Putting cash to work in cash-rich, foreign-controlled companies on Bursa - The Edge Malaysia

SINGAPORE, 11 AUGUST 2026 —

Several foreign-controlled companies listed on Bursa Malaysia have struggled to attract investor interest due to their limited free float and thin trading volumes, leaving their shares persistently illiquid and often trading at subdued valuations. This has led to some of these companies being taken private by their parent companies, such as JT International Bhd, which was delisted in 2014.

The issue of capital allocation has become a key concern for these foreign-controlled companies, with many generating healthy operating cash flow, carrying little or no debt, and accumulating sizeable cash balances. However, excess cash that cannot be deployed to projects that can earn returns above the company's cost of capital should generally be returned to shareholders through higher dividends or share buybacks.

Allowing excess cash to accumulate without a clear strategy can increase the opportunity cost for shareholders, depress return on equity (ROE), and weigh on valuation multiples. This debate has become increasingly relevant among the foreign-controlled companies on Bursa, with some potentially becoming privatisation candidates due to their concentrated ownership and limited liquidity.

One such company is Panasonic Manufacturing Malaysia Bhd, which has a debt-free balance sheet and RM468.75 million in cash and cash equivalents as of March 31, 2026. Despite this, the company's share price has fallen more than 80% over the past five years and 43% over the past 12 months, closing at RM5.99 on July 29.

The company's cash holdings exceed its market capitalisation of RM360 million, implying that investors are valuing the operating business at a substantial discount. Panasonic Malaysia's dividend yield stood at 10.35% based on its dividend per share (DPS) of 62 sen for the financial year ended March 31, 2025. However, dividend reliability remains a key concern, with payouts becoming increasingly inconsistent in recent years.

In contrast, Nestlé (Malaysia) Bhd has demonstrated a different approach to capital management. Rather than accumulating cash, the food and beverage manufacturer has historically maintained a lean balance sheet and used borrowings as part of its capital structure. As of June 30, 2026, Nestlé Malaysia held just RM5.04 million in cash, while borrowings had fallen to RM363.2 million from RM788.5 million a year earlier.

Despite carrying debt, Nestlé Malaysia has consistently generated sufficient operating cash flow to fund dividends, with payout ratios hovering around or above 100% in recent years. The company's share price had gained 12% over the past year to close at RM96.78 on July 29, with a consensus 12-month target price of RM114.93, implying upside potential of 19% from its latest closing price.

According to James Hay, founder and director of Singapore-based Pangolin Investment Management Pte Ltd, excess capital should either be invested to generate superior returns or distributed through higher dividends. Hay argues that surplus cash should not remain indefinitely on the balance sheet, particularly when it suppresses ROE and limits the company's valuation.

Pangolin Investment Management, via its long-term value fund Pangolin Asia Fund, previously owned a 1.6% stake in Panasonic Malaysia before selling out in 2018. Japan-based Panasonic Holdings Corp remains the largest shareholder of Panasonic Malaysia, with a 47.45% stake. The Employees Provident Fund (EPF) and Kumpulan Wang Persaraan (Diperbadankan) (KWAP) have also reduced their stakes in the company.

The concentrated ownership structure of these foreign-controlled companies has led to concerns about the potential for privatisation. British American Tobacco (Malaysia) Bhd, for example, is widely seen as a potential privatisation candidate due to its concentrated ownership and increasingly challenging operating environment. However, for long-term investors, the key concern is whether management is generating attractive returns from shareholders' capital.

As Hay notes, a significantly higher payout ratio would improve capital efficiency and could prompt a market rerating without compromising on the company's financial strength.

In terms of data and figures, Panasonic Malaysia's cash holdings exceed its market capitalisation, implying that investors are valuing the operating business at a substantial discount. The company's dividend yield stood at 10.35% based on its DPS of 62 sen for the financial year ended March 31, 2025. However, dividend reliability remains a key concern, with payouts becoming increasingly inconsistent in recent years.

Nestlé Malaysia, on the other hand, has consistently generated sufficient operating cash flow to fund dividends, with payout ratios hovering around or above 100% in recent years. The company's share price had gained 12% over the past year to close at RM96.78 on July 29, with a consensus 12-month target price of RM114.93, implying upside potential of 19% from its latest closing price.

Looking ahead, the key question is whether these foreign-controlled companies will be able to generate attractive returns for shareholders. With many of these companies generating healthy operating cash flow and carrying little or no debt, the focus will be on how they allocate their capital to drive growth and returns. As Hay notes, excess capital should either be invested to generate superior returns or distributed through higher dividends.

If these companies can demonstrate a clear strategy for capital allocation and generate attractive returns, they may be able to attract more investor interest and improve their valuations. However, if they continue to accumulate excess cash without a clear strategy, they may remain undervalued and potentially become privatisation candidates.

Details not yet available on the future plans of these companies, but it is clear that capital allocation will be a key factor in determining their success.

Related: Bursa Malaysia · Singapore