Distorted Valuation Methods

 

Analysts usually use two distinct methods in valuing companies, and they are the discounted cash flow method as well as the traditional price-to-earnings ratio (PER) method. The P/B method is well-known. The (P/B) method is an appropriate valuation method for companies in the financial industry such as banks or insurance companies. Balance sheet represents assets that are significantly liquid and are valued based on mark-to-market valuations, so it is deemed appropriate. 

Typically, banks or insurance companies are valued at a premium, as observed recently in the sale of a 30.95% stake in Maybank Ageas Holdings Bhd by Ageas Insurance International NV to Maybank at 1.98 times. The P/B method is also an appropriate method to use during times of distress or when a company is loss-making.

 

Source: https://www.investopedia.com

 

However, the P/B method has a fallacy, as the net asset value of a company is dependent on its dividend policy. Assuming two companies have a similar net asset value of RM500mil each and both companies can generate a net profit of RM70mil a year. A company’s dividend policy will have a significant impact on how the net asset value grows in the future. 

Literature has also shown that there is a positive correlation between P/B and return on equity (RoE). Hence, companies like Public Bank and Maybank do trade at a premium to the overall sector averages due to higher RoEs. A company that pays out much of its earnings as dividends tends to have better RoEs. 

There are no right or wrong answers when it comes to valuing a company based on a certain discount to its “fair value”, especially when it comes to the P/B method or, in the case of property companies, using the realisable net asset value (RNAV) method. The best approach to the appropriate discount is to use the historical trend in terms of the observable market price and the P/B or RNAV value. The difficulty lies when an analyst changes this discount and applies the discount arbitrarily. How does one justify changing a 30% discount to 20% or to 40% or 50% without quantifying why the change necessitates the different discounts? 

In the era of tech, artificial intelligence (AI) and semiconductor booms, revenue, cashflows or even earnings multiplier has taken a quantum leap. Valuing some of these companies north of 30 times or 40 times PER is getting too common. A word of caution is in order, as any multiples beyond a certain threshold will be tough to justify if the earnings growth does not match. As a rule of thumb, a stock is only cheap if its future growth is at a higher rate than the PER multiple used to justify its valuation. 

Based on the above examples, while one understands that valuation itself is an art and no two analysts will be valuing the same company based on the same valuation matrix, there must be justification as to why a valuation method is used and how the change in the company’s and industry’s fundamentals impact the valuation itself. In the case of high-growth companies, the PER multiple must be justified with the expected growth, as a company cannot be valued at a PER-to-growth multiple beyond 1.0 times as it is unrealistic. Distorted market valuation methods can hide a true fair value of a company, and analysts should not be chasing stocks, as markets and investors can be irrational. 

It is more difficult if it’s a start-up and you rely on projections. It requires more work on assumptions and the DCF method may be more appropriate. Valuation, as said earlier, is an art, although many try to make it into a science. Ultimately, it is a willing-buyer-willing-seller basis. And the valuation report is a starting point for the final, negotiated price for an investment or divestment. 

Reference:

Distorted valuation methods hide true value, Pankaj C. Kumar, The Star,
15 August 2026

Harapan’s Kamikaze Mission!

The drama over DAP leaving or staying with the government (DAPexit or DAPstay) doesn’t really matter, because the BN-PAS Malay tsunami may sweep the next elections. That’s why Pakatan Harapan should go all out on a final kamikaze mission to deliver reforms. 

PMX’s biggest promise was to crack down on corruption. Yet a Malaysian pilot could carry 26kg of drugs through KLIA and somehow the security people “didn’t see” it. The drug case proves Tourism Minister was right. He did a spot check at KLIA after tourists complained they were being extorted by rogue immigration officials in June 2023. He said there was a chronic “culture of corruption” there. Ten tourism and retail associations lauded the Minister for going on the ground to obtain first-hand information on the problems facing tourists at KLIA.

 

Source: https://en.wikipedia.org 

But a rabble-rouser slammed the Minister, saying he had no right to enter KLIA and reveal alleged wrongdoings.  

Some sign of a spine growing was the release of the Tabung Haji royal commission report after being backstabbed in two recent state elections. So, what are the reforms for Harapan’s final kamikaze mission? 

1) Local council elections

This is what affects urban dwellers’ everyday lives - be it garbage collection, potholes, the butchering of trees, or the killing of stray dogs. 

But some politicians have been screaming that this will give power to non-Malays, even though many cities now have Malay majorities. Not just Alor Setar, Kuantan, Shah Alam, and Kota Bharu, but also Kuala Lumpur. 

The truth is, all politicians want to keep control over rich cities, with lucrative planning permissions and contracts. But now that Harapan looks set to lose, please forget about such narrow interests. 

2) Reduce soaring medical insurance costs

This is the biggest concern of middle-class urban Harapan supporters. Control the profits of private hospitals and insurance companies, or create a good, affordable Madani health insurance. 

3) Allow refugees to work

Imagine hiring a maid without having to pay RM20,000 to crony agents to import them from overseas. Apart from families, small businesses will also rejoice. Refugees are already in this country, so why not allow them to work? The current system forces them into semi-legal sources of income and creates social backlash. 

4) Reform elections

Redraw boundaries to create more mixed-race seats to reduce toxic racial politics. Politicians must then appeal to all races. 

This can be done with a simple majority in Parliament if the number of seats is not increased. Johor Amanah deputy chief had also pointed out that it’s unfair that urban votes are much less valuable compared to votes in smaller rural seats. To further reduce racial politicking, state seats can also be added in Penang and Selangor.  

5) Fight corruption quickly

One of our open secrets is that some officials are clearly living beyond their means. If PMX is sincere about cracking down on corruption, he must pass a UWL or “Unexplained Wealth Law”. So, if a civil servant earning RM7,000 monthly has three bungalows and five luxury cars, they can be quickly seized if he can’t explain how he could afford them. There’s no need for court cases dragging on for years. 

Other reforms to consider

- Pass a Racial Harmony law to stop the endless poisonous politicking.

- Set up a National Ombudsman to resolve complaints against civil servants.

- Recognise the Unified Examination Certificate as Penang, Selangor, Sabah, and Sarawak already do.

- Free the MACC and public prosecutor from political control.

- Ensure fair, equal funding even for opposition MPs. 

Even if Harapan loses power in Putrajaya, it’s time to throw away narrow political calculations and do what’s right! Who knows, if PH can show voters what a great job they have done, PH may even score a last-minute goal and pull off an injury-time victory! 

Reference:

Comment: Harapan’s final kamikaze mission before losing, Andrew Sia, Malaysiakini,
17 August 2026

Government Debt in 2026

 

Comparing global debt burdens depends heavily on the lens used: overall dollar amount versus economic proportion. Based on 2026 IMF projections for the world's top 30 indebted governments, the contrast is stark.

While the U.S. holds the largest total debt footprint globally at $40.7 trillion, Japan faces the highest relative strain, with debt exceeding 204% of its economy. Meanwhile, multiple European nations rank near the top in debt relative to GDP, even though their total debt figures are modest compared to economic powerhouses like the U.S. and China.

 

 

Malaysia is not in the above chart because our debt to GDP is approximately 63.1% (and statutory debt ratio is at 62% of GDP, below the limit of 65%)

 

Reference: Post by Stanley Epstein on LinkedIn

EPF Posts 44% Jump in 2Q Investment Income!

 

The Employees Provident Fund (EPF) announced recently a 44% year-on-year surge in second-quarter investment income to RM29.77 billion from RM20.61 billion a year earlier. This was driven by a rally in global equities. However, it cautioned members to temper return expectations for the second half of the year.

 

It recorded total investment income of RM57.5 billion for the first six months ended June 30, 2026, up 48% from RM38.92 billion in the corresponding period a year earlier. This includes unrealised mark-to-market gains and losses on securities that arise mainly from foreign exchange rate fluctuations.

 

 

For the latest quarter, equities were the largest contributor to the fund’s investment income, generating RM20.94 billion, up 52% from RM13.77 billion a year earlier. 

Fixed-income instruments, comprising Malaysian Government Securities and equivalents, as well as loans and bonds, contributed RM6.91 billion, or 23% of total investment income (for Q2). 

Meanwhile, real estate and infrastructure generated RM1.3 billion, while money market instruments contributed RM620 million during the quarter.

The EPF’s total investment assets stood at RM1.54 trillion as at end-June, with 39% invested globally. International investments generated RM19.29 billion, accounting for 65% of total investment income in the second quarter of 2026. 

On membership, the EPF registered nearly 441,850 new members during the first half of 2026, bringing total membership to nearly 18.5 million. 

Active members rose to 10.9 million, improving the active-to-inactive member ratio to 59:41. The number of active employers also increased to more than 645,200 as at June, following 37,265 new employer registrations during the quarter. 

Total contributions rose 8.5% year-on-year to RM33.87 billion in the second quarter from RM31.21 billion. 

Voluntary contributions reached RM14.15 billion in the first half of 2026. Contributions through i-Saraan grew 15.7% to RM1.33 billion, while the number of Malaysian formal-sector members contributing above statutory rates through i-Topup increased 13.9% year-on-year to nearly 204,450 in the first half of the year. 

Impressive results and hope that this continues for second half of 2026 with contributors hopefully able to enjoy higher dividend payout in 2027. 

Reference:

EPF posts 44% jump in 2Q investment income to RM29.77 bil but tempers 2H expectations, Choy Nyen Yiau, theedgemalaysia.com, 18 August 2026

Only 4.2% of Malaysia’s Exports Face New US Tariffs

 

Phillip Capital estimates the total value of exports subject to the 10% tariff imposed by the US to be RM63.3 billion, equivalent to 4.2% of Malaysia’s total exports. On the national level, the total exports value subject to the 10% tariff is around RM63.3 billion or 4.2% of the Malaysia’s total exports. Strong global demand for semiconductor, which is exempted from the tariff, will continue to play a key role in boosting Malaysia’s exports.

 

Under the new tariff policy, countries will be subject to either a 10% or 12.5% tariff rate, depending on the strength of their labour safeguard policies and the extent to which they prohibit the importation of goods produced using forced labour.

 

Phillip Capital expects the impact of the new tariffs on Malaysia’s external demand to remain relatively limited due to key drivers of the country's export performance, namely within the semiconductor and electrical and electronics (E&E) sector.

 

Approximately 68.0% of Malaysia’s exports to the US will be exempted from the tariff.

 

By product category, semiconductors recorded the highest exemption rate at 99.9%, while the exemption rates for E&E products stood at 67.1% and non-E&E exports at 45.4%. The US remains an important export destination for Malaysia’s E&E sector. Between 2023 and 2025, Malaysia’s exports to the US accounted for about 13.1% of Malaysia’s total exports, while E&E products alone accounted for 34.0% of Malaysia’s exports to the US.

 

Overall, Malaysia will continue to have a robust export pipeline to the US, thanks to undisrupted global semiconductor supply chains.

 

Beyond semiconductors or E&E, we need to actively diversify our exports and secure non-USD payments for those exports. The US under Trump has no clue short-term or long-term. It is based on “gut” economics of one, clueless man!

 

Reference:

Only 4.2% of Malaysia’s exports face new US tariffs as key tech sector spared — Phillip Capital, Nikail Rezza, theedgemalaysia.com, 7 August 2026

 

Ancient Kedah’s Iron Ore Abundance Due to Meteoric Shower?

 

Arabic linguistic specialist-turned-historian without credentials, Prof Dr Solehah Yaacob is back! She has another mind-boggling archaeological revelation –iron ore found in Kedah is related to meteors! Gunung Jerai is among the areas that received meteoric impacts in the past. Her latest findings also debate the relatively sloping terrain of Kedah.

 

This could well be the latest of eight if not more controversial claims by the former International Islamic University Malaysia’s (IIUM) senior academician. It defies modern day historical, archaeological, anthropological and sociological knowledge realms.

 

Source: https://en.wikipedia.org

The inaugural director of the Asia Institute at the University of Tasmania Prof James Chin in a recent assessment of his IIUM academic peer following the list-down of her so-called “8 controversial claims” by the SEA History and Heritage site passed this remark: 

I’ve nothing meaningful to add, I’m simply not operating at her level. All I can share is that this poster has already been viewed 800K times as of this morning. 

She’s clearly gaining significant traction among the Malay community and is now running paid boat-cruise tours that she personally leads. 

These cruises are specifically designed to demonstrate and validate her research findings by taking passengers to the very locations that support her claims. I’m not joking. 

For context, Kedah is historically and naturally rich in iron ore with the state having emerged as a major iron mining and smelting centre in Southeast Asia more than 2,000 years ago. Excavations at the Sungai Batu Archaeological Complex revealed old smelting workshops, furnaces and raw iron ore dating back as early as the sixth century BCE. Researchers also found large ancient smelting furnaces and processing sites in inland areas like Jeneri (in the Sik district) and Jeniang (in the Kuala Muda district). 

Not everyone takes Prof Solehah’s words at par value despite her clip-on Facebook having amassed 5.8K likes, 829 comments, 772 shares and viewed 179K times at the time of writing. One pious Indonesian commenter even chided the academician. A seemingly archaeological nerd disputed Prof Solehan’s “meteoric shower” notion by justifying that “the Sungai Batu iron ore is local hematite and magnetite from around Bukit Tupah, the result of weathering of the Jerai formation, which is hundreds of millions of years old, not meteoritic material”. 

She needs attention. And Arabic studies do not give her that. She has no background or clue of history but propagates messages that may be helpful to insecure people. 

Reference:

Prof Solehah: Ancient Kedah’s iron ore abundance due to meteoric shower, not natural formation, Focus Malaysia, 20 August 2026

 

Merdeka!

 

There are several blessings as we count the days to Merdeka celebration. But we do have many areas that look like gaps between reality and vision; promise and performance; and politicians and ordinary folks! 

There are several “drags” and “accelerators” in a drive to unity. Many countries face similar issues, even the United States. The game is always to minimise the drags and enhance the accelerators. 

 

Source: https://commons.wikimedia.org

Unity is not something you can manufacture – it is a feeling; a commitment; a bond; and love for a place no matter what we face – economic, political or foreign interference. It has to be lead by the leadership in power; by the people who vote them in; and, the private/corporate sector operating in a country. 

I don’t have solution for all facets but in a small way, the private sector or corporates could do the following:

 

1.      Have Mesra sessions weekly in a corporate setting. Once a week at lunch time, the company organises a luncheon for its staff who will listen to a facilitator (or via video) on topics that relate to unity including:

a)                       Rukun Negara;

b)                       Cultures;

c)                       Festivals;

d)                       Affordability etc. 

The expositor uses 20-25 minutes to convey the message while the staff have a packaged lunch. Following that, the meeting breaks into groups of 8-10 persons per group to discuss the message and arrive at action steps, if feasible. These weekly meetings provide an avenue for bonding and harmony. Details could be discussed;

 

2.       2.  Have celebration awards for companies that encourage and promote unity in their places of work.   Individuals too could be given awards.

For corporates to subscribe to these ideas, incentives like partial reimbursement and/or tax relief will be helpful. 

I cannot say that the above will solve all our problems on unity but are small steps toward greater interaction and dialogue. Meanwhile, let us celebrate each other and enjoy the diversity of this land. Merdeka!

Currencies Performance (June 2026)

 

 

Currency markets have produced some striking winners and losers over the past year, with gains and declines approaching 20% against the U.S. dollar.

 

Highlighting sharp economic divides between regions, a new Deutsche Bank ranking tracks how 36 global currencies performed against the U.S. dollar over the year ending June 30, 2026. Colombia led the pack as the strongest performer, soaring 19.2%. Latin America captured both ends of the spectrum, with a massive 38.1 percentage-point performance gap separating Colombia from Argentina. On the flip side, Asian currencies suffered heavy losses due to escalating energy import expenses, filling six of the eight lowest spots. Malaysian ringgit, however, showed a positive 3.1% appreciation to the dollar.

Reference: Post by Stanley Epstein on LinkedIn

Too Many GLCs?

 

Malaysia has over 1800 GLCs, many of which are subsidiaries of statutory bodies and are not under the direct management of MOF, nor are their policy objectives well defined. It is this universe of GLCs which needs a review and stronger governance law, as their proliferation presents a significant fiscal risk, and takes up talent and resources which may be better utilised by SMEs that are seeking to grow in the private sector. This large network of government-linked companies (GLCs) is built on the premise that state ownership can accelerate development, protect strategic industries and generate returns for the public. 

There is merit to some of these arguments. Many GLCs are profitable, professionally managed and economically important. Investments in major companies have also generated significant dividends and capital gains for government institutions over the years. But the profitability of selected companies should not prevent Malaysia from confronting a more fundamental question.

 

Source: https://ms.wikipedia.org 

Why does the government need to own so many businesses in the first place? There is the crowding-out effect, government procurements go to GLCs, stunted growth of GLCs? How many are competitive in overseas markets? 

Several years ago, a-research led by Prof Edmund Terence Gomez showed that just seven federal government-linked investment companies or GLICs controlled over 68,000 companies directly and indirectly through minority interests. Why should the government continue to wield substantial influence over mature commercial institutions such as Malayan Banking Bhd and CIMB Group Holdings Bhd when these companies can stand on their own with greater private ownership?

Meanwhile, repeated episodes of financial mismanagement involving government-owned entities have shown what can happen when political influence, commercial decision-making and public money become too closely connected. The ongoing controversy surrounding Tabung Haji is a perfect example. 

Political appointments can weaken boards. Commercial decisions can be influenced by objectives that have little to do with profitability. Acquisitions can proceed despite questionable economics, while companies may accumulate debt because creditors assume that the government will eventually intervene. When problems become serious, taxpayers frequently bear at least part of the financial consequences. That’s called moral hazard. 

This creates a governance problem that cannot be solved merely by replacing directors after losses have occurred. Have you noticed no one is charged for misdemeanours? We have an Institute of Directors and courses for directors, but no one is culpable for mistakes. 

Divestments should therefore become a central part of GLC reform, not simply an occasional exercise conducted when the government needs revenue. There are companies where government ownership remains commercially lucrative or strategically justified. Certain infrastructure, utilities and businesses involving national security or essential public services may require substantial government participation. But substantial government ownership should become the exception rather than the default. A useful starting point would be to establish an ownership ceiling for government stakes in companies operating in competitive industries. 

Instead of allowing ministries, agencies or state governments to retain controlling interests indefinitely, Malaysia could consider limiting government ownership to perhaps 20% in companies where there is no compelling strategic reason for control. The government could continue benefitting from dividends and capital appreciation without necessarily controlling appointments, procurement, management strategy and corporate expenditure. 

The same reforms must apply to state governments. Discussion about GLC reforms in Malaysia tends to focus heavily on federal institutions, yet states have created extensive networks of corporations, subsidiaries, investment arms and development companies of their own. Some perform legitimate economic functions. Others operate in sectors where private companies are already capable of competing. Every additional state-owned company introduces another layer of directors, senior management, subsidiaries, procurement processes, related-party transactions and financial exposure requiring effective oversight. The issue becomes particularly important when political appointments extend into these companies. A board seat in a government company should never be treated as compensation for political service. Directors should be appointed because they possess the financial, industry, legal or operational expertise required to supervise a commercial organisation. 

Management should similarly be evaluated against measurable financial and operational targets. Malaysia cannot promote a culture of excellence while maintaining a system in which political access can influence appointments. Reforming GLCs therefore requires more than divestment. A proper monitoring framework should first identify every significant company owned directly or indirectly by federal and state governments. Their purpose should then be reviewed. Companies performing functions that can be carried out competitively by the private sector should face a clear presumption towards divestment. 

Companies serving genuine public policy objectives should have those objectives explicitly stated and their costs transparently accounted for. Commercial and social objectives should not be mixed without proper disclosure. If it is not commercially viable, then its social objectives is going to “drain” resources and its imminent closure. 

If a company is required to provide a public service below commercial returns, the cost should be clearly recognised rather than concealed within its corporate accounts. When state-controlled companies compete extensively across property, construction, financial services, plantations, infrastructure, hospitality and other sectors, private businesses may find themselves competing against shareholders with regulatory influence, cheaper access to financing or an implicit perception of government support. Reducing unnecessary state ownership can strengthen competition and expand opportunities for private capital. 

Malaysia does not need to abandon GLCs, but it needs to define their limits. But ownership should not automatically mean control, and control should not become permanent simply because it has existed for decades. The next stage of GLC reform should therefore ask a more difficult question than how these companies can be managed better: how many of them do the government really need to own at all? In addition, there are GLCs who refuse to divest small profitable subsidiaries to a primary bumiputra intrapreneur. Rationale is we need these subsidiaries for our overall profit! This is why bumiputra entrepreneurs are not emerging when GLCs shelter them with wrong motives. It is time to let go and move on! 

It needs a Commission to review every one of them and Prof. Terrence Gomez should chair such a commission which not only reviews but recommends next steps. Is Madani open to that? 

References:

Malaysia must shrink its GLCs, Ganeshwaran Kana, The Star, 15 August 2026 

Post by Alissa Rode on LinkedIn

 

 

Has the PM’s Job Changed?

 

Some people may keep asking why PMX looks strong on the world stage but weak at home. Some blame his personality. Some blame his choices. But if we zoom out, is there something bigger? 

There are those who say Malaysia’s political system has quietly transformed. This isn’t about PMX but the office itself. The old PM was a commander. The new PM is a coordinator.

 

Source: https://en.wikipedia.org

For decades, Malaysian prime ministers ruled with supermajorities. They could fire ministers, push reforms, and make decisions without worrying about their government collapsing before lunchtime. They had authority because the numbers were stable. Some say that era ended in 2018. The moment voters broke the old one-party dominance; the country entered a new phase. A coalition-heavy era where every government is stitched together like a patchwork quilt, full of different colours, textures, and agendas. And the PM became not a leader who commands, but a negotiator who survives. Is it impossible to be a strong PM in Malaysia today? 

The reality now may be: 

-One partner controls Borneo support

-Another controls Malay grassroots

-Another controls urban voters

-Another controls the budget levers

-Another holds the keys to legal outcomes 

Every block has leverage. Every block has demands. Every block can threaten to walk. 

In this environment, even a brilliant leader would struggle. Not because he is weak, but because the structure forces weakness. It’s like asking someone to drive a car with four different steering wheels. You can’t move forward without someone pulling left or right. 

When PMX talks in overseas forums, he sounds clear and decisive. Why? Because no coalition partner can interrupt him at the UN and say, “don’t say that”. No one can veto his message on Palestine, Islam, or ASEAN strategy. 

At home, every sentence has a political price. Every policy has a vote-buying cost. Every reform must pass through a dozen filters. The contrast isn’t about courage. It’s about freedom. 

The apologists will say what used to be a leadership role has now become a balancing act: 

-Keep Borneo happy

-Keep UMNO calm

-Keep DAP loyal

-Keep PKR stable

-Keep the opposition from poaching MPs

-Keep the economy moving

-Keep public trust alive 

People want bold reforms, tough decisions, and long-term plans. But the system rewards caution, compromise, and survival mode. 

So, what does this mean for the future? If Malaysians want decisive leadership again, then we must choose one of two paths: 

-Give a single coalition a clear majority; or

-accept that negotiation is now the default style of governance. 

If Malaysia remains fragmented, the PM will never be the main driver. He will be the one holding the steering wheel gently while every partner tugs from the side. And as some say, unless the political structure changes with it, no leader can escape the tightrope. 

Having said all that, it is better I think for a “weak” PM to challenge the “deep state”, the elites and the entrenched political warlords. Why? It is better to be a lion for a day than a lamb for a thousand years (an Italian proverb). Then again, what’s the point of an Election Manifesto if you can’t fulfil it? People are not stupid. They can see if “kata dikotakan”. And it is for the incumbent to show courage in this political malaise! 

(Adapted from a blog by an unknown author)