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Kenanga Investment Bank Bhd’s (KIBB) two consecutive years of bumper earnings, fuelled by strong trading volumes in the stock market, helped it score a hat-trick at The Edge Malaysia Centurion Club Corporate Awards 2022.

The country’s largest independent investment bank won in all three categories in the financial services sector — Highest Growth in Profit After Tax (a feat it shares with Insas Bhd), Highest Return on Equity and Highest Returns to Shareholders over the three-year period (2019-2021) under review.

The group, which has been around for more than 45 years, is involved in equity broking, 

investment banking, treasury, Islamic banking, investment management, wealth management and trade financing, among others.

For the financial year ended Dec 31, 2020 (FY2020), KIBB’s profit after tax jumped to a record RM102.1 million — its best performance at the time after it obtained an investment banking licence in 2007 — compared with just RM26.4 million in FY2019 and RM11.9 million in FY2018. The strong performance came on the back of a spike in trading activity in the local bourse, which helped boost the group’s income from stockbroking and investment management. 

The group went on to do better in FY2021 as profit after tax expanded 16% from the previous year to RM118.4 million. That year, the group declared a dividend per share (DPS) of 10.5 sen — the highest since it became a listed company in 1996 — of which 6.5 sen was a special dividend. This was markedly higher than its DPS of 8.8 sen in FY2020 and 3.25 sen in FY2019.

The compound annual growth rate (CAGR) of KIBB’s profit after tax over the three-year period under review was an impressive 22.5%. Its weighted ROE for the three years stood at 9.6% — the highest among its peers — as ROE grew from 3% in FY2019 to 10.7% in FY2020, and then to 11.5% in FY2021.

KIBB also bested its peers in terms of shareholders’ returns with a CAGR score of 21.8%. A penny stock for many years, it began trading above the RM1 threshold only in January 2021.

As at the cut-off date of March 31 this year, KIBB’s share price stood at RM1.24 (adjusted) apiece, for a market capitalisation of RM909.6 million, compared with 42 sen (adjusted) three years earlier on March 29, 2019 (the nearest date).

However, the stock, which is not widely covered by analysts, has since come down. It had been trading below the RM1 level since mid-June and closed at 89.5 sen on Aug 30.

With a challenging economy and weak investor sentiment weighing down the market, KIBB’s equity broking business is expected to face headwinds, exacerbated by an increase this year in stamp duty on share trading.

In order to mitigate this, and to increase and diversify its revenue source, KIBB is rolling out algorithmic trading tools to its clients and traders, as well as foreign share trading via its joint venture company, Rakuten Trade Sdn Bhd.

Last month, the group said it planned to integrate its portfolio of digital products into a one-stop centre with its Wealth SuperApp, which is expected to be launched in the first quarter of 2023.

Group managing director Datuk Chay Wai Leong revealed that the bank is investing about RM10 million to RM15 million to develop the superapp, which is leveraging mobile platform as a service (mPaaS) provided by Ant Group’s digital technology unit.

KIBB reported a lower profit after tax of RM18.6 million in 2QFY2022 compared with RM30.7 million in the same period a year earlier, mainly because of lower brokerage income. This took its 1HFY2022 net profit to RM35.1 million, which was almost half the RM64.7 million it made in the previous corresponding period.

Nevertheless, the group managed to grow its retail segment market share to 28.04% from 23.48% a year earlier, maintaining its position as one of the largest and fastest-growing retail stockbrokers in the country.

KIBB’s largest shareholder is Sarawak-based conglomerate Cahya Mata Sarawak Bhd, which had an 18.64% stake held through CMS Capital Sdn Bhd as at March 31.