Will Value Up plans sway investors?

WHEN the first public MY Value Up plans land in 2027, fund managers and analysts will face a practical question: what do they actually do with these plans?

For years, Malaysian institutional investors have screened companies on familiar grounds – valuation, earnings quality, free float, governance scores and, more recently, environmental, social and governance (ESG) metrics.

The new programme from the Securities Commission and Bursa Malaysia now asks the largest listed companies to articulate clearer long-term strategies, capital-allocation priorities and, in many cases, quantified targets for returns.

The open issue is whether this information will remain background colour or evolve into a meaningful filter for stock selection and portfolio construction.

Early conversations with portfolio managers and sell-side analysts suggest a quiet shift is already under way.

The stakes are real.

Companies among the original top 88 that produce generic or non-committal plans may not be discarded overnight, but they risk lower conviction scores, more probing questions in meetings and gradual “underweighting” by institutions hunting for long-term compounding names.

As the market prepares for the first wave of disclosures, institutional investors are beginning to decide which elements of a Value Up plan will actually move capital – and which will be filed away as another well-intentioned report.

According to Rakuten Trade head of equity sales Vincent Lau, investors will approach the imminent public disclosure of Value Up plans by assessing whether a particular strategy fits the company or industry they are looking at.

“For big cap companies, we believe institutional investors will, of course, be looking at the respective Value Up plans, but for the mid- to smaller caps, other more traditional factors such as return on equity or investment (ROE/ROI), sector, growth potential, or earnings per share will still play a bigger role in decisions,” he says.

Tradeview Capital chief investment officer Nixon Wong expects the first public MY Value Up plans to become an informal screening factor in his stock selection and portfolio construction process, similar to how ESG scores or free-float quality are already used, but in a more supplementary capacity, particularly in the initial stages.

“A good and credible Value Up plan could become an informal quality signal, especially around capital allocation, governance and management discipline,” he tells StarBiz 7.

“Ultimately, fundamentals, valuation and execution will remain the key drivers.”

Speaking about the specific elements of a company’s Value Up plan that would potentially carry the most weight for him as a fund manager, Wong reiterates that ROE targets and capital allocation would be the most significant.

He emphasises that clear shareholder return policies and excess cash deployment plans are particularly valuable because they are measurable.

However, credibility also matters, as a strong plan needs a realistic execution path and management accountability.

More notably, while cautioning that companies among the top 88 that remain relatively silent or produce only generic plans could risk being sidelined by institutional investors seeking long-term conviction names, especially if peers offer clearer commitments, Wong says strong fundamentals and attractive valuations can still outweigh weak Value Up participation.

Rakuten Trade’s Lau concurs, noting that initiatives such as Value Up plans and ESG guidance could play a part in an investor’s decision, but company fundamentals and valuation will still be paramount.

“That said, we feel that the big caps, especially those with more complete investor relations teams, will be able to deliver clearer Value Up plans.

“Hence, from this angle, a more articulate guidance could serve to attract investors.

“But there is no one-size-fits-all. Investors will still tend to judge mid- to smaller caps on the more traditional metrics, such as valuation, ROE, fundamentals and performance,” he says.

Meanwhile, a dealer with a foreign fund management firm says the disclosure of Value Up plans will almost certainly become an informal screening factor quite quickly, and for some investors, it may evolve into a more formal one over time.

“Once the first public plans appear in 2027, the quality of a company’s capital-allocation roadmap, the credibility of its quantified targets, especially ROE or total shareholder return, and the clarity of board ownership will naturally feed into our qualitative scoring of management and governance,” she says.

The dealer says that, with ESG disclosures and free-float quality already being considered for many years now, Value Up plans will simply become another layer of the same process.

While she does not expect every house to build a rigid quantitative “Value Up score” immediately, she says teams that focus on long-term compounding will start distinguishing between companies that treat the exercise seriously and those that produce generic statements.

“Over a 12 to 24 month period after the first disclosures, this distinction is likely to influence both stock selection and the intensity of engagement.”

“For us the ranking would be: explicit, time-bound capital-allocation and return targets (especially ROE or return on invested capital relative to cost of capital, and a clear plan for excess cash; shareholder-return policy – a coherent framework for dividends and buybacks rather than ad-hoc decisions; and credibility and specificity of the overall narrative – whether the plan is linked to actual business drivers and shows evidence of board-level ownership,” she tells StarBiz 7.

Pointing out that a polished story without numbers will carry less weight than a less eloquent but concrete plan that shows management is prepared to be held accountable, the dealer says she will also look at whether the targets are ambitious enough relative to the company’s history and peer set.

“We are quite convinced that soft, qualitative language will be discounted; hard commitments that can be tracked year by year will be rewarded,” she says.

Nevertheless, she perceives a real, though gradual, risk that companies with unclear Value Up plans could be left behind in the long run.

She explains that, in the initial stages, traditional fundamentals and valuations will still dominate – a cheap, well-run company with strong cash flow will not be abandoned solely because its Value Up plan is weak.

“However, among the large-cap universe that institutions actually own in size, the competitive bar for capital allocation and communication is rising.

“Companies that remain silent or produce boilerplate plans will likely face more probing questions from us in meetings, lower conviction scores in our internal rankings, and, over time, a higher probability of being ‘underweighted’ relative to peers that demonstrate clearer discipline,” the dealer observes.

The presence of capital from government-linked investment companies as a potential reward for strong commitment only reinforces this dynamic.

In a nutshell, silence or generic responses will not be fatal in 2027, but they will become an increasing competitive disadvantage as the market starts to differentiate more sharply between genuine value creators and the rest.