This year’s 184 The Edge Billion Ringgit Club (BRC) members made up 20.4% of the companies listed on Bursa Malaysia as at March 31, 2017 — the membership cut-off date. They collectively commanded a market capitalisation of RM1.59 trillion, or 90.3% of the entire market value as at that day, up 5.2% from RM1.51 trillion last year, after falling for two consecutive years.

The gain in the collective value of the BRC companies — those with a market capitalisation of at least RM1 billion as at end-March — happened even as the FBM KLCI regained ground and closed above 1,700 points again in March.

Before that, the ringgit’s decline to levels last seen during the 1998 Asian financial crisis and the market volatility following the outflow of foreign funds from emerging markets after the US presidential election, nudged the FBM KLCI 3% lower year on year in 2016 to 1,641.73 points. It marked a third straight year of decline after skidding 3.9% in 2015 and 5.7% in 2014. Before that, the local benchmark had risen for five consecutive years, from 876.75 points at end-2008 to 1,866.96 points by end-2013.

By June 30 this year, the 184 BRC members’ combined market capitalisation had increased further (from end-March) to RM1.61 trillion, led by gains at Malayan Banking Bhd and CIMB Group Holdings Bhd, which each gained more than RM10 billion in market cap in the second quarter. In June this year, Maybank became the first Malaysia-listed company with a market cap of more than RM100 billion.

The significant change in stock prices between end-March and end-June is why The Edge decided to change the cut-off date in tabulating total returns to shareholders from end-March to end-June, closer to the BRC gala dinner and awards.

The membership cut-off date was kept at end-March to give enough time to compile data for tabulation as well as for the panel of corporate responsibility (CR) judges to review the companies. Because of this, two large IPOs did not make it to our list this year: Eco World International Bhd, which listed on April 3, and Lotte Chemical Titan Holdings Bhd, listed on July 11. They will only be included for membership next year.

The 184 BRC 2017 members continue to be major taxpayers, paying an estimated RM30.9 billion in taxes in FY2016 compared with RM29.8 billion in FY2015 and RM30.7 billion in FY2014. The taxes paid for FY2016 made up about 27% of the “more than RM114 billion” in direct taxes the Inland Revenue Board reportedly collected last year. The IRB collected RM116.8 billion in direct taxes in 2015, RM127 billion in 2014 and RM121 billion in 2013. The taxman reportedly aims to collect RM127 billion in direct taxes this year.

The higher combined tax haul came even as the combined revenue of the 184 BRC 2017 members reached RM747.1 billion in FY2016, up 2.8% from RM726.8 billion in the previous financial year.

Nonetheless, the bottom line was lower, with BRC members posting a collective pre-tax profit of RM112.5 billion in FY2016 compared with RM115.3 billion in FY2015.

Collective net profit was RM81.6 billion in FY2016 compared with RM85.4 billion in FY2015, RM87.8 billion in FY2014 and RM85.5 billion in FY2013. Collective FY2016 earnings were weighed down by sizeable losses at several oil and gas as well as industrial and services companies, including UMW Oil & Gas Corp Bhd, UMW Holdings Bhd, Bumi Armada Bhd and DRB-Hicom Bhd.

A quick sectoral analysis of this year’s 184 BRC members reveals that the collectively higher turnover was lifted by significant gains in the plantation sector. All other sectors also gained in terms of top line, except for consumer products. Planters also led gains in terms of pre-tax and net profits for FY2016.

The FY2016 net profit of the nine Super Big Cap companies — those with a market capitalisation of at least RM40 billion — were largely unchanged year on year, although their combined turnover was up 4%. On the other hand, the 29 Big Cap companies — with a market capitalisation of RM10 billion to RM40 billion — saw a 1% decline in combined turnover but an 8% rise in profit before tax and 7% gain in collective net profit.

The 146 BRC 2017 members with RM1 billion to RM10 billion in market cap, meanwhile, saw a 5% rise in turnover for FY2016 but 17% lower pre-tax profit and a 27% fall in net profit collectively.

On a brighter note, DiGi.Com Bhd — The Edge BRC’s Company of the Year in 2013 — continues to be the only one that has made it to The Edge BRC top 20 list every year in the eight years since the inception of the awards in 2010. Meanwhile, Nestle (M) Bhd — last year’s Company of the Year — is the only one that has appeared on the BRC top 20 list in seven of the eight annual BRC rankings since 2010.

 

METHODOLOGY

Membership of this elite group is automatic and complimentary for all companies listed on Bursa Malaysia as at March 31, 2017, with at least RM1 billion in market capitalisation. There are 184 members in the club this year.

As recognition is the best reward for accomplishments, it is The Edge’s hope that the awards continue to encourage more companies to strive even harder for excellence.

 

THE AWARDS

• One Company of the Year award;
• Value Creator(s): Outstanding CEO(s) of Malaysia award(s) [optional];
• One Best Corporate Responsibility (CR) initiatives award in three categories; and
• 36 sectoral corporate awards – three categories for 10 sectors plus two categories for large companies.
• The sectoral awards are:
• The Edge BRC Highest Return on Equity Over Three Years;
• The Edge BRC Highest Growth in Profit After Tax Over Three Years; and
• The Edge BRC Highest Returns to Shareholders — for best performing stock.

 

The 12 CATEGORIES are:

• Super Big Cap companies - companies with over RM40 billion market capitalisation;
• Big Cap companies - companies with RM10 billion to RM40 billion market capitalisation;
• Construction;
• Consumer products;
• Finance - below RM10 billion market cap;
• Finance - RM10 billion and above market cap;
• Industrial products;
• Plantations;
• Property - below RM3 billion market cap;
• Property - RM3 billion and above market cap;
• REIT; and
• Trading and services, hotel, IPC and technology.

 

THE EDGE BRC SECTORAL CORPORATE AWARDS

To be eligible for the corporate awards, a BRC member must have been listed at least four calendar years before the end-March cut-off date in the current year as companies are evaluated on their financial performance over three years.

The methodology for the corporate awards is both stringent and transparent, with the results audited by Deloitte Malaysia The data used in determining the companies that qualify for The Edge BRC membership and winners of The Edge BRC Corporate Awards is provided by Asia Analytica Data Sdn Bhd (formerly known as The Edge Markets Sdn Bhd) and data extracted from Bloomberg.

Members eligible for the Highest Return on Equity Over Three Years and Highest Growth in Profit After Tax Over Three Years awards must be profitable every year throughout the evaluation period. For this year, the evaluation period is between FY2013 and FY2016. Calculation for PAT growth is also subject to a risk-weight factor component to recognise the importance of consistency in profit delivery throughout the evaluation period.

Winners for The Edge BRC Highest Returns to Shareholders award are judged purely based on total return, consisting of share price gains and dividends over a three-year period. This year, the cut-off date is changed from March 31 to June 30 so that the market data is closer to the BRC gala dinner. The June 30 cut-off date will be maintained going forward, with this year being the “gap” year when the data is for three years and three months (March 31, 2014, to June 30, 2017). The annual end-March cut-off date for BRC membership is unchanged due to the need to source CR information for the judges’ consideration.

Companies with scores within 0.5point of each other are deemed to be of the same rank in determining the recipients of both gold and silver awards. There could, therefore, be cases of joint recipients for gold and silver awards.

 

THE EDGE BRC BEST CR INITIATIVES AWARD

Eligible companies are evaluated by a panel of judges on their CR initiatives. The Edge BRC Best CR Initiatives award is presented to companies with the top average scores in three categories: the Super Big Cap category (companies with over RM40 billion in market capitalisation), the Big Cap category (companies with RM10 billion to RM40 billion in market capitalisation) and companies with less than RM10 billion market capitalisation.

The panel is selected by The Edge and the evaluation criteria are based on the three focal areas spelt out by Bursa Malaysia’s Sustainability Reporting Guide for Public Listed Companies — economic, social and environmental.

CR scores account for 30% of the evaluation for The Edge BRC Company of the Year award.

THE EDGE BRC COMPANY OF THE YEAR AWARD

 

VALUE CREATOR: OUTSTANDING CEO OF MALAYSIA

The winner(s) of this award is determined by The Edge based on an assessment of the person’s contribution to value creation for his/her company. Here, value creation is reflected in the company’s market valuation, return to shareholders and stakeholders, revenue and profit growth as well as employment creation. To be chosen, the CEO must have achieved outstanding success in all these areas. Assessment starts from when the person became CEO of the company. The Edge has absolute discretion in deciding on this exclusive award and can choose not to name a winner — as was the case in 2011 and 2015.

In 2010, the award went to Tan Sri Teh Hong Piow and Datuk Seri Nazir Razak for their outstanding contribution to their respective banking groups, Public Bank Bhd and CIMB Group Holdings Bhd.

In 2012, the recipients were AmBank Group founder and chairman Tan Sri Azman Hashim and AirAsia Bhd co-founder and group CEO Tan Sri Tony Fernandes. Azman remains a financier for all seasons while Fernandes won for his role in transforming Asia’s aviation industry.

In 2013, the award went to Minister in the Prime Minister’s Department Tan Sri Abdul Wahid Omar and Tan Sri Liew Kee Sin, former president and CEO of S P Setia Bhd. Abdul Wahid was recognised for his leadership during his tenure as CEO of Renong Bhd (2001 to 2004), Telekom Malaysia Bhd (2004 to 2008) and Malayan Banking Bhd (2008 to 2013) while Liew won for his contribution at S P Setia, a company he left in April 2015 (after about 18 years) for niche developer Eco World Development Holdings Bhd.

In 2014, the award went to Sunway Group founder and executive chairman Tan Sri Jeffrey Cheah and Axiata Group Bhd president and group CEO Tan Sri Jamaludin Ibrahim for having shown exemplary leadership in building businesses and creating value for all stakeholders. Last year, the award went to Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar, who was instrumental in not only transforming the institution but also the collective transformation of 20 government-linked companies across varied industries.