KUALA LUMPUR: A common corporate exercise among Bursa Malaysia companies of late is to undertake a share split.

Last month alone, the market saw no less than four share split proposals — Taliworks Corp Bhd, Lii Hen Industries Bhd, Tasco Bhd and VS Industry Bhd — all for the conventional reason of enhancing the marketability and liquidity of their shares.

Corporate finance advisory firm Astramina Advisory Sdn Bhd managing director Wong Muh Rong, however, reckoned that the prevailing weak market sentiment, which resulted in low trading activity, could also be one of the motivating factors for these companies to consider splitting their shares.

“Ultimately, the corporate exercise will not change anything fundamental for the company, other than diluting its earnings per share,” she noted.

One thing is for sure — the market seems to like the idea of share splits. All four stocks have risen significantly since their respective share split proposals were out.

The biggest jump was seen in infrastructure group Taliworks’ share price, which has spiked about 29.9% to RM4 last Friday, since it announced a two-to-five share split with free warrants to enhance the marketability and liquidity of its shares on July 22, when it was trading at RM3.08.

Kenanga Research analyst Lim Sin Kiat, who issued a report on Tasco on May 18, besides having been tracking VS Industry, said it was within expectations for both companies to undertake a share split exercise as their share prices had increased quite significantly in the recent past.

Year-to-date (YTD), Tasco (fundamental: 1.8; valuation: 1.4) has appreciated 56.93% to RM4.30. The logistics solutions provider proposed a one-to-two share split when it was trading at RM3.80 on July 14 (up 13.16% since then).

Electronic parts maker VS Industry’s (fundamental: 1.3; valuation: 1.7) share price has more than doubled to RM6.35, YTD. It also announced on July 14, when it was trading at RM5.36 (up 18.47% since then), that it wanted to split its shares, but on a one-to-five basis.

Lii Hen’s (fundamental: 2.8; valuation: 2.4) share price has similarly more than doubled YTD to close at RM5.77 last week. It proposed a one-to-two share split on July 1, together with a one-for-two bonus issue, when it was trading at RM4.85 (up 18.99% since then).

“If we compare Tasco’s share price today with where it was a year ago, it has gone up significantly. It is good that they lower the share price [via the share split], so that it can entice more investors to go in [and trade]. The same goes for VS Industry,” said Lim.

Meanwhile, when contacted, Taliworks (fundamental: 1.3; valuation: 2.4) chief investment officer Kevin Chin told DigitalEdge Daily that the group was not following any particular trend when it made the decision to do a share split.

“I think it was just a coincidence. I was not aware of that many share split [proposals] before this,” he said, adding that the group’s share split goals had been purely to make it easier for prospective investors to invest in the group.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in Digital Edge Daily, on August 3, 2015.