A surge in stock market trading activities, which started in 2020 after the global equity rout, has been a boon for Kenanga Investment Bank Bhd (KIBB).
The group turned in its best earnings in the financial year ended Dec 31, 2020 (FY2020) since obtaining an investment banking licence in 2007.
Main Market-listed KIBB is the country’s largest independent investment bank by equity trading volume and value, and one of the top three brokerage houses.
Thanks to a strong run in its share price and regular dividends, KIBB clinched The Edge Billion Ringgit Club (BRC) award for highest returns to shareholders over three years in the financial services industry.
It churned out a rate of return of 53.5% over the BRC review period between March 30, 2018 and March 31, 2021 — the best among its peers.
KIBB’s share price gained a solid 206.8% over the period, from 59 sen (March 30, 2018) to RM1.81 (March 31, 2021). It peaked at RM1.90 several times in February this year.
A penny stock for many years, KIBB began trading above the RM1 threshold only in January this year. Since the BRC cut-off date of March 31 this year, its share price has fallen by 35.4% to RM1.17 as at Dec 8, giving the company a market capitalisation of RM860.84 million.
KIBB’s net profit jumped to a record RM102.08 million in the financial year ended Dec 31, 2020 (FY2020) from just RM26.39 million in FY2019 and RM11.91 million in FY2018 as a spike in trading activity over the local bourse helped boost income from its stockbroking and investment management businesses.
Recall that in 2020, the average daily trading value of securities on the local bourse had doubled to RM4.2 billion, driven mainly by retail investors.
Given its exceptionally strong earnings in FY2020, the group rewarded shareholders with a total dividend per share (DPS) of 8.8 sen, of which 4.8 sen was a special dividend.
This was a big leap from the dividends that shareholders received in FY2019 (3.25 sen) and FY2018 (1.1 sen).
Like most financial institutions, KIBB has been making concerted moves to up its digital game in recent years.
Notably, its joint venture with Japan’s Rakuten Securities Inc to create the first fully online stock trading platform in Malaysia, Rakuten Trade Sdn Bhd, had proved particularly fruitful during the Covid-19 lockdowns as investors, particularly first-time millennial traders, sought online trading channels.
Its next planned venture is in digital banking. On June 29, KIBB applied for a digital banking licence from Bank Negara Malaysia as part of a consortium with the Sarawak state government and payment solutions specialist Revenue Group Bhd.
KIBB’s largest shareholder is Sarawak-based conglomerate Cahya Mata Sarawak Bhd, which has an 18.75% stake held through CMS Capital Sdn Bhd.
It remains to be seen whether the consortium will be successful, as Bank Negara, which received 29 applications for digital bank licences, plans to issue only up to five. It will name the successful applicants in the first quarter of next year.
In October last year, KIBB acquired a 4.99% stake in Merchantrade Asia Sdn Bhd, a fast-growing digital payments and money services player. This came about after it partnered Merchantrade to develop the country’s first stockbroker e-wallet, Kenanga Money.
Continuing with its digital agenda, KIBB announced in February this year that its wholly owned subsidiary Kenanga Private Equity Sdn Bhd would buy a 19% stake in digital asset exchange operator Tokenize Technology (M) Sdn Bhd. The latter operates Tokenize Xchange which allows trading of cryptocurrencies like Bitcoin and Ethereum.
KIBB, whose stock is not widely covered by analysts, reported a net profit of RM86.17 million in 9MFY2021, a 37.2% increase from the same period a year earlier. Stockbroking accounted for the bulk, or 64.5%, of its profit before tax of RM106.59 million, followed by investment and wealth management (19.3%) and investment banking (12.3%)