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Saving and Investing towards Financial Independence in Malaysia

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Public Bank and Public Mutual

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Filed Under: Dividends, Annual General Meetings (AGM) 3

Public Bank Group

I added 600 units of Public Bank (“PB Bank”) shares back in March 2016 at RM18.50 a piece to my Freedom Fund. In my view, PB Bank although not the largest is one of the best-managed banks in Malaysia.

You often hear Malaysians lauding the exceptional customer service and complaining about the strict loan requirement imposed by the bank. As a shareholder and part owner (a very small part) of the bank, I smile every time I hear these.

Moving onto the facts and figures, the bank’s performance speaks for themselves as shown in the summary of the annual report I received this month.

Public Bank Annual Report 2016

Public Bank Annual Report 2016
PB Bank 5 Year Summary

Apologies for the somewhat blurry image. I’ve also uploaded the full Annual Report for everyone interested: Public Bank Annual Report 2016

The two key figures I always look at are Net Profit as well as Equity. And PB Bank’s numbers has been increasing every year.

As usual, I will not go into too many details on the company. If you’re investing in a business, read the whole report and understand everything.

I’d be more than glad to answer your specific questions regarding the annual report. However, questions like ‘What do you think I should invest in?’ or ‘Will Company A’s profit continue to increase?‘ should be answered by you alone.

Public Bank and Public Mutual

I’m sure most of you remember how I’m against Public Mutual? How they charge exorbitant fees?

The question to ask yourself is – Who owns Public Mutual? If you don’t already know, Public Mutual is wholly owned by the group and as a shareholder, I can’t be happier. If you do invest with Public Mutual, consider investing instead in PB Bank instead. Let the fees work in your favor instead of the other way around.

Another perk, every time a public mutual agent approaches you, you can tell him/her you already invest without having to lie. If they persist, you can go on a long educational talk and preach how investing in Public Bank is better than Public Mutual funds.

Public Bank AGM

Together with the annual report was the notice of annual general meeting (“AGM”).

The bank’s AGM will be held on 27 March 2017. I’ll be attending so those of you who are heading there let me know! Hope to meet those of you who are PB Bank’s shareholders there.

I’ll be sure to snap some pictures and keep the rest of you posted as well.

Public Bank AGM
Notice of AGM

 

Malaysian REITs and their Tax Treatment

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Filed Under: Dividends 21

Malaysian REITs

Special Tax Treatment of Malaysian REITs

The taxation of a Real Estate Investment Trust (REIT) in Malaysia depends on the amount of income that is distributed to shareholders.

Two different important conditions affect a Malaysian REITs’ tax treatment:

  1. If a Malaysian REIT distributes at least 90% of its taxable income, it will not be subject to corporate income tax;
  2. If the 90% threshold is not met, the REIT would be subjected to the prevailing corporate tax of 24%.

As such, Malaysian REITs generally always pay out at least 90% of its taxable income in dividends. And as a dividend investor, REITs are especially attractive to me and feature heavily in my portfolio.

Tax Credits for Resident Shareholders

I’ve received numerous queries regarding a REIT’s withholding tax as well as tax credits applicable to resident Malaysian unit holders. Firstly, you have to be a tax resident for any tax credits to be applicable.

The withholding tax is a final tax and it comes into play when Malaysian REITs reach that 90% threshold in distribution (Condition 1 above). Individuals and non-corporate investors are not required to declare REIT dividend income in their tax filing/returns. And no, you have no tax credits to claim if the REIT doesn’t pay any corporate tax. Distribution made to shareholders will only be subjected to a final withholding tax. For residents and individuals, that rate is 10%.

So when do you get tax credits? When Condition 2 is in effect and the REIT doesn’t meet the 90% payout requirement.  This is when you are allowed to set off those tax credits against your own payable tax. However, a REIT almost always pays out at least 90% of their income (this is when tax transparency is achieved) to take advantage and not pay any corporate tax.

End.

So, the short answer to whether or not we as individual investors are entitled to tax credits: almost (99%) never. No sensible REIT manager would miss out on the huge corporate tax cut.

I would actually like some feedback from you guys if you know of any Malaysian REITs that have opted not to distribute that 90% income. 

For a more comprehensive understanding of Malaysian REITs, please divert yourself to The Complete Guide to REITs in Malaysia.

 

Investing in AirAsia – Now Everyone Can Fly

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Filed Under: Dividends, Companies in the News 0

Update: 2024

AirAsia, a prominent Malaysian low-cost airline, has demonstrated significant growth and resilience in recent years. As of 2023, the airline reported a revenue of approximately RM14.69 billion, a substantial increase from RM6.44 billion in 2022.

This growth reflects a strong recovery in passenger demand and strategic operational enhancements.

In the fourth quarter of 2023, AirAsia’s parent company, Capital A Berhad, reported a revenue of RM4.2 billion and an EBITDA of RM448 million, indicating impressive year-on-year increases of 153% and 384%, respectively.

This performance underscores the company’s effective strategies in navigating the post-pandemic aviation landscape.

AirAsia X, the long-haul subsidiary of AirAsia, also reported robust financial results. For the full year 2023, the company achieved a revenue of RM2.5 billion and a net profit of RM366.5 million, attributed to the recovery of its scheduled passenger flight operations and significant improvements in ancillary income.

As of December 2023, AirAsia X maintained a core fleet of 18 A330-300 aircraft, with its associate, Thai AirAsia X, operating an additional eight A330-300 aircraft.

This fleet supports a network spanning various destinations across Asia and Australia, contributing to the airline’s extensive reach.

In recognition of its service excellence, AirAsia was named the World’s Best Low-Cost Airline by Skytrax for the 15th consecutive year in 2024.

This accolade reflects the airline’s commitment to providing affordable and quality air travel.

Looking ahead, AirAsia continues to expand its services and network. In December 2024, the airline launched fixed fares to reunite Malaysians for the upcoming Lunar New Year celebration in January 2025, demonstrating its dedication to meeting customer needs during festive seasons.

Overall, AirAsia’s financial performance and strategic initiatives indicate a positive trajectory, reinforcing its position as a leading low-cost carrier in the region.

Update : 2019

AirAsia – The Pride of Malaysia

AirAsia Special Dividend

We’ve really got a gem of a company to be proud of right here in Malaysia. AirAsia has been voted World’s Best Low-Cost Airline for 8 years running and the company is dominating the skies with their exceptionally low fares and unmatched talent displayed by the management.

How it all started

Established in 1993, AirAsia was founded first by DRB-Hicom. You’ve all heard the tale of how Tony Fernandes purchased the airline for RM1. Here’s how it happened: On 2 December 2001, the almost bankrupt airline was purchased for a token sum of RM1 WITH RM40 million worth of debts. Within just one year,  Fernandes managed to turn the company around, producing a profit in 2002.

With all sorts of promotional fares, some as low as RM1, AirAsia managed to eat into former monopoly airline MAS. Malaysia Airlines will eventually decline to the point where they delisted from the KLSE. Fast forward to 2008, the company added a whopping 106 new routes to its list of 60. As they say, the rest is history. AirAsia is now an RM10 billion company with huge, HUGE growth potential.

AirAsia Annual Report 2016

Financial highlights

The airline reported an RM6.846 billion revenue and RM2 billion profit after tax in 2016. Shareholders’ equity also increased to RM6.628 billion. The company has also significantly reduced its net debt to just under the RM8 billion mark. This is an immense sum but it is typical in the airline industry.

Another key factor is the airline’s growth in passengers and it’s capacity every single year, maxing out at a total of 26 million passengers and a 30 million capacity in 2016.

AirAsia has one of the most interesting and engaging annual reports out there. Give it a read: AirAsia Annual Report 2016

AirAsia’s Special Dividend?

[UPDATE] 23 February 2017 – RM2.70
AirAsia Tony Fernandes

There has been a frenzy over AirAsia the past few days due to the potential special dividend that will be declared.

Market experts predict the special dividend to range from RM0.50 to RM1.10 per share. The most recent information is that it could be as high as RM1.50 per share. That’s a 50% dividend yield based on the current market price. The one-time special dividend comes from the sale of an 80% stake in Asia Aviation Capital (AAC) which is said to garner a valuation of at least RM3.5 billion.

Want more good news? With my analysis, and excluding this special dividend, AirAsia underlying value is roughly RM2.90 per share. Another food for thought, as of last month, CEO Tony Fernandes and Kamarudin Meranun have both raised their combined stake of 32.3% in the company which was largely funded by loans. I believe they will declare a large amount in the form of special dividends which would enable them to settle the aforementioned loans.

That being said, there are of course the ever hovering external risks associated with airlines ie. jet fuel prices and airport charges. Let’s not forget our weak Ringgit and the competition from MAS and Malindo.

Previously, I sold my AA shares at RM2.95, making a handsome 79% gain in the process.

AirAsia to Establish LCC in China

[UPDATE] 15 May 2017 – RM3.40
AirAsia China JV

AirAsia Bhd has signed a memorandum of understanding (MoU) with China Everbright Group and Henan Government Working Group to establish a low-cost carrier (LCC) in China.

It outlines how the parties will incorporate a joint-venture to be known as AirAsia (China) for the purposes of operating a low-cost aviation business based in Zhengzhou, the capital of Henan province in central China.

In addition, AirAsia (China) will invest in aviation infrastructure, including a dedicated LCC terminal at Zhengzhou airport and an aviation academy to train pilots, crew and engineers, as well as maintenance, repair and overhaul (MRO) facilities to service aircraft.

The MoU was exchanged between AirAsia Group Chief Executive Officer, Tan Sri Tony Fernandes, Everbright Financial Investment Holding Executive Director and President, Wang Weifeng and Henan Airport Group General Manager, Li Weidong at China World Hotel here on Sunday.

The ceremony was witnessed by Prime Minister Datuk Seri Najib Tun Razak who is on a five-day working visit to China.

AirAsia was the first foreign LCC to enter China and has carried more than 40 million guests since its inaugural route to China in April 2005. AirAsia and AirAsia X currently fly to 15 destinations in China and is the largest foreign LCC operating into the country.

(Bernama)

This is huge news for AirAsia and will translate to a big slice of the pie in China’s aviation market for the company if the deal materializes. China has 1.37 billion vs Malaysia’s 30 million. Malaysia is only 2% of China. Think of the possibilities!

With this latest piece of good news, I’m pretty sure the counter will go past the RM3.50 per share mark. Please be aware that the deal has yet to materialize and even if it does, it’ll be a few years before it adds to the company’s bottom line. But again! Think of the possibilities and growth potential AirAsia has. We’ve conquered ASEAN and we’re establishing ourselves and gaining a strong foothold in the world’s most populous nation.

AirAsia is looking to become one of THE long term stocks to hold on to.

AirAsia’s Special Dividends

[UPDATE] 29 August 2019 – RM1.75

Tony Fernandes and gang have so far declared and paid out two rounds of special dividends during my tenure so far as an AirAsia shareholder.

Round 1 – 28 December 2018

The first round was back in December 2018.

The company declared a 40 sen dividend per share and I received a total of RM5,320 in dividend income then.

Round 2 – 29 August 2019

This year, AirAsia again declared 90 sen in dividend per share. Giving me a total of RM11,970.

Total AirAsia Special Dividends

In total, I’ve received RM17,290 in special dividends from the airline.

Total dividends received – RM22,462.00
Gross Investment – RM41,481.37

That’s about 54% of my capital back in my pocket in dividends alone. The average bought price for me, however, is at RM3.1189, today it is at RM1.75. That’s a 43% drop.

End.

In pure numbers, AirAsia is still positive in the Freedom Fund.

Can’t wait to see where the budget airline goes from here. I am especially excited about its role in the logistics industry.

As always, invest at your own risk.

Vasco’s @ Hilton Kuala Lumpur [Review]

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Filed Under: Travel, food and the finer things in life 2

Vasco’s at Hilton KL

Vasco's @ Hilton Kuala Lumpur [Review]

How to Get There – Address

Vista Tower, 182, Jln Tun Razak,
Kampung Datuk Keramat,
50400 Kuala Lumpur,
Federal Territory of Kuala Lumpur

Contact

Phone – 03-2164 2133
Reservations – here

Vasco’s – The Food

Went for the buffet lunch at Vasco’s located at Hilton Kuala Lumpur to celebrate an overdue Valentine’s Day (sort of). I still think the whole V-day is a big conspiracy ginned up by the jewellery, card and flower industry. The amount of money people are willing to spend on that particular day still astounds me.

Before you start pegging me for a hypocrite:

1. I try to always celebrate Valentine’s Day after February 14th; and

2. We are part Hilton Premium Club and got this buffet for FREE!

We of course like the civilized people we were, called ahead and made reservations. I’ve been here a few times and the menu last Saturday was quite a letdown compared to my previous visits.

I started off with some kimchi and seafood. The kimchi was horrible like what I could get at Jusco or Giant. Vasco’s used to serve fresh oysters and crabs as well as salmon sashimi, it has since been reduced to prawns, mussels and butterfish sashimi. A real letdown.

Next up was their salad and some cold cuts. Nothing special. Had those to add some greens to my meal.

Vasco’s Hilton Verdict

I’ll let the pictures do the talking.

Overall, the buffet was a total disappointment. One of the best dish they used to serve was this awesome steamed seabass, which they’ve decided to take off the menu. Their briyani and curry used to be delicious as well, it has since been replaced by something you could get at a your local Pelita restaurant.

All that being said, I did enjoy their pasta which was cooked for you on the spot as well as their pistachio flavored gelato. The chefs stationed there were all really friendly and polite as well. Enjoyed myself asking and learning about the food.

End.

You’d be paying RM158 per head for the lunch buffet on weekends. I got to know that they hired a new executive chef who changed the entire menu. Seems like a huge cost-cutting exercise if you ask me.

So, my thoughts? I’d rather fork out an extra RM40 and gorge myself on some free-flow wagyu beef at Hanare @ The Intermark. However, I did get to eat for free here so I’d better stop with the complaints.

Have you guys been to Vasco’s recently? Were you let down in a similar fashion?

Thanks for reading!

All My Food Reviews

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Grow Your Wealth with Retirement Savings

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Filed Under: Guest Posts 2

Retirement Savings

Grow Your Wealth with Retirement Savings to Ensure a Financially-Stable Future

Growing your retirement savings can seem like an overwhelming task, especially considering the various investment options out there. However, with proper planning and a focus on your goals, you can achieve the financially-stable future you need.

EPF to grow your retirement wealth

If you’re a working professional, a portion of your income is automatically deducted into the our local retirement savings – the Employees Provident Fund (EPF), of which there is Akaun 1 and Akaun 2.

Akaun 1 is off limits until you reach retirement age, which is great because this means you are guaranteed savings when you reach the age of 55. Akaun 2 however, allows you to make withdrawals and this is usually towards purposes that will help you have a more stable retired life such as for education, health, or the purchase of your home. You may read more about the rights with each account in this article.

The great thing with EPF is that you are guaranteed at least a 2.5% dividend on your savings, and in recent times, the dividend has been around 6%. This is the power of compound interest. Your savings will grow year-on-year without you even needing to do much.

If you want to know how much you have in your retirement fund, use the i-Akaun portal which is EPF’s online service. It’s a great tool that helps you achieve your retirement goals, because you can keep a close eye on your funds, make withdrawal requests, and gain access to your latest EPF statements for banking needs.

But first, set your goals.

Before you even embark on investments, we suggest to pause and think about your retirement goals. Here’s how:

  1. Begin with the end in mind: Envision your retirement and think about the kind of lifestyle you would like to have. Thereafter, work backwards to achieve that.
  2. When do you plan to retire?: Legally, the retirement age is 55, however some of you may want to retire earlier in life, or later. Either way, think about how long you have until retirement, how many years do you have left to save?
  3. Think about your lifestyle expenses: How much do you need to survive in your preferred lifestyle once you retire?
  4. Be SMART: Ensure your goals are Specific, Measurable, Attainable, Realistic and Time Bound.

With your retirement goals in mind, you can then embark on putting the plan into action, think about savings accounts that give you a high return on interest.

Compound interest is key when growing wealth, because over time, your money will continually to exponentially grow and by the time you hit retired age, you will be basking in wealth. At least, we hope so. The key though, is to start early and to start young, thus giving you more time for your dividends to grow before you retire.

CompareHero.my is dedicated to raising financial literacy and helping Malaysians make wiser financial decisions by letting compare credit cards, personal loans and broadband plans. Visit their blog to learn more!

The 7 Stages of Financial Independence

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Filed Under: Financial Independence, FI/RE, Financial Planning, Investment 8

Financial Independence (F.I.) in Malaysia

There are a lot of misconceptions about financial independence and early retirement (FI/RE) here in Malaysia. People think you have a high income if you’re able to retire early. No doubt, having a high income helps, but the crucial part of the whole F.I. equation, in my opinion, is our ability to save and invest.

As with all things in life, financial independence can be broken down and achieved in stages, even after you’ve retired, you still have to work at it to keep your money flowing in. It’s a lifelong process.

The Road to Financial Independence

Stage 1 – Dependence / Reliance 

We all begin here at this first stage. We start off being reliant on financial support from our families. They provide us with our daily necessities for the initial years of our lives. We then slowly being to chip away at this dependence when we earn our first salary.

Some of us may get a head start by having part-time jobs while still in school. Some may have gotten lucrative scholarships which gives an allowance. All of these help us break free from our reliance and dependence on financial support eventually.

Stage 2 –  Dependence (Continued)

After we are finally financially independent from our parents, guess what? We are still at the Dependence / Reliance stage. Moving out and living on your own doesn’t automatically make you independent. You are now in fact, heavily dependent and indebted to our various financial institutions.

The majority of us after ‘gaining independence’ from our families would have taken out a huge loan to buy their first home. You’re still in this stage if you spend more than you earn (if you’re digging deeper into debt). Basically, if you’re not earning a “profit”, you are dependent on somebody else. You are not financially independent.

After you start having a surplus — and again, this means you’re earning more than you’re spending — you FINALLY make your way down the path to financial freedom. One sure-fire way to do is to live frugally, which is how I was able to build my portfolio slowly.

Stage 3 – Solvency 

Stages of Financial Independence Solvency

Solvency is the ability to meet your financial commitments.

You reach this stage when you no longer rely on anyone for financial support. When you have surplus savings at the end of every month, you’re at this stage. This is where you’re no longer accumulating debt. You might still have loads of loan payments, but you’re not accumulating additional debt.

As a Certified Financial Planner, I’ve found that to get a person to go from the Dependence stage to Solvency is one of the toughest. It is not only taxing physically but also mentally exhaustive for someone to overcome Stages 1 and 2. But once a person finally finds themselves with a surplus at the end of the month, they will have the confidence to sail through the next 4 stages.

Remember, it varies from person to person how long it takes for us to reach stage 3. Some people reach this stage in their teens. Some never reach it. But even when it seems impossible, if you start taking charge of your finances,, I guarantee you’ll see the light at the end of the tunnel.

Stage 4 – Stability / Resilience

Stages of Financial Independence DEBT

You achieve stability after you’ve repaid your bad debts (ie. credit cards), established some emergency savings, and continue to increase your savings. 

You’ll feel an immense weight lift off your shoulders the moment you make the final payment to your debts. Trust me, it is a great feeling.

It is important to have your emergency fund built up to prevent yourself from falling back to stage 3 due to unforeseen circumstances. The usual recommendation is to save up to 6 months of your salary as your buffer. But if you’re feeling more risk-averse, there is no harm in going up to 1 -2 years.

Now you’ve built a buffer of savings to protect you from unfortunate events, you’re ready to put the extra funds to work by investing.

Stage 5 – Security

You reach the Security stage when your investment income can cover your BASIC needs. At this stage of financial independence, you have the ability to live and work as you choose. You have enough saved that you could quit your job at a moment’s notice without hesitation. I am still striving to reach this stage of financial independence. I estimate my basic needs as a young adult in Malaysia to be about RM1,500 per month. With the dividends from my portfolio – the Freedom Fund, I’m almost there.

Update Nov’2020.
Fortunately, I’m now at Stage 5. I’m able to cover my basic needs through my passive income from dividends. Stage 6 here I come!

Based on how much you have saved and invested, you could live a meager existence for the rest of your life without worrying about money. Even if you never worked again, you could afford shelter, basic food, daily essentials, and medical care.

Stages of Financial Independence Time > Money

Starting from Stage 5 on the road to financial freedom, your concerns are no longer just about survival. Money is no longer a safety net. It is now a tool to help you thrive and build the life you want. People who reach this stage will truly understand that money is just a tool. You will learn the value of your time. Instead of spending 8 hours a day for your monthly salary, you start to think about using money to free up your time for yourself and your family. Knowing what gives you meaning and purpose is a vital part of financial freedom and I believe it should be the starting point on this journey.

Stage 6 – Independence

Financial Independence

This is the Financial Independence we should all aim and strive for where your INVESTMENT income can support your current standard of living. At stage 5, you are merely able to cover your basic needs. At this stage, you can finally declare true financial independence. The money you have saved and invested would allow you to live like you do today until the day you die… and then some more.

It is the ultimate goal and dream of mine to reach this stage as I’m sure it is for many of you. All the savings and investments I’m doing has been to eventually be able to reach this stage. Financial independence varies from each person. For some of you, FI is achieved at RM12,000 per annum. Some will only be satisfied with RM24,000 per annum. For me, the sweet spot is RM36,000 per annum. Decide on your number now and start working your ass off towards it.

Stage 7 – Abundance

Financial Independence

In the final stage of financial freedom, you have more than enough. Your passive income will not only fund your lifestyle forever, you can even turn it up a notch or two. Now is the time to indulge in the luxuries in life and enjoy the fruits of your long tedious labour.

Here’s the bottom line: The more money you save, the more freedom you have, and the more risks you can take. As your financial independence increases, you chip away at the wall of worry. You’re able to make financial decisions proactively rather than reactively.

End.

There are tonnes of resources out there on Financial Independence each with their different stages. I’ve sifted through them all throughout the years and tried my best to compile them to best fit Malaysians.

The regular readers here are likely to be professionals (or at least semi-pros) of the personal finance world. We should take the time out to help others out of the financial binds they find themselves in. I think it’s in our best interest — in the best interest of everyone, really — to get more people into the ‘game’ of Financial Independence.

The more Malaysians we can get on the road to financial freedom, the better off we all will be. I hope I’m able to start cultivating the Financial Independence mindset here at Dividend Magic.

For the next article of the FI/RE and Savings Series, check out article 006 – Basic Financial Plan for Malaysians.

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