Turning decisions into value

A PROFITABLE company can still be a poor investment.

It can grow earnings while tying up too much capital, preserve businesses that no longer earn their keep, or accumulate cash without explaining what shareholders should expect from it.

A more polished presentation will not resolve those problems. Different decisions might.

That is where MY Value Up becomes important to the Institutional Investors Council Malaysia (IIC).

For long-term asset owners, the central question is straightforward: What will a company do differently with the capital entrusted to it, and how will shareholders know whether those decisions have worked?

Introduced by the Securities Commission and Bursa Malaysia in April 2026, MY Value Up offers a framework for companies to explain their long-term direction.

With public plans expected to begin appearing in 2027, the preparation period should be used to challenge the assumptions behind corporate strategy. Investors should enter that conversation before the plans are finalised.

Diagnose problems before promising upside

A credible plan should begin with an honest explanation of what is holding value back.

Is the business earning inadequate returns? Is capital trapped in underperforming divisions? Is the balance sheet poorly suited to its growth ambitions? Or is a sound strategy insufficiently understood by the market?

These are different problems and require different responses.

A valuation discount should prompt investigation, rather than an automatic conclusion that investors have misunderstood the company.

Boards should test their performance against relevant regional and global peers and explain persistent gaps.

Where the problem is execution, better communication cannot carry the whole burden.

Consider a company announcing another expansion while an existing division continues to earn below its cost of capital. Investors need to know why the next investment will perform better, what management has learned and how much more capital the weaker business will receive.

An attractive growth forecast leaves those questions unanswered.

Make capital allocation choices visible

The most revealing part of a Value Up plan may be what the board decides to stop funding. Growth absorbs capital; it does not necessarily create value.

An acquisition can lift revenue while weakening returns. A legacy operation can remain profitable in accounting terms while consuming resources that could be used more productively elsewhere.

Boards should explain the basis for choosing between reinvestment, acquisitions, debt reduction and shareholder distributions.

What return must a new project earn? When will it generate cash? What would trigger a review, restructuring or exit? If surplus cash is retained, what strategic purpose does it serve?

This does not mean every company should pay a larger dividend.

A business with credible opportunities may create more value by investing.

Equally, distributing cash should not come at the expense of necessary maintenance, workforce capability or resilience.

The discipline lies in explaining the trade-offs and demonstrating why the chosen use of capital serves shareholders over time.

Give investors a way to judge delivery

Broad ambitions such as becoming a regional leader are difficult to assess unless accompanied by a starting point, milestones and a time frame.

Each company should identify a small number of measures that capture its economics and connect them to the actions management can take.

Depending on the business, these could include returns on invested capital, cash conversion, asset utilisation or leverage.

A growth company may need milestones for customer economics and the path to positive cash flow.

A cyclical company should explain performance across a cycle, with assumptions and sensitivities, rather than offer false precision about commodity prices or demand.

Targets also need continuity. When results fall short, investors should be able to compare outcomes with the original commitment and understand the reasons.

A revised strategy may be entirely justified.

Quietly replacing the old targets with new ones makes accountability impossible.

Boards should review delivery through their regular strategy and performance discussions, including quarterly meetings where appropriate.

Public updates should explain material changes and provide a consistent account of progress without encouraging decisions designed merely to flatter the next quarter.

Connect board accountability to consequences

Board endorsement has limited meaning if the plan has no bearing on management incentives or subsequent investment decisions.

Remuneration committees should examine whether executives are rewarded for the outcomes the strategy promises. Incentives tied mainly to revenue or absolute profit can encourage expansion even when returns on capital deteriorate.

Shareholders should be able to understand who is responsible for delivery, how performance affects remuneration and what follows repeated failure.

Accountability should distinguish a temporary setback from a flawed investment thesis.

It should also protect worthwhile long-term investment from pressure to manufacture an immediate improvement in reported numbers.

Strengthen stewardship

Long-term ownership should involve sustained scrutiny of strategy and capital deployment.

Investors cannot reasonably demand discipline from boards while accepting vague answers year after year.

Institutional investors should bring company-specific questions into engagement now, identify the disclosures that would improve their assessment and revisit unresolved issues against agreed milestones.

Where engagement repeatedly fails, investors should consider escalation through their stewardship and voting policies, including scrutiny of relevant director re-elections and remuneration proposals.

Those conversations must respect fair disclosure. The aim is to improve the information available to all shareholders.

Investors should also avoid treating participation as an investment endorsement: publishing a plan does not establish its credibility, and credibility does not remove valuation or execution risk.

Set standards beyond largest companies

The initial focus on 88 companies representing about 80% of Bursa Malaysia’s market capitalisation provides a practical starting point.

The next challenge is to make the discipline useful across the market, with expectations proportionate to a company’s size and complexity.

Smaller companies should be able to explain their investment case without building an elaborate reporting apparatus.

For IIC, the measure of success should be whether boards make better capital decisions and investors can hold them to account. Publishing plans will make intentions visible.

The harder test comes when a board must withdraw funding from an underperforming business, reject an acquisition or explain a missed milestone.

That is when shareholders will discover how much MY Value Up has changed.