This article first appeared in The Edge Malaysia Weekly on August 10, 2026 - August 16, 2026

SHARE buybacks remain an underused capital allocation tool among Malaysian listed companies despite many trading below their intrinsic value, says Permodalan Nasional Bhd (PNB), adding that stronger capital allocation, governance and management accountability are key to lifting long-term shareholder returns.

Malaysia’s largest fund manager by assets is pushing its investee companies to deploy capital more efficiently through higher returns on equity (ROE), stronger board oversight and executive incentives that are directly tied to shareholder outcomes.

“Boards sometimes say, ‘Share price has nothing to do with me.’ I disagree. If you control the levers that drive shareholder value, then the share price is, to some extent, within your control,” PNB president and group chief executive Datuk Rizal Rickman Ramli tells The Edge.

“So you either enhance returns, or you manage the equity base. If you do that well, over time, the market will reward you because you are growing ROE.”

The push forms part of the My Value Up initiative, under which the institutional investor is encouraging its investee companies to focus on creating shareholder value through stronger capital efficiency.

Officially launched by the Securities Commission Malaysia (SC) and Bursa Malaysia in April, My Value Up is Malaysia’s national capital market initiative under the Capital Market Masterplan 2026-2030 that aims to help listed companies improve long-term value creation, strengthen capital efficiency and enhance investor communication.

Rizal Rickman, who goes by Rick, argues that many Malaysian companies already generate healthy profit margins and maintain reasonable levels of leverage compared with regional peers. The weak link, he says, is capital inefficiency.

PNB’s analysis found that while aggregate corporate earnings have broadly kept pace with Malaysia’s economic growth, earnings per share (EPS) has lagged because companies continue to issue new shares instead of generating higher returns from their existing capital base.

“When we compared Malaysian companies with regional peers, what we found was that margins and financial leverage were broadly in line. Where they were underperforming was in return on assets — they have an inefficient capital base,” Rick explains.

One example of strong capital discipline, Rick points out, is the wide use of share buybacks.

He notes that while US companies have historically reduced their share count through buybacks, Malaysian companies continue to expand their equity base, resulting in weaker EPS growth despite rising corporate profits.

“Malaysia doesn’t do much share buyback,” he says. “Historically, US companies have retired about 1% of their capital base each year [through share buybacks]. In Malaysia, the capital base grows by about 2% to 3% annually. That’s why EPS has grown at roughly half the pace of absolute profits.”

“If a company doesn’t have a good use for its capital, it should buy back its shares and cancel them,” Rick contends.

Many Malaysian companies instead retain repurchased shares as treasury shares.

“Normally, when Malaysian companies do share buybacks, they keep [the shares] as treasury shares. So what we’re saying is to do share buybacks and cancel [the shares], so you’re a bit more disciplined,” he says.

Cancelling repurchased shares, rather than holding them in treasury, reduces the company’s equity base, helping to lift EPS while imposing greater discipline on how excess capital is deployed.

As part of its corporate stewardship and active shareholder engagement framework, PNB has been playing a more active role in engaging investee companies on strategy, capital allocation and governance.

The fund manager has already been practising a form of shareholder activism by publicly disclosing its intended voting positions — together with the supporting rationale — for key resolutions ahead of annual general meetings (AGMs), while continuing private engagement with boards throughout the year.

“We are privately engaging with the boards. We are privately writing them letters. We’re [also] now writing shareholder AGM letters publicly,” Rick says.

At AGMs, Rick says PNB routinely asks boards to explain their total shareholder return (TSR) over the past one, three and five years, identify the factors driving those returns, and outline what management is doing to improve them.

“What are you doing to actively improve that metric? If you say ROE influences my TSR, what are you doing to improve ROE?” he says. “We force the company to articulate, ‘This is what I’m doing.’”

PNB is also encouraging boards to rethink how they evaluate investment proposals. Boards, Rick argues, should look beyond revenue and profit projections and instead focus on whether proposed investments enhance ROE and represent an efficient use of shareholder capital.

“A lot of times, when proposals come to the board, it’s about, ‘Here’s a bunch of profits I can make.’ But no one asks, ‘What’s the ROE? Is it accretive to what we’re doing? Is it capital-efficient?’ That’s what we want to do. We want companies to anchor on ROE, have a plan to improve it, [because if ROE improves], then price-to-book improves, and ultimately valuation improves.”

Another resolution that frequently attracts PNB’s opposition is the reappointment of independent directors who have served on boards for more than nine years.

It maintains that good corporate governance requires board independence to be refreshed periodically, and that directors serving beyond the nine-year threshold can no longer be regarded as “fully independent”.

The emphasis on shareholder value also extends to how PNB evaluates executive remuneration.

Rick says long-term incentive plans (LTIPs) should have clear performance targets and transparent payout structures, with rewards tied primarily to shareholder outcomes.

“In the past, you had LTIPs with unclear targets, unclear outcomes and unclear payoffs,” he says.

Among PNB’s preferred performance measures are absolute TSR and ROE. The fund manager opposes relative TSR targets, arguing that executives should not be rewarded simply for outperforming peers if shareholders are still losing money.

“We don’t like relative TSR because you can be the best relative TSR, but it’s still negative. It doesn’t help me as a shareholder,” he says. “What we want is absolute TSR and ROE.”

Where remuneration structures fail to meet those principles, Rick says PNB is prepared to oppose them.

“If this doesn’t comply, we will vote no. And we have voted no,” he says, referring to companies where PNB is not a major shareholder.

Ultimately, he believes value creation begins with setting the right targets and ensuring boards and management are held accountable for delivering them.

“If you set the right targets for the company, have the right board alignment and oversight and get management aligned to deliver, that’s the outcome we want for My Value Up essentially,” he says.  

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