Malaysia’s MY Value Up: Boosting Undervalued Stocks

Malaysia has initiated a significant push to enhance the value of its public-listed companies with the launch of the MY Value Up programme by Bursa Malaysia and the Securities Commission (SC). This strategic initiative, drawing inspiration from successful stock market reforms previously implemented in Japan and South Korea, is designed to cultivate a more dynamic corporate environment. Its core objective is a joint commitment from Bursa and the SC, with a strong emphasis on fostering robust growth trajectories and outlining clear medium-to-long-term strategies for these companies. The programme is poised to address the persistent undervaluation of many local stocks, aiming to boost Malaysia’s standing in the influential MSCI Malaysia Index by shifting corporate focus towards profitability in capital rather than solely on earnings and revenue.

Industry analysts have provided positive feedback on the programme’s potential impact. Kenanga Research, for instance, has highlighted that a considerable number of Malaysian stocks are currently undervalued. Many trade below their book value or possess excess cash on their balance sheets, indicating significant untapped potential for improvement and value creation. The research house projects that if the MY Value Up programme is executed effectively, it could substantially improve Malaysia’s representation in the MSCI Malaysia Index. This improvement could see an increase by 0.3 to 0.4 percentage points from its current modest 1.2%. Such a gain would be highly significant, considering the immense scale of assets benchmarked against MSCI Equities Indices globally, approximately US$21 trillion in assets under management.

The strategic intent behind the MY Value Up programme extends beyond mere financial metrics; it seeks to fundamentally alter corporate perception and strategy. Kenanga Research further suggests that companies demonstrating a deeper and more nuanced understanding of shareholder value drivers will be better positioned. These proactive entities are expected to identify and capitalize on value creation opportunities more effectively. This initiative is anticipated to catalyze a significant shift in corporate focus. Historically centered on earnings and revenue, the new emphasis will be on profitability in capital, a strategic alignment that mirrors the successful trends and reforms observed in the stock markets of South Korea and Japan.

Currently, the MY Value Up programme operates on a voluntary basis, allowing companies to adopt its principles at their own pace. However, a potential mandatory implementation is under consideration for 2028, signaling a long-term commitment to these reforms. Kenanga Research supports the initial voluntary approach, underscoring the critical importance of developing a balanced mix of incentives. These incentives are crucial to encourage widespread adoption across public-listed companies, thereby preventing the programme from becoming a superficial ‘box-ticking’ exercise. Several companies have already been identified by Kenanga as potential beneficiaries that could see significant upside from participating in this initiative, including S P Setia Bhd, IJM Corp Bhd, Genting Malaysia Bhd, and Yinson Holdings Bhd.

MBSB Research echoes these sentiments, noting that many Malaysian public-listed groups, despite possessing fundamentally sound operations and robust business models, frequently suffer from a lack of adequate market recognition. This issue is primarily attributed to the increasing expectations from investors for greater transparency in strategic planning, robust corporate governance frameworks, disciplined capital allocation practices, and effective execution of business plans. The research highlights a persistent valuation gap that many Malaysian companies face when compared to their regional and global counterparts, even in cases where they demonstrate reasonable profitability and maintain healthy balance sheets. MBSB Research views the MY Value Up programme primarily as a strategic playbook, anticipating a two-phase effect. An initial ‘signalling effect’ is expected as public-listed groups begin to disclose their Value Up initiatives, followed by a more substantial ‘fundamentals effect’ as these strategies translate into tangible improvements in corporate performance and market perception. Their top stock picks under this initiative, poised to benefit significantly, include YTL Power International Bhd, Ranhill Utilities Bhd, and Tenaga Nasional Bhd.