).

The most recent delisting was that of Ivory Properties Group Bhd. Two weeks ago, it was delisted from the Main Market after the stock exchange rejected its appeal for more time to submit a regularisation plan.

The Penang-based firm triggered PN17 status in 2022 after its external auditor, Messrs KPMG PLT, issued a disclaimer of opinion on its audited financial statements for FY2022. CEO and executive director Datuk Low Eng Hock stepped down in August this year amid reports linking him to investigations into the MBI Group investment scheme scandal.

To enhance investor confidence, SC says it will study and adapt corporate value enhancement measures and best practices from other jurisdictions that are best suited to the Malaysian capital market.

“SC and Bursa will go through the required public consultation process where feedback and input from capital market players will be highly valued and duly considered. It is expected that any initiatives in this regard, will allow for a reasonable transition period prior to becoming fully effective,” the regulators say.

Minority Shareholders Watch Group (MSWG) CEO Ismet Yusoff tells The Edge that it is important to distinguish between fundamentally weak companies — such as those with persistent losses or are involved in sunset industries — and those that are temporarily affected by external headwinds but possess potential for recovery.

In general, underperforming companies tend to exhibit one or more of these characteristics: weaker financial performance relative to peers; governance weaknesses; solid fundamentals but ineffective investor relations; and lagging performance in environmental, social and governance (ESG) practices.

Ismet says the common indicators used to identify such companies include price-to-book ratio, return on equity and free float — though benchmarks may differ across industries. Other indicators that could be taken into account are financial performance trends (for example, consecutive years of losses), dividend payout ratio and yield, as well as governance and ESG scores.

“PLCs that fall below the defined thresholds for these indicators could be placed on a watch list for closer monitoring and improvement initiatives,” he suggests.

Other relevant considerations may include minimum share price requirements (with restrictions on excessive share consolidation as applied by the New York Stock Exchange and Nasdaq), minimum market capitalisation and shareholders’ equity thresholds, he adds.

That said, Ismet stresses that delisting should always be the last resort.

“It is highly disruptive for both companies and investors, as shareholders may be compelled to sell their shares at unfavourable prices. Every possible measure should first be taken to support and rehabilitate such companies before delisting is considered.”

He is of the view that the current ecosystem comprising regulatory, governance and market-driven mechanisms provides adequate safeguards for minority shareholders, even in situations of prolonged underperformance.

Take regulatory measures, for example. Ismet says companies classified under PN17 or GN3 are required to submit and implement a regularisation plan within a prescribed time frame to restore financial health and compliance, and failure to do so may lead to suspension or delisting, thereby preventing further erosion of shareholder value.

On governance measures, he notes that the Listing Requirements and the Malaysian Code on Corporate Governance reinforce board accountability and strengthen checks and balances, including measures such as mandatory board refreshment for long-serving independent directors and enhanced disclosure on board performance and independence.

For market-driven mechanisms, Ismet points out that institutional investors, guided by the Malaysian Code for Institutional Investors and stewardship principles, play a vital role in monitoring underperforming investee companies.

“Increasingly, minority shareholder activism is also driving constructive engagement with boards and management to advocate for improved financial performance, strategic direction, governance and ESG practices.

“We continue to advocate for fair and reasonable offer prices in any voluntary takeover or privatisation exercise to ensure equitable treatment of all shareholders.”

Ultimately, he says minority shareholders should remain vigilant and proactive in monitoring their investments. Beyond attending annual general meetings and engaging with company management, investors are encouraged to conduct their own research and make informed decisions, and may consider divesting when a company’s prospects turn unfavourable.

Signs of a company possibly triggering the PN17/GN3 classification are declining shareholders’ equity due to persistent loss-making; the appointment of receivers/managers/judicial managers over the assets of the listed issuer, its subsidiary or associated company; and the winding up of a subsidiary or associated company that accounted for at least 50% of the listed issuer’s total assets.

Other signs are auditors expressing an adverse or disclaimer opinion in the listed issuer’s latest audited financial statements, as well as highlighting material uncertainty related to going concern, be it default of payment by the listed issuer, its major subsidiary or major associated company. 

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