MY Value Up – a critical evaluation

THE Capital Market Masterplan 2026-2030 (CMP) was released in March but the Securities Commission (SC) and Bursa Malaysia have gone a step further.

They have launched a more detailed programme under the MY Value Up incentive, which the regulators say can help achieve greater capital market growth in terms of liquidity, and higher values among top listed companies as well as market velocity.

The IIC welcomes the incentives introduced by the SC, but cautions on the need to push for greater commitment from listed companies beyond what is necessary.

Both the SC and Bursa believe that Malaysian-listed companies lack compelling stories that will allow investors to take a long-term view when investing in the local bourse.

Hence, the MY Value Up programme. The vision is for MY Value Up to help articulate the storytelling to ensure investors, especially foreign ones, have a better buy-in of these public-listed companies or PLCs.

The programme is also envisioned to guide the mindset of boards towards long-term value creation. The IIC believes that a structured approach for all listed companies makes sense, where different yardsticks are used to measure their performances rather than single out the top 88 companies.

The SC recognises that there is a need to uplift the market in terms of foreign ownership, from the current market 19%. Non-strategic holding is also seen at about one-third, which is indeed a cause for concern.

The IIC views that the ­downtrend in Malaysia’s foreign ownership did not occur overnight, but is a long-term trend from the heydays of the market itself.

It is widely recognised that the Malaysian bourse has become more of a “marginalised” market, or a term used by fund managers – “a tracking error” – as its weighting on the widely followed MSCI Emerging Market (EM) Index is barely 1.21%.

Only 27 listed companies make the mark into the widely followed global index, from a high of 3.88% and as many as 46 constituents.

The SC should investigate the reasons for this massive decline, and one cannot deny that we lack pure growth companies that are only “local champions” but failed miserably outside Malaysian shores.

Other than a select few, Malaysia does not have global brand names such as the likes of Singapore Airlines, Taiwan’s TSMC, South Korea’s Samsung, Hyundai or LG, and Japan’s Toyota or Softbank that foreign portfolio investors would add positions on.

According to the SC, the MY Value Up programme will be rolled out in stages, starting with consultations and workshops, and a guidebook.

Participating companies are also required to submit private reports on how they plan to improve performance and market position. By 2027, the programme will expand voluntarily before any decision is made to make it mandatory.

While the IIC is receptive to this move, it remains cautious on the approach taken, as any move to make it mandatory will lead to greater compliance costs to listed entities.

The IIC also notes that among the large listed companies, more than half are linked or are owned by government-linked investment companies (GLICs).

The listed companies owned by GLICs are well governed and have carried out many reform agendas to boost internal and external communications and help boost valuations.

However, the IIC believes that the SC’s call for companies to have better market communication to investors is key, as there are cases within the 88 companies that the SC has identified, that have neither a formal investor relations (IR) team nor coverage by an analyst.

Although the numbers are small, it is cause for concern, and the respective companies should take steps to have a formal IR team as well as market coverage by brokers.

Value up – other experiences

Three key markets have seen some success in implementing value-up programmes, and these include those in Singapore, South Korea and Japan.

In Singapore, the move was spearheaded by the Monetary Authority of Singapore with a S$5bil Equity Market Development Programme aimed at revitalising the market and boosting valuations.

This was carried out via a ­partnership with asset managers, targeting mid-to-small-capitalised stocks with high growth ­potential, and encouraging the adoption of better corporate ­governance to boost valuations.

There were also efforts to boost the overall market’s ­attractiveness, such as removing outdated rules, lowering listing costs and enhancing liquidity via tie-ups with Nasdaq.

In the case of South Korea, the regulators encouraged companies to disclose what their plans were for improving key financial metrics such as price-to-book ratio (P/B) and return on equity (RoE).

Companies were encouraged to increase dividends and share buybacks/cancellations. The Korean Value Up programme also encourages better communication with shareholders and improved board practices to move away from low-valuation practices. 

As for Japan, listed companies had to disclose concrete action plans for boosting capital efficiency, such as P/B, RoE and cost of capital.

The regulators also introduced a name and shame approach, whereby the Tokyo Stock Exchange would publish a list of companies that have disclosed the key ratios, while companies that failed to respond face public pressure, encouraging voluntary compliance to avoid damage to their reputations.

The programme also encouraged companies to utilise their cash reserves for dividends and share buybacks.

Taking the three examples from the Value Up programmes initiated there, the regulators’ MY Value Up programme seems to be combining the South Korean and Japanese models to suit our local needs.

The board’s agenda

For large, listed companies, the mission to take things to the next level is driven by the board. In these companies, board members have the right credentials in terms of business knowledge, experience, and strategic thinking.

To embark on a voluntary disclosure on how these companies will improve their performance or even market position seems to be a tall order.

IIC views that it is acceptable to have some of the key deliverables for disclosure purposes, but one must not forget that listed companies’ strategic and future growth may be set by the board of directors.

Short-term (one year) and medium-term (beyond one year and up to five years) targets are usually discussed at annual business strategic meetings with collective discussion among board members and senior management.

However, whether a company is undervalued, fairly valued or overvalued is a function of the market, with fundamentals playing a key role, as different industries have different yardsticks when it comes to the valuation perspective.

Other factors also come into play, such as governance issues, growth expectations and ­government policies such as changes in tax treatment

and licensing, while external factors such as tariffs and geopolitical risk add further risk to not only market valuation but also individual sectors and stocks.