Following up from our previous piece where we identified 9 Singapore cash rich companies that pay more than 5% dividends and 5 cash rich Hong Kong stocks that pay more than 7% dividend, we now look at 5 cash rich Malaysia stocks that pay more than 5% dividends.
Similarly, we use a robust method to select stocks by using a variation of the Ben Graham Net cash method, with the formula being the sum of cash and short term investments minus total liabilities.
Short term investments are taken into consideration because some of these companies have such strong balance sheet with so much excess cash that they have deployed them into a variety of short term investments such as fixed deposits, bonds or even equities so as to obtain better returns for their idle pile.
The stocks we have identified are also profitable and some are trading at a relatively low P/E ratio.
5 cash rich Malaysian stocks that pay more than 5% dividends
| Company | Ticker (KLSE) | Market Cap (MYR$’b) | Graham Net cash as a of market cap (%) | Dividend Yield (%) | P/E ratio (times) | 5 year capital return (%) | 5 year revenue growth (%) |
| Supermax Corporation | SUPERMX | 2.42 | 91 | 25.8 | 1.4 | 78 | 557 |
| MTAG Group | MTAG | 310 | 36 | 6.5 | 10.6 | 0 | 52 |
| Hong Leong Industries | HLIND | 2.88 | 35 | 5.9 | 15.7 | -12 | 20 |
| Oriental Holdings | ORIENT | 4.42 | 60 | 5.6 | 9.7 | 7 | -41 |
| UOA Development | UOADEV | 4.31 | 30 | 5.4 | 19.8 | -26 | -45 |
1. Supermax Corporation (KLSE:SUPERMX)
Supermax is a global manufacturer, distributor and marketer of high quality medical gloves. currently exports to over 160 countries worldwide in the regions of America, Europe, Middle East, Asia and the South Pacific. Supermax owns a range of brands such as Supermax, Aurelia and Maxter which meet medical and surgical standards.
According to Supermax, it produces up to 26 billion pieces of gloves per year, meeting approximately 12% of the world demand for latex examination gloves. Supermax has 12 manufacturing plants based in Malaysia equipped with energy-saving biomass systems and a research and development centre.
With demand for gloves gradually reverting to pre pandemic norms and profits declining, share price are also reverting in a similar fashion, having fallen 75% in the last one year and 92% from the all time high in 2020.
With profits made in the last two years, Supermax is reinvesting these profits into building 5 new factories in Klang, Malaysia which would add 22 billion capacity at a cost of RM1.3 billion. Its first manufacturing plan in the US is also slated to open in 2Q23 with an investment of US$350 million which will have a capacity of 3.6 billion gloves annually.
Supermax become Malaysia’s very first home-grown contact lens manufacturing company and in 2016 successfully commissioned its manufacturing facility in Malaysia after carrying out extensive R&D activities in the UK, and is gradually building up its production capacity which should help to diversify the company’s revenue stream.
Supermax has a Graham net cash position of approximately 91% of market cap and has a dividend yield of 25.8%. However this was due to its strong pandemic year performance in 2021, hence 2022’s profit and dividend levels are highly uncertain.
2. MTAG Group (KLSE:MTAG)
MTAG Group specialises in the printing of labels and stickers and customised converting services for various materials such as polyethylene plastics, adhesive tapes, metals and cardboard. In addition, the company distributes industrial tapes and adhesive products for two global brands, 3M and Henkel.
MTAG also manufactures industrial consumables such as tapes, die-cut, adhesives, static controls, carrier & cover tapes, cleanroom supplies, abrasives and industrial protective products including disposables such as wipers & gloves, masks & respirators, hearing and protective eyewear.
The company carried out its IPO in September 2019, raising RM72.3 million of which it has used RMB 29.3 million. As seen in the table below, the bulk of the delay in utilisation of its IPO proceeds was for the acquisition of land and capital expenditure for the construction of a manufacturing plant. Due to the pandemic, the company has not identified a suitable parcel of land for the new plant yet. Instead, MTAG converted warehousing space at its existing plant into production capacity to meet its immediate requirements.
Despite the delay in its expansion plans, MTAG was still able to grow its revenue by 17% and profits by 11% when compared to 2020. 2021’s revenue and profit levels are also slightly higher than 2019. The 2021 performance was attributed to a 31% increase in its distribution segment revenue which accounts for 20% of its total revenue. The converting segment which accounts for the remaining 80% of total revenue saw a 14% growth.
MTAG Group has a Graham net cash position of approximately 36% of market cap and has a dividend yield of 6.5%. Based on its FY21 results, its dividend payout ratio is about 61% which is higher than its policy of distributing 20% of net profit.
3. Hong Leong Industries (KLSE:HLIND)
Hong Leong Industries (HLI) is a member of the Hong Leong Group and operates in the automotive and building material segments. Its four main segments are as follows:
- Yamaha Motor – manufacturing and distribution of the Yamaha brand of motorcycles with a factory in Selangor and provision of after sales service support . HLI also has a 24% stake in Yamaha Motor Vietnam.
- Guocera – Manufacturing of porcelain and ceramic tiles with two manufacturing facilities located in Johor and Selangor.
- Hume Cemboard – Manufacturer and distributor of fibre cement boards, with two manufacturing facilities in Selangor and Perak
- HLY Marine – Distributor of Yamaha marine motor products since 2017
It is mainly geographically located in Malaysia with nearly 95% of its revenue originating within the country while the remaining 5% comes mainly from countries in Asia Pacific such as Australia, Vietnam and Singapore.
As shown in HLI’s financial highlights below, the company was on a growth track up to before the pandemic occured which nearly halved its profits for FY 2020. In FY 2021 it got back on its growth track with higher revenue as compared to pre pandemic levels as all segments contributed strongly. However, earnings per share were still below about 10.5% below pre pandemic levels. As the company has confidence in its future prospects, it has increased total dividend to 52 sen in FY21, 2 sen higher than FY19.
Hong Leong Industries has a Graham net cash position of approximately 35% of market cap and has a dividend yield of 5.9%. Based on its FY21’s results, the dividend payout ratio is about 56%.
4. Oriental Holdings (KLSE:ORIENT)
Oriental Holdings is a diversified conglomerate operating in the following segments:
- Automotive and related products (61% of revenue) – Distributor of Honda vehicles in Singapore, Brunei and Malaysia.
- Plastic products (6%) – Integrated contract manufacturing of plastic vehicle parts.
- Plantation (16%) – Palm oil plantations in Indonesia and Malaysia.
- Hotel and resorts (5%) – 9 assets in Australia, New Zealand, Singapore, Thailand, United Kingdom and Malaysia.
- Healthcare (2%) – Medical centre, nursing college and pharmacy in Malaysia.
- Property investment and trading of building material products (9%) – Property investment in Malaysia & Australia. Building materials include steel wire, cement, concrete and other products.
- Investment holdings (1%) – Investment of excess capital in shares and bonds.
Due to the strong palm oil prices in 2021, Oriental Holdings recorded five year high profits of RM 607 million underpinned by the Plantation segment. Other segments such as the Hotel and resorts, healthcare and investments segments also made further recovery in 2021. The Automotive segment saw an overall decline in Honda cars sold amidst tough competition and a weak consumer spending backdrop. Volume demand plastic products segment also remained weak as it is connected to the Automotive segment.
Oriental Holdings has a Graham net cash position of approximately 60% of market cap and has a dividend yield of 5.6%. Based on its FY21 results, its dividend payout ratio is about 77%.
5. UOA Development (KLSE:UOADEV)
UOA Development is an integrated developer of residential, commercial and hospitality assets in Malaysia, Australia and Vietnam. UOA Development’s parent company is United Overseas Australia (ASX:UOS / SGX:EH5) and the parent company also owns UOA REIT (KLSE:5110), a listed commercial REIT.
Being in the property development sector, it has been significantly affected by the COVID-19 pandemic. Construction activities were slower as the company had to comply with various new operating procedures so as to curb the spread of the pandemic. UOA Development assessed market sentiments and decided not to launch any new project in 2021, instead focusing on selling its existing inventory.
It has since launched a project in Bangsar South and is planning to launch at least three more projects this year. However, as these launches will only contribute to its earnings towards the end of FY22 or from FY23.
As seen above, revenue and profits have fallen for consecutive years, however with a strong balance sheet and negligible borrowing levels, it is able to distribute 100% of its profits for 2021 or 10 sen per share. The dividend distributed in FY21 was lower than FY20’s divdend of 15 sen per share on earnings per share of 19 sen per share. With this, UOA has a Graham net cash position of approximately 30% of market cap and has a dividend yield of 5.4%.
Dividend Yield may not be sufficient stock picking metric…
Similar to the previous pieces on 9 Singapore cash rich companies that pay more than 5% dividend and the 5 Hong Kong cash rich companies with more than 7% dividend, of the 5 cash rich Malaysian stocks with more than 5% dividend presented only 2 out of 5 stocks saw a capital gain over a 5 year time frame.
This demonstrates that merely looking at time in the market coupled with dividend yields may not be a profitable investment. However, when a stock comes with a high dividend yield coupled with additional criteria such as a strong net cash position, profitability and a track record of revenue growth, the odds of a positive investment return increases.
