Hong Leong Capital: Navigating Market Headwinds with Resilient Core Businesses in 9M FY25
Hong Leong Capital Berhad (HLCB), a prominent investment holding company within the Hong Leong Financial Group, has recently unveiled its financial results for the nine months ended 31 March 2025 (9M FY25). This report offers a comprehensive look into the Group’s performance, highlighting both the challenges faced from a volatile market and the underlying resilience of its core operations.
While HLCB reported a lower net profit after tax of RM40.8 million, primarily due to reduced equity investment returns, it’s crucial to note the robust performance of its core businesses. The Group’s profit before tax (PBT) actually saw a marginal increase, sustaining at RM49.8 million, a testament to the strength of its investment banking and asset management arms.
Core Financial Highlights: A Closer Look
The 9M FY25 period presented a mixed bag for HLCB. Geopolitical tensions and evolving global trade dynamics contributed to market volatility, impacting the FBM KLCI and, consequently, the Group’s equity investment returns. However, the underlying operational strength of HLCB’s divisions shines through in key metrics.
Overall Group Performance
9M FY25
Net Profit After Tax: RM40.8 million
Profit Before Tax (PBT): RM49.8 million
Book Value Per Share (as at 31 Mar 2025): RM4.33
9M FY24
Net Profit After Tax: RM61.2 million
Profit Before Tax (PBT): RM49.4 million
Book Value Per Share (as at 31 Mar 2024): RM4.20
As evident, the net profit after tax declined by 33% year-on-year. This was largely attributed to lower equity investment returns. However, the Group’s PBT saw a marginal increase from RM49.4 million to RM49.8 million, signaling the stability and growth in its core operational segments. Furthermore, the book value per share improved to RM4.33, up from RM4.20 a year ago, reflecting an increase in the company’s intrinsic value.
Divisional Performance Breakdown
Hong Leong Investment Bank Berhad (HLIB)
HLIB, a key operating subsidiary, reported a net profit after tax of RM31.2 million, a slight 2% decline from the previous corresponding period’s RM32.0 million. This was primarily influenced by lower contributions from its stockbroking division, though partially offset by an improved performance in investment banking.
HLIB Net Profit (9M FY25)
RM31.2 million
HLIB Net Profit (9M FY24)
RM32.0 million
Stockbroking Division
The stockbroking division’s PBT decreased to RM32.4 million from RM34.2 million. This was partly due to ongoing strategic investments in client acquisitions, digital platforms, and network expansion. The division’s overall market share saw a slight decline of 0.48% year-on-year, settling at 3.51%, largely influenced by increased foreign institutional flows where HLIB has limited participation. Despite this, HLIB’s commitment to excellence was recognized at the Bursa Excellence Awards 2024, securing the 2nd runner-up for Best Retail Equities Participating Organisation – Investment Bank for the sixth consecutive year, alongside 8 additional awards.
Investment Banking Division
In contrast, HLIB’s investment banking division achieved a higher PBT of RM8.7 million, marking a 10% year-on-year increase. This growth was fueled by increased deal flows in its Equity Markets and improved net interest income from proactive funding cost management and effective portfolio management in its Treasury & Markets (T&M) divisions. However, the Debt Markets faced challenges due to delayed completion of several key mandated deals.
As of 31 March 2025, HLIB remains well-capitalised, demonstrating strong financial health:
| Capital Ratio | Value |
|---|---|
| Common Equity Tier 1 Ratio | 34.1% |
| Tier 1 Ratio | 34.1% |
| Total Capital Ratio | 42.7% |
Hong Leong Asset Management Bhd (HLAM) and Hong Leong Islamic Asset Management Sdn Bhd (HLISAM)
HLCB’s fund management business, operating under HLAM and its subsidiary HLISAM, delivered a strong performance with a net profit after tax of RM7.1 million, representing a significant 25% year-on-year increase, driven by prudent cost management.
Fund Management Net Profit (9M FY25)
RM7.1 million
Average AUM (9M FY25)
RM11.57 billion
Islamic Funds Average AUM (9M FY25)
RM1.95 billion
Fund Management Net Profit (9M FY24)
~RM5.68 million
Average AUM (9M FY24)
~RM11.125 billion
Islamic Funds Average AUM (9M FY24)
~RM1.28 billion
The average Assets Under Management (AUM) of HLAM and HLISAM recorded a healthy 4% year-on-year growth to RM11.57 billion. This growth was powered by strong contributions from Private Mandates, Equity Funds, and Fixed Income Funds. Notably, Islamic funds managed by HLISAM showed exceptional growth, achieving an average AUM increase of 52% year-on-year to RM1.95 billion, largely due to strong Fixed Income Funds performance. HLAM also continues to garner industry recognition, receiving accolades at the LSEG Lipper Fund Awards Malaysia 2025 for its Hong Leong Dividend Fund and Hong Leong Consumer Products Sector Fund.
Risks, Prospects, and Strategic Direction
HLCB acknowledges the challenging external environment, marked by heightened geopolitical tensions and evolving global trade dynamics, which have directly impacted the stock market and the Group’s equity investment returns. Despite these headwinds, the Group’s core businesses have demonstrated resilience, and management is actively implementing strategies to navigate these challenges and drive future growth.
Moving forward, HLCB is committed to executing its strategic priorities to deliver long-term value creation. A key initiative involves bolstering the sales outreach of HLCB’s suite of products by leveraging the integrated distribution network of the broader Financial Group. This includes the introduction of upcoming foreign-denominated funds from its asset management division.
Furthermore, the Group is enhancing its stockbroking application to create a more integrated user experience, aiming to improve customer satisfaction and serve as a crucial feature for client acquisition. These strategic endeavors are underpinned by a disciplined approach to capital, liquidity, and cost management.
Commitment to Sustainability
HLCB is also actively advancing its sustainability agenda. HLIB has completed four ESG/sustainability-related issuances totaling RM913 million, showcasing its capabilities in structuring sustainable financing solutions and reinforcing its commitment to responsible investment practices and supporting a low-carbon economy. HLAM has integrated Environmental, Social, and Governance (ESG) considerations into its research process, utilizing an in-house ESG model to embed sustainability at the core of its investment philosophy. Beyond business, the Group actively engages in community outreach, demonstrating its social commitment through initiatives like distributing kurma during Ramadan and employee volunteerism with Pertiwi Soup Kitchen.
Summary and
Hong Leong Capital Berhad’s 9M FY25 results paint a picture of a financial institution adapting to a challenging market. While the overall net profit was impacted by external factors affecting equity investment returns, the underlying strength of its core investment banking and asset management divisions is clear, as evidenced by the marginal increase in profit before tax and solid growth in AUM. The Group’s strategic focus on leveraging its integrated distribution network, enhancing digital platforms, and maintaining financial discipline positions it to pursue long-term value creation. Its continued recognition through industry awards and strong capital ratios further underscore its operational and financial stability.
However, potential investors should remain mindful of the prevailing market volatility and specific challenges faced by the stockbroking division, particularly its market share in the face of increased foreign institutional flows. The delayed completion of deals in the Debt Markets also bears watching.
Key points to consider from this report:
- Market Volatility Impact: The Group’s net profit was significantly affected by lower equity investment returns due to broader market volatility and geopolitical tensions.
- Core Business Resilience: Despite the net profit decline, the Group’s core profit before tax (PBT) showed a marginal increase, driven by strong performances in investment banking and asset management.
- Strategic Initiatives: HLCB is actively pursuing strategies to bolster sales, enhance digital platforms for client acquisition, and maintain strict capital and cost discipline.
- Divisional Performance Nuances: While investment banking and asset management showed growth, the stockbroking division faced challenges including market share decline and increased investments.
- Commitment to ESG: The Group is actively integrating sustainability into its business practices and community engagement.
From a professional standpoint, HLCB’s ability to sustain its core business PBT amidst significant external headwinds is a positive indicator of its operational resilience. The strategic initiatives to enhance digital platforms and leverage the broader financial group’s network are crucial steps for future growth and client acquisition, especially in a competitive landscape. The continued strong performance and industry recognition of its asset management arm further bolster its diversified revenue streams. While the decline in overall net profit due to equity investment returns is a concern, it appears to be more a reflection of market conditions than core operational weakness.
What are your thoughts on HLCB’s performance this quarter? Do you believe their strategic initiatives are sufficient to navigate the ongoing market challenges and drive sustainable growth?
Share your perspectives in the comments below!
