Focus Point - worth for investment?

 

I am myopic since 10 years old. Now am I am 45.

When I was 25 years old, my younger sister brought me to Focus Point in the Curve to buy a pair of branded glasses. I forgot the brand of the glasses already. But, I remember that the price of my glasses was around RM 800++. Pretty expensive for me. Since then, my first impression to Focus Point is --> high-class & expensive (not my taste). 

I never thought to buy the shares of Focus Point (FOCUSP) all this while, until I found out from HLIB's analyst report about this company. After doing some analysis on FOCUSP's financial report, I found that its revenue and net profit historical data are as below:

It is listed in the ACE market of KLSE in 2010. Since then, its net profit is down-trending from 2010 to 2018, although the revenue is growing. Interestingly, after 2018, both revenue and net profit have experienced a noticeable growth. Indeed, I am curious on why this could happen as optical industry is highly competitive. So, I dig into its Annual Report 2018 and found the following statements from the Chairman:

Thus, to bring focus back to our business, our fellow board members together with the management team and we have pushed through five main strategies so that we can have a more sustainable business:

 1. Upgrading our malls in areas where population growth is still prominent; 

2. Careful selection of our growth areas and launching our own e-commerce site; 

3.  Smarter procurement to match the changing lifestyle needs of our consumers; 

4.  Investing in human capital to support both our wholly owned and franchise business’; and  

5.  Aligning, and initiating cost management processes for managing and expanding the food and  beverage business.

If I understand correctly, the Management has been very selective in picking up locations for establishing new branches. Also, they would invest in upgrading the shops (in selected hot locations) to make them more appealing to potential customers. Cost management (smart procurement) is another way out, and the Management would find ways to expand the franchise and F&B business. 

Now, let us zoom into the CAGR of its business segments from 2018-2024. There are 3 business segments of FOCUSP, i.e. optical (main), F&B (Komugi) and franchise (mainly optical, I think).

One thing that has grasped my attention is its optical business. Although its revenue growth  is only 7%, its PBT growth is recorded at 24%!! This may indicate the cost management strategy implemented by the Management team is working well. The similar trend has been observed for its franchise segment. This is pretty amazing. Its F&B revenue experienced a double digit growth as well; however, this segment's profitability is hardly predictable. Sigh... bakery industry is high competitive.

I have also studied the number of optical retail outlets of Focus Point. Up to 2025, there are about 200 outlets in Malaysia. There are many types of optical retail outlets of Focus Point, targeting different market segments. Table below shows the number of outlets of the main types:

Can you see the pattern? Since 2018, the number of Concept Store has experienced a double digit growth, a whopping 23%!! As compared to other types of retail outlets, they are hardly growing in number. Management could believe that Concept Store could attract more sales as compared to other types of retail outlets, hence, they have been trying to grow the number of concept stores. I went into the Focus Point Concept Store in IPC yesterday (21 March 2026). Basically, all kinds of Focus Point optical products are housed in the Concept Store, ranging from the affordable (Whoosh) to luxurious (branded, e.g. BOSS, OAKLEY, etc.) one. I believe most customers would find it easier to find their desired glasses in the Concept Store. My daughter told me that the glasses there are trendier than other ordinary eyewear shops in United Point Kepong, as she finally found her preferred frame in the Focus Point Concept Store in IPC. She has her new Whoosh glasses readied in 30 minutes (Original Price: RM 288 Frame + Lens (UV & thin) + RM 100 (Blue-ray) = RM 388). As I am a MiCare member, I am entitled for another 10% discount (so I paid RM 349).

I have asked my daughter what's her experience when doing eye-power checking in the dark room. I did not manage to enter the room as I am filling out the optical form. She mentioned that the staff has performed a more thorough checking on her eyes as compared to the eyewear shop in United Point Kepong. The staff also check the focal points on her left and right eyes using a separate machine, before assembling the glasses. My wife did a free eye-check also on her eye pressure. I remembered that the CEO of FOCUSP once said he is offering differentiation in terms of service offered.

How about its Free Cash Flow (FCF)? One should note that a healthy company should pay dividends from FCF, not from bank borrowings. All this while, Focus Point is able to generate +FCF since 2014, which is commendable. More interestingly, its FCF generation capability is significantly stronger after FY2018. In FY2025, the total dividends given is RM0.0356/share * 616M shares = RM22M (only 30% of its FCF in FY2025 of ~ RM 74M). No wonder Focus Point has recently revised its dividend policy to become 50%.

Valuation

I have studied the PER of Focus Point during the years when its net profit is growing. Based on the median PER values of years 2020, 2021, 2022, 2024 and 2025, the median PER is ~11.2. So, the fair value would be around PER x Estimated EPS (=RM 0.0569) = RM 0.63.

During the time of writing (22 March 2026), the share price is RM 0.485. So, the Margin of Safety (MOS) is around (RM 0.63 - RM 0.485) / RM 0.485 ~ 30%. It is very attractive for me personally.

Strength of FOCUSP:

1. Largest eyewear retail chain, enjoying economies of scale.
2. Many shops are available (nearly 200 as in FY2024). Easier accessibility.
3. Differentiation in eye-checking services.
4. Aging population, rising myopic cases amongst children.
5. Working with Third Party Administrator (TPA) like MiCare & other corporate partners to boost up sales.
6. Offers advanced and comprehensive eye-screening procedures which are hardly found in other ordinary eyewear shops.

Risk:

1. Stiff competition by other players. Recently, A-look was acquired by EssilorLuxottica, the largest  eyewear company in the world. If A-look is expanded further, it could pose a risk to the growth of FOCUSP.
2. Dragged by F&B business which is very competitive.

Q4 2025 YSPSAH: A good quarter?

 

I am very lazy nowadays. Just have time to summarize the findings of YSPSAH recent quarter result. YSPSAH just reported its Q4 2025 earning as below:

As expected, due to the strengthening of MYR against USD, it booked another forex loss of RM 4M this quarter (vs. gain of RM 3 M Q4 2024). This reported figure is the combination of realized and unrealized forex loss. To know the exact numbers of each category, we have to refer to the upcoming annual report. No choice. However, according to my research (from FY2016 - FY2024), regardless of the fluctuation of USD against MYR, its realized forex gain/loss is only around RM 1M - 2M. I believe its natural hedging is properly implemented so far. Even during FY2024 (where USD weakens against MYR broadly), YSPSAH is still able to book in a realized forex gain of RM 1.6M (& unrealized loss of RM 9.2M).

For this Q42025, despite the forex loss, the net profit attributed to shareholders (accounting profit) stands at RM 7M, which is higher than the accounting profit reported in Q4 2024 (RM 6 M). On the whole year basis, however, the accounting profit for FY2025 is RM 25M, slightly lower than RM 27M made in FY2024. However, core profit (after adjusting forex loss, assuming the reported RM14M is unrealized forex loss) for FY 2025 is RM 39M (vs RM 35M in FY2024), which is commendable.

The operating cash flow (OCF) generated in FY 2025 is very strong, which is significantly higher than the accounting profit. Free cash flow in FY2025 comes at RM 54M-RM4M = RM 50M, which translate to FCF/share of RM0.35. It has ample cash to pay dividend from the internally generated cash flow obviously.

Concerning on its future expansion plan, I learn from the Management in AGM 2024 that they would build an advanced production line to boost up the capacity. They claimed that there is a problem in their old manufacturing line, leading to their inability to secure some local orders. As shown in the revenue breakdown below, local (and overall) sales experienced a slight drop indeed. This might indicate that the manufacturing plant could not take more capacity any longer, hence need further expansion.

From the cash flow statement (under Property, Plant and Equipment), I guess the number reported does not reflect the arrival of the new machinery yet. Still, the budget falls under capital commitment (Note A12 below). 

For valuation, core EPS comes at RM39M/142M shares = RM 0.27/share. Considering the closing price on 19/3/2026 (RM2.08), PER ~ 7.7. Personally, I found that it is very attractive. Plus, its dividend yield is > 5% with potential of further profit growth after the commissioning of the new production line.

Of course, Mr. Market would definitely abandon this counter as the USD is weakening nowadays (vs MYR). For a value investor like me, this would enable me to slowly accumulate the shares. Of course, this comes at certain opportunity cost. However, I am the kind of person that do not like to chase hot counter at high valuation. This kind of "boring" counter, instead, is my cup of tea.

The risk is rising energy cost (Iran war) and competition from bigger rival like DPHARMA in local market. It seems to me that DPHARMA is always the preferred supplier of government hospital. The Management told me that their competitiveness is their good service. Well, I am not sure how good service would translate to more sales lah... I am not familiar in pharma industry. Need more time to find out.

The truth of long term investing 长期投资 & the "mean reversion"

I believe most of us have heard about this: 

"To succeed in share investment, one MUST practice long-term investing, or 长期投资".

Sometimes, I wonder why those experienced investors always say the above. It seems to me that they like long-term investing SO..........MUCH. 

But, is it really the case?

I have a personal experience. I bought the shares of CCK in late 2023 at around RM 0.8x, the price shoots up to RM 1.4++ around mid of 2024, a hefty 80% gain in just a few months. I sell all my CCK shares as it is trading beyond the intrinsic value.

The above is one of my success stories, achieving 80% realized profit within 6 months.

However......

There are many instances in my investment journey whereby the bought companies have not reached their intrinsic values within the anticipated period of time. This is due to many factors: 

(a) Money does not flow into the sector of the bought company. For example, most monies flow into AI-related sectors in 2025, making those companies in other sectors under-performing although they are growing and financially sound.

(b) Near-term headwind on the industry. For example, export-based companies experience unrealized forex loss due to USD weakening against MYR, or facing business disruption in the Middle East during the Iran-Israel war in 2026, etc.

All these factors could be unprecedented, and out of our control in most cases. As investors, we have no choice but live with all these uncertainties.

In many cases, I bought the shares of those under-valued, fundamentally strong and growing companies at the time when their share price is up-trending (with the help of technical analysis), hoping their share price would revert to their mean (i.e. the so-called mean reversion process, which the legendary investor Ben Graham said that it would just happen magically). During this process, some headwinds would just appear and drag the entire mean reversion process. What would be a value investor do in this scenario? Well, if the headwind is not long-term, I believe most investors would choose to hold. There you go.... they have no choice but to go for long-term investment in this company.

For me, the strategy of  LONG-TERM investing is developed from the fact that in short-term, an under-valued, good company is very likely to face headwinds from time to time. If you are lucky (like my investment journey in CCK above), then you could make handsome profit in just a few months. But, in a real investment journey, sadly to say, we could not replicate this "luck" for every company that we bought. 

This is my message: We DO NOT like long-term investing. 

In fact, we are "forced" to do LONG-TERM investing to accommodate all the uncertainties during the mean reversion process, which could take years. After all, who do not wish their companies to get to their intrinsic values within a short period of time?

AJI-Q3 ending 31 Dec 2025 quarter result

 

AJI just released its Q3-2025 result as below:

By purely looking at the above result, the quarter net profit is not so good if compared to last year. What are the main reasons behind? Well, let us look into Note 11 below:

As expected, there is an unrealized forex loss of RM1.9M vs gain of RM 3.6M last year. It is due to the strengthening of MYR to other major currencies. If adding back the unrealized forex loss to the current quarter net profit, the core profit of the current quarter would be: RM 13234k+ RM 1938k = RM 15.2M (vs core profit of RM19348k - RM3624k = RM15.7M). So, the core business profit is almost flat.

Meanwhile, Management has guided that there is a marketing expense in Q3. Unfortunately, the exact amount is not disclosed. Similar question has been asked to the Management during AGM; however, no exact numbers coming from them... Not sure why it is so secretive.

Overall, the current Q3 result is not bad. If no marketing expenses, I guess the overall core profit would be higher than last year.

At the time of writing, Iran war is happening in the Middle east. I believe the freight cost to Jeddah (Saudi) would be higher, affecting the profit of AJI in near term. As a result, Market has realized this and sell the shares beforehand. I choose to hold, as the current share price is still below my calculated intrinsic value. 

Frankly speaking, I feel bit sad as all my paper profit evaporated due to the heavy selling. Who wouldn't, right? But, this would definitely happen to any serious investors in their long investment journey, I believe.

Hopefully the Iran-US-Israel conflict would be resolved soon.

When to buy, when to sell - relevance with 冷眼方程式

There is a formula put forward by a renowned investor in Malaysia, cold eye (冷眼) for those who wish to build long-term wealth in share market. The formula is called  冷眼方程式, consisting of 3 elements:

(1) Growth (成长）

(2) Contrarian (反向）

(3) Time (时间）

Undoubtedly, to succeed in share market investment, these 3 elements are indispensable. 

But, how to implement these strategies in practice? Let us get into each element in more detail.

Element 1: Growth (成长）

One must ensure that the business of the company we invested in is growing. As such, puzzles such as BUSINESS. MANAGEMENT and NUMBER that I'd mentioned earlier in my previous post (4 puzzles) should be intact. 

The logic is like this: A company run by a good management team (MANAGEMENT puzzle) could generate more business (BUSINESS puzzle) and bring in more free cash flow (NUMBER puzzle), leading to greater potential of distributing higher dividends to shareholders. As dividend increases, more investors would be interested in buying the shares of the company, hence driving up the share price. Hence, investors would be able to enjoy both the increasing dividend and capital gain. This is how we could build our wealth from the share market in long term.

From my point of view, if one is willing spend time in researching into the business of the company (via financial statements, web info, etc.), he/she should be able to identify the growth potential of the company. Therefore, in terms of implementation, I would think it is less difficult as compared to the other twos.

Element 2: Contrarian (反向）

"Be fearful when peoples are greedy, and be greedy when peoples are fearful." 

This is a very common quote amongst investors. 

I have heard a lot of auntie and uncle saying that when the share price drops, they will just "sapu".. In most cases, they will tell me about their "sapu" story only after the share price goes up to prove that they "sapu" at the correct timing. If they "sapu" and the share price drops further, most of them will just keep quiet, I presume. Some of them might just cut loss.

Not many peoples discuss about the exact implementation of this contrarian (反向）element. In fact, it is hard to implement this psychologically, as our brain is programmed to follow crowd behavior/social norms by natural instinct. So, the key is to act against this instinct, using the second-level thinking. This is not easy, frankly speaking, as you need to be confident on the business prospect on the company you've invested in. That could be the reason why Warren Buffet always advocate the idea of "circle of competence", i.e. investing only on those companies that you're familiar with.

Say you are confident on the business prospect of the company you are interested in. Shall we buy the stock as soon as peoples dump their holdings crazily? We could, from my point of view, if we have a lot of reserved fund to back us up. We could keep on buying at different stages as what those legendary investors (like Warren Buffett) did. However, for an ordinary investor where he/she has limited fund, do you think keep on buying the shares when the share price keeps on falling is a good strategy? How many monies you have to keep on "sapu-ing"?

From my opinion, in order to execute this contrarian (反向）element effectively, we need to look into the last piece of puzzle, i.e. VALUATION. A lot of peoples (including my friends with a PhD degree) just look at the historical share price to make investment decision. For example, they might say the share price has dropped from RM1.0 to RM 0.8 (20% drop), so it is a good time to buy, according to them. The word historical is fine, but NOT historical price definitely. Instead, we should look into historical valuation metric instead, such as historical price-to-earning ratio (PER), historical price-to-book (PB) ratio, historical dividend yield, etc. For example, let say market offers you a ridiculously high price to buy your share. At the offered price, you find that the current PER is way higher than the averaged PER (say 5 years averaged historical data), you should sell. In contrast, if the offered share price is low, and your find that the current PER is way lower than the averaged PER this time (with huge Margin of Safety say > 20%), you should buy. This is the essence of contrarian (反向) element .

In bear market, share price of most companies would drop substantially, regardless of how good is the fundamental aspect of the company. An ordinary investor might run out of fund before the share price hits the bottom, if the investor keeps on buying the shares when the market keeps on selling. Therefore, to implement 反向 effectively, we need an extra tool. This tool is called timing.

Timing on when to buy

From my point of view, we could refer to technical analysis to spot for a good timing for buying. Of course, I should emphasize that technical analysis is only secondary here; fundamental analysis (the FOUR puzzles) should always precede technical analysis before making any investment decision. I noticed that before a stock picks up its uptrend pattern, its share price would normally consolidate at a fairly low level with limited trading volumes (meaning that not many peoples are interested in this stock). When you see the share price finally moves up (with the low trading volume in particular), it could be an indicator that some long-term investors are accumulating the shares slowly in small batches. This could indicate the beginning of an uptrend, according to the legendary investor from Germany, André Bartholomew Kostolany. At this stage, if you think that the business of the company is still intact, and the traded price is way below your calculated intrinsic value (say with margin of safety MOS > 20%), this is a strong buying signal, from my opinion. GPMMA (i.e. fast moving averaged lines are above those slow ones) and the "Higher Low + Higher High" pattern (see below) are some strong technical indicators for an uptrending share price.

In other words, buy when the valuation is cheap & the share price has finished its consolidation stage and begins its uptrend. This would reduce the opportunity cost substantially.

Timing on when to sell

As a contrarian, how to sell a stock? Shall we sell the stock right after the stock price moves up crazily? Again, the VALUATION puzzle plays a key role again. We could sell the stock if it is selling at a price way above our calculated intrinsic value (say negative MOS). Or, we could sell certain portions of your shares to take back your original capital, leaving only the free shares with you. Leaving only the free shares would calm you down if the share price reverses its uptrend and plummets thereafter. This is quite straightforward to execute.

My common dilemma is: What if the stock price rises sharply to a level where it is still below our calculated intrinsic value? Some value investors might choose to hold, as there is no reason for a value investor to sell the share of a good company at a cheap price, right? However, recall that the intrinsic value is just based on our personal judgement and approximation. In other words, it is subjective (different peoples would come up with different intrinsic values of a company). So, if the share price is about to reach the calculated intrinsic value (say MOS of < 5%), and if your holding on this company is excessive (say > 20% of your portfolio), you might trim some of your holdings to bring down the weightage of the company shareholding (to say 10-15% of your entire portfolio). 

To execute selling, again, we could adopt some of the methods from technical analysis. I noticed that when the spike of share price is accompanied with BIG trading volume, we should at least get ready (mentally) to sell, if you are running out of reserved fund/wishing to trim your holdings. When the share price hardly goes up anymore regardless of the BIG trading volume, then we could start to sell some of our holdings. Also, the "Lower High + Lower Low" pattern as below:

is a strong indicator that the share price is downtrending. When the share price is off its first peak and its second peak is lower than its first peak, you might also consider to sell some shares to preserve more cash (if your reserved fund is limited or the share price has exceeded the intrinsic value).

Selling is harder to be executed, as compared to buying. This is normal. Nobody could sell at the highest price. Most experienced investors would sell their holding in batches when the share price is moving up, as long as they think the price is right.

Element 3: Time (时间）

The third element sounds simple. However, from my opinion, this is the most difficult element to master. A lot of people would start to lose patience when the share price hardly goes up after a few months. If you tell them to buy an undervalued company and ask them to hold the company share for another 3-4 years to see potential good returns, they might not interested to talk to you anymore, I guess :-) This embarrassing situation happened to me all the time. That's the main reason why I have decided NOT to talk about value investing in front of my friends/colleagues anymore. I believe most serious value investors would have the same feeling as mine, i.e. being lonely :-).

To master this element, we must really treat buying stocks like "owning the business", and should appreciate the fact that business needs time to grow. We must get rid of the "trader mindset (buy today, sell tomorrow)", in other words. My wife once said: "We should treat ourselves as a consumer (rather than a trader) after buying the stock". You might read the books authored by those renowned investors (such as those books written by 冷眼 and KC Chong) and listen to the interview of Warren Buffett to learn their investment philosophies, which I think their philosophies would help you to strengthen the belief that a company would move back towards its fair value in long term (the so-called "reversion to the mean"). To master this third element, you must train yourselves to be more persevering.

Sometimes, while you are waiting for a company to grow/return to its fair value, some bad things might happen on the company you invested in. If I think that those "bad things" would affect the long-term business prospect of the company, I will choose to sell even at a loss (a very hard decision) to preserve my capital. This happened to me several times (DANCO, TAKAFUL). 

Conclusion

Like in many kungfu movie, to master a kungfu, we need both elements: 外功 + 内功。

冷眼方程式 is a powerful (proven) kungfu to build wealth in share market. This powerful kungfu consists of 外功 + 内功 as well, i.e.

冷眼方程式:

外功 = Growth (成长）+  Contrarian (反向）

内功 = Time (时间）

Have you mastered both 外功 and 内功 of this kungfu?

My investment return in 2025

Year 2025 is definitely not a good year for me. 

I wish to summarize my thoughts and made some self-reflections on my investment journey this year.

HLFG

This is the largest holding in my portfolio (33%). Since Sept 2024, the share price has been downtrending from its peak at RM 20+ to RM 15+. My paper profit changes from +6 figure to -6 figure. During that time, I keep on holding the share as it is still below my calculated intrinsic value of RM 23+ (based on averaged PER). 

I dig further on the company to see if it is doing something wrong. After performing my research, there are a few factors that could contribute to its depressed share performance:

(1) Low dividend (around 2%++ per annum) in FY2024.

(2) Low liquidity.

(3) Heavy exposure to Bank of Chengdu (BoCD). Profit of BoCD is 30% of total profit of HLBANK, which is quite risky if BoCD's financial performance drops. China economy is weakening in 2024-2025 (US-China tariff war, property slowdown, etc.)

(4) Conglomerate discount applicable to holding company like HLFG. Well, this is the first time I heard about this in 2025.

Lesson: I should have sold some HLFG share to reduce my holding to say < 20% so that my portfolio is more balanced.

Thankfully, in FY2025, HLFG declared a big dividend (RM 0.72/share in FY2025 vs RM0.54/share in FY 2024), double digit growth yoy. This has stimulated the buying interest from the market (at least EPF is accumulating). At the end of calendar year 2025, its share price is positive yoy (~ 4-5%). 

I have taken this opportunity to reduce my holding of HLFG (around RM 19.0-RM19.2). My holding is reduced from 33% to 25% of my entire portfolio. 

ABLEGLOB

This company is now focusing on milk industry. In Malaysia, their more famous brand is "tarik-tarik" (a fish head noodle hawker is using this brand). I saw SC neighbourhood market is selling this brand as well. Of course, this brand is relatively small compared to other big brands like F&N. That could be the reason why the ABLEGLOB management decided to sell their milk products mainly to overseas, such as Mexico.

In early 2025, their executive chairman and CEO have been remanded by MACC. The share price dropped substantially. Market (including myself) has lost faith on the Management. I have no choice but to sell all my ABLEGLOB stakes at a lost (loss of RM30k++). This has affected the performance of my portfolio tremendously.

AEONCR

This company is my second largest holding after HLFG. Indeed, its share price skyrocketed to RM 7++ in June 2024. I choose to hold (instead of trimming my holding) as I believe it should worth more based on its current earning per share and fair PER value (based on 5 year averaged PE).

But, something unexpected happened thereafter. AEONCR made a lot of impairment loss (write-off as well) on its loan book (younger generation is unable to pay back the loan). Its share price plummeted to the lowest level at RM 4.8++ in 2025. 

Lesson: I should have trimmed my holdings when the share price skyrocketed with big volume, regardless of the share price is still below its intrinsic value (A well-respected investment guru in Bursa taught me this). He told me that when share price rises with big volume, big boys will likely take this opportunity to sell their shares (based on his experience, for reference only ya).

YSPSAH

This is another sad story. The share price skyrocketed to RM3++ after it reported a good quarter earning in Q1 FY2024 around May 2024. I bought more shares of this counter, without checking the reasons why its quarter earning is so good.

The following quarters saw a substantial drop in quarter earnings. Why?? In fact, its quarter earning is dependent heavily on the unrealized forex gain/loss (as overseas sales is almost 30% of its total sales). When USD is strengthening against MYR, it reported unrealized forex gain, which makes the accounting profit looking awesome in Q1 FY2024 (this is just accounting profit, not real cash in).

YSPSAH share price plummeted when USD weakened against MYR (when Fed reduces interest rate), as the reported quarter earning was looking ugly.

Lesson: Instead focusing on reported earning, I should focus on core earning instead. For example, if it reported unrealized forex gain of RM A, I should calculate the core earning as: Core earning = Reported Earning - A. This would tell me the real profit from the core business of the company. If I know this earlier, I should have sold my shares after it released its Q1 FY2024 report.

Anyway, I choose to hold this counter as its core profit is still intact. Plus, the company has invested on a new production line which is expected to start operating in early 2026. Its dividend yield is not bad either (> 5%).

TAKAFUL

I made a loss in this counter as I read from some reports saying that expansion of SST scope (JULY 2025 onwards) could affect the profitability of Banca insurance. I read somewhere saying that it is hard to pass the cost to customers. As TAKAFUL Malaysia focused a lot of Banca insurance, I worry that its profitability would be negatively impacted. I have decided to sell my shares.

DANCO

Originally, I made a handsome paper profit on this counter (based on technical analysis GPMMA + fundamental analysis based on averaged PER + good dividend yield). However, I choose not to sell as it is still below my calculated intrinsic value. What happened next? Well....

The share price drops as its business segments hardly grow. For example, its metal stamping business (serving HVAC customers) is unable to grow. From what I know, Panasonic (one of its customers) is doing bad (competition from china). Its trading segment (core segment) on pump/valve bought from overseas such as Europe is doing better and commands a higher margin. However, this company relies heavily on M&A to expand its business (bought businesses such as pump manufacturing, EV charging station, metal stamping), which I do not prefer to see unless there is a synergy between the business segments. The bought businesses hardly grow.

One thing I noticed during the AGM. The MD hardly speak anything when I ask him questions. His brother, and the CFO did most of the talking.

In 2025, its business experienced a double digit drop yoy. I sold my shares at a loss. I am so sorry to my sister as I have recommended this company to her.

Question: Could trading business on pumps/valves could secure a sustainable competitive advantage (moat)?

AJI

I started to buy in AJI around Sept 2025 as its operation in the new plant (Bandar Enstek) started to gain momentum. If it could retain the momentum, it should worth more than the current share price.

SCIENTX

I started to buy in SCIENTX after it reported its Q1 earning in 17 Dec 2025. Its affordable housing segment is strong, which has compensated the weakness in its plastic film business. Hopefully its plastic film segment would continue to shine again. I do not dare to buy in a lot as I am still monitoring the company performance.

Summary

Overall, I could grow +2.89% only of my portfolio this year. This is truly below my initial target (> 10% yearly), but above my expectation as I was anticipating a loss initially. Thankfully, the share price rally of HLFG during the year end (window dressing?? MYR strengthening??) has helped a lot.

Hopefully 2026 is a good year for me.

Is HLBANK/HLFG Really That Giam Siap?

 

I always like to ask my friends which bank stocks they would buy in Malaysia. Most of the time, the answers are the same: Maybank, Public Bank, CIMB, or RHB.

Then I ask, “Eh, how about Hong Leong Bank (HLBANK)?” Straight away, the comments come:

• Aiya, the boss too giam siap lah (means stingy in Hokkien dialect).
• Wah, price so high somemore — around RM19+. One biji (1 biji = 100 shares) already nearly RM1,900 leh! (typical retail mindset).

So I push further: “Then would you consider Hong Leong Financial Group (HLFG)?”

They just laugh and say: “HLFG? Even more giam siap than HLBANK!”

I believe most retail investors share the same mindset as my friends à HLBANK and HLFG are never on their list of investment choices. The typical reasons? Low dividend payout ratio and low dividend yield.

For retail investors (and even some fund managers), the priority is securing a steady, high-dividend income stream. That’s why when it comes to banking stocks, they naturally prefer banks with higher dividend yields, while bank asset quality often becomes a secondary concern.

 

But has anyone stopped to wonder why HLBANK/HLFG pays out relatively lower dividends compared to other banks? Is it really because the boss is stingy and doesn’t want to share profits with minority shareholders as my friends like to claim? If that’s true, then why does the very same boss, who controls HLBANK/HLFG, allow such high dividends in other of his/her companies like Hong Leong Industries (HLIND)? For reference, HLIND’s dividend payout was above 56 % since FY 2020 (reaching 87% in FY2024, including the special dividend).

 

To understand why HLBANK gives a relatively low dividend, perhaps it is good to look at a key capital ratio in banking industry, i.e. the CET-1 ratio, defined as:

 

CET-1 ratio = CET-1 capital / Risk-Weighted Assets (RWA)

 

Simply put, a higher CET-1 ratio means the bank has a stronger capital buffer and better ability to withstand an economic crisis. Retained earnings form part of CET-1 capital, and these are calculated after deducting dividends from net profit.

 

Now, what about Risk-Weighted Assets (RWA)? In simple terms, they represent the loans disbursed to customers, adjusted for their riskiness. Since lending always carries the risk of default, banks must hold sufficient capital against these loans.

 

In Malaysia, banks are required by BNM to maintain a minimum CET-1 ratio of 7.0% (4.5% minimum + 2.5% Capital Conservation Buffer). Put another way, a higher CET-1 ratio means the bank has more cushion, either by keeping more capital on hand or by controlling the size of its RWA (lending less).

 

Good news: All Malaysia banks are well above the regulatory requirement of BNM as shown in Table 1 below. Our banks are indeed well capitalized.

 

But how exactly does dividend payout tie in with the CET-1 ratio? Well, BNM requires banks to maintain at least 7%. If a bank is currently sitting at, say, 15% (almost double the requirement), it means the bank can afford to pay out more dividends. Of course, that reduces retained earnings → lowers CET-1 capital → and brings down the CET-1 ratio. But even then, the ratio would still be comfortably above BNM’s minimum, right?

 

Let us have a look in the CET-1 ratio on several banks in Malaysia (extracted from their 2024/2025 Annual Report) shown in Table 1 below:

Table 1: Key metrics for Malaysian banks (2024/2025)

RHB Bank has the highest CET-1 ratio and hence it could afford to declare a dividend payout of 60%, which is amazing. Meanwhile, Alliance Bank has the lowest CET-1 ratio, which could be attributed to the double-digit loan growth of 12% in 2024. Still, it declared a dividend payout of 40%, which is quite impressive. However, to preserve the CET-1 ratio at a comfortable level, Alliance Bank would need additional capital. This may be the reason why the Bank recently offered a rights issue to its shareholders.

 

How about Hong Leong Bank (HLBANK)? Its loan growth looks solid at 7.3% in FY2024, and yet its bad loans (GIL ratio) are among the lowest in the industry. The only catch is its CET-1 ratio — at 13.3%, which is slightly below the bigger banks.

 

Why lower? Mainly because HLBANK grew loans faster (which increases RWA) than its larger peers, plus it injected capital into its associate, i.e., Bank of Chengdu (BoCD) in China (note: HLBANK holds 17.8% stake in BoCD). To keep its CET-1 ratio at a relatively comfortable level, the bank has to retain more earnings, rather than paying more dividends from the net profit. That’s why its dividend payout is only around 33%, much lower than its peers.

 

The good news is, under the new Basel rules, the capital ratios of certain banks are expected to look stronger, and HLBANK’s management has hinted they may raise dividend payout closer to peers in the future. The new Basel rules would concentrate on the calculation of RWA, as the Basel Committee highlighted a worrying degree of variability in banks’ calculation of their RWA. The new Basel framework aims to restore credibility in those calculations by constraining banks’ use of internal risk models à some internal risk models give banks the most freedom to estimate their credit risk of RWA, often yielding a much lower risk (hence CET-1 ratio rises) than the regulator’s standard model. Hence, some banks that rely heavily on “internal models” to calculate their credit risk may see changes to their capital ratios once the new rules kick in, and that could affect their future dividends payout.

 

How about Hong Leong Financial Group (HLFG)? HLFG is essentially a holding company — it owns shares in Hong Leong Bank (HLBANK), Hong Leong Capital (HLCAP), and HLA Holdings (insurance arm). Naturally, its dividend payout depends on what it receives from these subsidiaries.

Table 2: Total dividends contributed by HLFG subsidiaries in FY 2024 (in RM)

Looking at FY2024 (see Table 2), HLFG declared total dividends of about RM620 million, which means it distributed almost 65% of the dividends it received to shareholders. The tricky part is HLA Holdings, which is unlisted, so its dividend contribution isn’t publicly available. But if we assume HLA Holdings paid out 50% of its FY2024 profit after tax (RM511m) as dividends to HLFG, then the effective payout to HLFG shareholders still comes up to around 51% of total dividends received from its subsidiaries.

 

So, is HLFG really “giam siap” and unwilling to share profits with minority shareholders?

Honestly, it depends on how you look at it. Some investors might only consider HLFG generous if it paid out 100% of what it receives. But in practice, retaining part of the earnings/dividends gives the group more flexibility to reinvest, support subsidiaries, and preserve capital buffers.