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Hong Chew Eu
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Retired Group CEO of i-Bhd. Now a full time blogger
IOI Corporation may not be the fastest-growing name in the plantation sector. But beneath its quiet exterior lies a far more compelling story than most investors realize.
For nearly a decade, IOI has navigated one of the world’s most volatile commodity industries with a steadiness that few of its peers can match. Revenues may have plateaued, but margins, returns, and cash generation have quietly held firm through price booms, downturns, labour shortages, and structural shifts in global sustainability standards.
While others chased expansion, IOI doubled down on discipline. It focused on controlling fixed costs, sharpening operational efficiency, and building a downstream portfolio that delivers resilience when crude palm oil prices swing.
Its balance sheet has strengthened, its global footprint has deepened. And its integrated model has created advantages that are far harder to replicate than headline numbers suggest.
Yet despite this underlying strength, the valuation picture tells a very different story - one that raises a critical question for investors: Is IOI a defensive compounder hiding in plain sight, or a fully priced stock offering little margin of safety?
Why IJM Could Outperform — Even Without a Construction Boom
Investors often chase the next “turnaround” story. But what if the real outperformer is one that is already delivering steady, disciplined gains? IJM Corporation Berhad may not grab headlines, yet its post-2022 transformation tells a different story - faster profit growth, stronger cash flow, and sharper capital discipline.
After shedding its plantation arm, IJM refocused on four synergistic engines — Construction, Property, Industry, and Infrastructure — each feeding into the other through vertical integration. This structure is not just efficient; it is strategic.
It gives IJM cost advantages that peers struggle to match, recurring cash from concessions, and a pipeline tilting toward higher-value projects like industrial parks, logistics hubs, and data centres. Peer analysis shows IJM ranking among Malaysia’s best in returns on capital, margins, and cash flow stability — even as its earnings per share lag. That weakness, however, looks fixable.
With better capital allocation and leverage discipline, IJM could move from “good” to top-quartile performance among construction and property conglomerates.
The catch? The stock already trades near intrinsic value. Yet the fundamentals suggest growing strength. For long-term investors, the question isn’t whether IJM can survive a mature market, but whether it can thrive in it.
IHH: A World-Class Hospital Network, Still Healing Its Returns
Can a hospital group with world-class brands and sprawling global reach truly deliver premium returns — or is it just a premium story?
IHH Healthcare, one of Asia’s largest multi-country hospital networks, has spent the past decade expanding across the region. This scale gives it strong moats - brand reputation, procurement efficiency, and network effects that draw both top specialists and patients. Yet behind the glamour of its Mount Elizabeths and Gleneagles lies a tougher investment question: has size translated into superior capital returns?
Yet, beneath this impressive surface lies a more sobering truth. IHH’s growth has leaned heavily on volume and operating leverage rather than structural efficiency. While post-pandemic recovery and better FX management have helped earnings rebound, the balance between growth and discipline remains delicate.
In a region where peers like Apollo Hospitals and BDMS are sharpening their focus on returns and efficiency, IHH still appears to be finding its equilibrium. It has the brand, the breadth, and the demand tailwinds, but whether it can translate these into sustainably superior performance remains the question worth watching.
Unless IHH can consistently turn its scale and reputation into lasting value creation, investors may find its promise greater than its payoff. It is a premium platform, yes — built on trusted brands and strong demand, But it has yet to prove that growth and quality can truly compound together.
Genting’s Big Move: Will the VTO Fix a Low-Return Giant?
Genting has been in the news recently with its voluntary takeover (VTO) proposal to acquire the remaining 51% of Genting Malaysia Berhad that it does not already own.
The VTO signals strategic intent — to unlock better capital allocation, simplify the group structure, and pursue big-ticket ambitions such as potential U.S. expansion.
The move does not change Genting’s underlying operational and efficiency challenges; those remain the key hurdles to long-term value creation.
The weakness lies in capital efficiency — ROIC has rarely cleared 7%. EPS has shrunk over the past decade, and large expansions like Resorts World Las Vegas have lifted fixed costs without delivering matching returns. Unlocking value depends on redeploying cash into higher-return projects and narrowing the gap between ROIC and WACC.
The VTO may simplify Genting’s structure, but only higher returns — not bigger bets — can fix a low-return giant.
Hap Seng: When Diversification Stops Protecting You
Once seen as one of Malaysia’s more resilient conglomerates, Hap Seng Consolidated now faces a different reality. Its diversified portfolio - spanning property, plantations, trading, credit financing, automotive, and building materials - once offered protection against market swings. But beneath the surface, those defensive qualities are eroding.
From 2015 to 2024, Hap Seng’s revenue grew modestly at 2.8% annually, yet profits fell 20%. Leverage climbed, cash flow conversion weakened, and return on equity slid even as operating margins remained industry-leading.
The company’s strength in property and trading masks a deeper fragility: mature markets, thin moats, and rising competition. Property depends heavily on land sales, trading offers scale but little differentiation, and credit financing lacks defensibility against banks.
While Hap Seng still commands strong EBIT margins and a sizeable cash buffer, its returns no longer exceed its cost of capital. Over the past three years, ROIC averaged 5.8% - below its 6.7% WACC - suggesting that growth is destroying rather than creating value.
For value investors, Hap Seng offers stability but not compounding potential. It remains a case study in how diversification can preserve earnings - but not necessarily grow them. Unless management rebuilds its moats or discipline, the Group risks becoming more a capital preservation play than a value-creation story.
CelcomDigi’s Next Chapter: Compounder or Value Trap?
CelcomDigi is now Malaysia’s largest mobile operator — the product of a merger that promised scale, synergy, and a new growth chapter for the nation’s telecom sector.
Two years on, the Group stands as an undisputed market leader, connecting over 20 million customers through a converged, 5G-ready network. Yet behind this dominance lies a deeper question: has the merger truly created value, or has it merely reshaped the numbers?
The merger of Celcom and Digi was hailed as a strategic masterstroke — cost savings, efficiency gains, and a stronger platform for enterprise growth.
But when you strip away the headlines and look closely at the fundamentals, the story becomes far less straightforward. Revenue growth has barely moved, margins have continued to narrow, and fixed costs remain stubbornly high.
Still, CelcomDigi’s returns exceed its cost of capital — a sign of value creation at the business level. But translating that into shareholder wealth is another matter entirely.
I broke down CelcomDigi’s performance through two lenses — absolute and peer-relative — to reveal where it truly stands in the spectrum between compounder and value trap.
Is CelcomDigi quietly building long-term value beneath the surface — or has it already peaked as a mature, cash-rich incumbent? The answer lies not in its size, but in what that scale has (and hasn’t) achieved.
This is not a story about telcos alone; it is about the fine line between stability and stagnation — and why even market leaders can become value traps when scale stops translating into growth.
BAT Malaysia: Buying Cash Flows, Not the Narrative
British American Tobacco (Malaysia) Berhad is not your typical growth story. It is a classic case of defend and optimise. The cigarette market is structurally declining, illicit trade remains a persistent thorn, and new categories like vaping are still too small to offset the combustible base.
Yet, despite shrinking volumes, BAT Malaysia continues to generate enviable returns: a 21% ROIC and 47% ROE in 2024. Cash flows remain durable, but only if pricing power, product mix, and cost discipline consistently outrun volume attrition.
This is where the investment case gets interesting. Markets often discount such companies too heavily, focusing on past declines rather than the resilience of the cash engine.
BAT Malaysia’s premium and value-for-money brands still fund dividends and strategic bets, but with revenue flatlining and fixed costs creeping up, efficiency gains are not optional - they are survival.
The valuation math suggests limited margin of safety today, but a disciplined investor might still see opportunity when the price fully reflects structural headwinds. So, is BAT Malaysia a value trap or a cash compounder in disguise? The answer lies not in chasing growth, but in testing the durability of its cash machine.
Axiata’s Strategic Pivot: Transformation or Illusion?
Axiata once built its reputation as a sprawling mobile operator across Asia. Today, it claims to have transformed into a regional digital connectivity platform, with ventures in fintech, infrastructure, and enterprise services.
The story is compelling: exits from risky markets, mergers to consolidate strength, and a shift toward platform-driven growth. On the surface, this looks like a company ready to ride Southeast and South Asia’s booming digital wave.
But when you peel back the numbers, the picture is less inspiring. Over the past decade, revenue has barely grown, returns on capital still trail the cost of capital, and margins remain stuck. Even compared with peers, Axiata ranks near the bottom on profitability and shareholder returns.
So the question is — has Axiata truly pivoted into a stronger, value-creating business, or is this just another corporate reinvention that sounds better than it performs?
My deep-dive analysis suggests cautious optimism but no margin of safety at today’s price. Axiata may be worth watching — but is it worth buying yet?.
Astro’s Digital Gamble: Can Malaysia’s Pay-TV Giant Reinvent Itself Before It’s Too Late?
For two decades, Astro Malaysia Holdings was the undisputed leader of Malaysian Pay-TV. Its satellite dishes crowned rooftops nationwide, its channels dominated living rooms, and its financial performance seemed rock solid.
But the media landscape has changed dramatically. Streaming platforms like Netflix, Disney+ and YouTube have captured audience attention. The once-invincible Astro now faces declining revenues, shrinking profits, and the challenge of redefining itself in a digital age.
To counter this disruption, Astro has embarked on an ambitious transformation. It has launched Astro Fibre to bundle broadband with content, integrated global streamers into its Ultra and Ulti Boxes, and pushed its own OTT platforms such as sooka.
The company is positioning itself not just as a broadcaster, but as a converged media-tech platform that combines entertainment, connectivity, and enterprise services.
The question for investors is whether these moves are enough. From 2016 to 2025, Astro’s revenue contracted at an annual rate of 6.2%, while net profits fell to just one-fifth of their former levels.
Yet Astro is not without strengths. It continues to generate healthy cash flows, maintains a solid financial base, and offers bundled services that still resonate with local consumers.
At today’s share price, the stock even trades below its estimated intrinsic value, suggesting possible upside—if management can stabilize the business.
Astro’s future now hinges on execution. Will its digital pivot create a leaner, cash-generating platform fit for the streaming era—or is this another case of too little, too late?”
