Frankly Speaking: Timely retail boost

This article first appeared in The Edge Malaysia Weekly, on December 14, 2020 - December 20, 2020.
Frankly Speaking: Timely retail boost
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Last week was a good week for Public Bank Bhd as its share price spiked 18.6% after it announced a four-for-one bonus issue on Tuesday.

It was unexpected, given that Public Bank’s last bonus issue was in 2003, having earlier undertaken a similar exercise in 2002 and 2001. In 2004, it had embarked on a share split.

Moreover, the banking sector has not seen such a corporate exercise in a decade as the last bonus issue undertaken by a bank was by CIMB Group Holdings Bhd in 2010.

While the value of a stock does not really change fundamentally, a bonus issue or share split is viewed positively as it tends to attract more retail interest because the stock price appears more affordable post exercise.

Based on Public Bank’s closing price of RM21.90 last Friday, its share price will reduce substantially to RM4.38, which is lighter on the pocket.

Earlier, Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd — three of the “Big Four” glove makers — also took the opportunity to reward their shareholders with bonus shares as their stock prices had soared on the back of super robust demand amid the Covid-19 pandemic.

Likewise, global giants like Apple Inc and Tesla Inc undertook share splits, which have made them more valuable as their share prices have continued to rise after the stock splits took effect.

Such corporate exercises are quite common, and even Nestlé (Malaysia) Bhd and Dutch Lady Milk Industries Bhd — the two most expensive stocks on Bursa Malaysia in terms of absolute value at RM137.70 and RM37.40 respectively — have repeatedly been asked about the possibility of a bonus issue or share split.

As retail participation remains elevated as a result of ample liquidity and super low interest rates, could it be the right time for the multinational companies to entertain such an idea to enlarge their shareholder base?

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