ANNUAL REPORT 2022
The Annual Report 2022, Corporate Governance Report 2022 and Sustainability Report 2022 are our primary reports. Supplementary information are available on our website: https://www.kenanga.com.my Our Reports Annual Report Provides an overview of Kenanga Group’s financial performance, as well as business highlights of the year. Corporate Governance Report Provides an overview of Kenanga Group’s corporate governance and how it facilitates effective management to deliver long-term value for the company. Sustainability Report Provides an understanding of Kenanga Group’s sustainability ambitions, initiatives and progress, as well as how it is integrated across the business. Cover Rationale At Kenanga, we uphold four core values: agility, collaboration, trustworthiness, and future facing. These values underpin our dedication to building a strong and resilient organisation that can navigate the challenges of the ever-evolving financial landscape. Our commitment to these values empowers us to remain agile in our approach, collaborate effectively with colleagues and partners, maintain the highest standards of trustworthiness, and remain future facing by actively seeking out new opportunities in digital innovation for financial inclusion. The paragliding image on our Annual Report’s cover symbolises our commitment to taking calculated risks in the pursuit of success, and our willingness to explore uncharted territory. Despite the inevitable ups and downs of the financial world, we remain dedicated to doing what is best for our organisation and our stakeholders. We continuously push boundaries, innovate, and pursue new opportunities for growth and value creation. 49th ANNUAL GENERAL MEETING Kenanga is committed to making a difference in the environment. Play your part by opting to download a softcopy of our reports at https://www.kenanga.com. my/investor-relations/AGM2023 or by scanning the QR code above. Date : Thursday, 25 May 2023 Time : 11.00 a.m. Venue : Level 19, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Wilayah Persekutuan, Malaysia
INSIDE THIS REPORT SECTION 1 Kenanga At A Glance 2 Who We Are 4 Our Notable Recognitions in 2022 5 Corporate Structure 7 Corporate Information 8 WE ARE KENANGA SECTION 2 Chairman’s Message 10 Group Managing Director’s Management Discussion and Analysis 14 LEADERSHIP MESSAGE SECTION 3 Our Sustainability Statement 22 OUR SUSTAINABILITY APPROACH SECTION 4 Founder Emeritus & Adviser’s Profile 46 Profiles of Directors 48 Group Managing Director’s Profile 56 Senior Management’s Profiles 57 Corporate Governance Overview Statement Principle A: Leadership & Effectiveness 67 Principle B: Effective Audit & Risk Management 87 Principle C: Relationships with Stakeholders 89 Ethics and Compliance Statement 97 Statement on Risk Management and Internal Control 110 Audit Committee Report 115 HOW WE ARE GOVERNED SECTION 5 Five (5)-Year Group Financial Summary 125 Five (5)-Year Group Financial Highlights 125 Directors’ Report 126 Statement by Directors 132 Statutory Declaration 132 Independent Auditors’ Report 133 Shariah Committee’s Report 139 Consolidated Statement of Financial Position 140 Statement of Financial Position 141 Statements of Profit and Loss and Other Comprehensive Income 142 Consolidated Statement of Changes in Equity 144 Statement of Changes in Equity 146 Statements of Cash Flow 147 Notes to the Financial Statements 149 FINANCIAL STATEMENTS SECTION 6 Analysis of Shareholdings 354 List of Thirty (30) Largest Shareholders 355 Substantial Shareholders’, Directors’ & Group Managing Director’s Interests in Securities 356 SHAREHOLDERS’ INFORMATION SECTION 7 Notice of 49th Annual General Meeting 357 Statement Accompanying Notice of 49th Annual General Meeting 364 Corporate Directory 365 • Proxy Form ADDITIONAL INFORMATION
2 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information Introduction Kenanga Investment Bank Berhad (“Kenanga”, “the Group” or “Kenanga Group”) is an award-winning independent investment bank in the country with a continuous commitment towards driving collaboration, innovation, digitalisation and sustainability in the marketplace. The Group’s ambitions include building a robust digital ecosystem that meets the needs of its clients and businesses. Some of its game-changing products include Malaysia’s fully online digital stockbroking platform Rakuten Trade and a fully artificial intelligence (“A.I.”) robo-advisor, Kenanga Digital Investing. It is currently developing Malaysia’s first Wealth SuperApp that will be rolled out in 2023. KENANGA AT A GLANCE >1,300 employees >500,000 clients Awarded ‘Highest Returns to Shareholders Over Three Years’ ‘Highest Growth in Profit After Tax Over Three Years’ ‘Highest Return on Equity Over Three Years’ at The Edge Malaysia Centurion Club Corporate Awards 2022 >RM20 billion assets under management >6,000 licensed representatives
3 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 KENANGA AT A GLANCE Kenanga’s Digital Journey Rakuten Joint Venture Kenanga entered into a joint venture with Japanese internet giant Rakuten Securities, Inc. 2016 Back Office Digitalisation Kenanga completed back office digitalisation to enhance efficiencies. Launch of Rakuten Trade Kenanga and Rakuten Securities, Inc. jointly launched Rakuten Trade, Malaysia’s first fully digital equity broker. 2017 2017 2019 Launch of Remisier Portal Kenanga launched a new portal to enable remisiers to work remotely. 2020 E-Wallet Launch with Merchantrade Kenanga launched an e-wallet with Merchantrade and later acquired a 4.99% stake in the company. 2020 Partnership with CapBay Kenanga entered into partnership with CapBay to digitalise first-in-Malaysia factoring solution unifying both, private and public sector’s receivables under one (1) platform. 2021 A Stake in Tokenize Xchange Kenanga received approval from Securities Commission Malaysia to acquire 19% stake in Digital Asset Exchange Platform, Tokenize Xchange. 2022 2022 Launch of a Robo-Advisory Platform Kenanga launched a fully A.I.-driven robo-advisory platform, Kenanga Digital Investing. Signed Memorandum of Understanding with Ant Group Kenanga entered into partnership with Ant Group to develop Malaysia’s first Wealth SuperApp, geared to revolutionise wealth generation and management.
4 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information WHO WE ARE Established for almost fifty (50) years, Kenanga is a financial group in Malaysia with extensive experience in equity broking, investment banking, treasury, Islamic banking, listed derivatives, investment management, wealth management, structured lending and trade financing. We are nimble and quick to respond with creative, customised solutions to meet our stakeholders’ needs, both externally and internally. Agility We are supported by an integrated network of colleagues and partners. We believe in consolidating our knowledge and working together for the best solutions. Collaboration We are constantly pushing boundaries. Our pursuit of digital innovations will drive financial inclusion and create opportunities and possibilities for our stakeholders. Future Facing Professionalism, integrity and transparency are values we hold dear. We are fully committed to ethical practices and strive to always maintain credibility in all that we do. Trustworthiness OUR BRAND VALUES
5 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 OUR NOTABLE RECOGNITIONS IN 2022 We have garnered a host of awards and accolades over the years, reflecting our commitment to excellence across the various aspects of our business. KENANGA INVESTMENT BANK BERHAD Tatler Asia’s Most Influential Malaysia 2022 Datuk Chay Wai Leong (Finance and Venture Capital) Asiamoney’s 2022 Best Securities Houses Awards Malaysia’s Best Securities House The Edge Malaysia Centurion Club (Financial Services Category) • Highest Returns to Shareholders Over Three Years • Highest Growth in Profit After Tax Over Three Years • Highest Return on Equity Over Three Years United Nations Global Compact Network Malaysia & Brunei Sustainability Performance Awards 2022 • Partnership for the Goals Recognition • Sustainable Product Recognition • Sustainability Awareness and Employee Engagement Recognition Bursa Excellence Awards 2022 • Best Overall Equities Participating Organisation (Champion) • Best Retail Equities Participating Organisation (Champion) • Best Online Retail Participating Organisation (Champion) • Best Remisier, Margaret Heng (Champion) • Best Remisier, Chew Yee Seng (2nd Runner Up) Bursa Retail Investor Campaign 2022 Top Remisier Category • Highest Number of New Accounts Opened: Yvonne Phang Wei Chien • Highest Number of New Accounts Opened (Shariah): Ahmad Faizal bin Mohamed Yusuf • Highest Traded Value in ETF: Peter Shia Kee Chooi Top Futures Broker Representative Category • Highest Trade Volume – New Accounts (Derivatives): Ho Chih Wei • Highest Number of New Accounts Opened (Derivatives): Ho Chih Wei SRP Asia Pacific Awards 2022 • Best House, South and Southeast Asia Award • Best Educational Initiative Award The Edge Deals of 2022: Best Fundraising (Non-IPO) • Yinson Holdings Berhad’s RM1.2 billion Rights Issue Alpha Southeast Asia 16th Annual Best Deal & Solution Awards • Best Debt Restructuring Deal of the Year 2022 – Capital A’s RM974 million Rights Issue Sustainability & CSR Malaysia Award 2022 • Bank of the Year Award for Environmental, Social & Governance Excellence • Long-Standing Excellence in Sustainability Malaysia PR Awards 2022 • Sustainability Award (Silver) – Launch of The HumanKIND Project: Meals That Give • Consumer Launch Award (Silver) – Kenanga Digital Investing CSRWorks International 8th Asia Sustainability Reporting Awards 2022 • Asia’s Best Sustainability Report – First Time, Silver
6 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information KENANGA INVESTORS BERHAD FSMOne Recommended Unit Trust Awards 2022/2023 Sector Equity – Malaysia Focused Kenanga Growth Fund Series 2 Sector Equity – Malaysia Small to Medium Companies (Islamic) Kenanga Shariah Growth Opportunities Fund Asia Asset Management’s 2023 Best of the Best Awards Malaysia Best Equity Manager Kenanga Investors Group Malaysia Best Impact Investing Manager Kenanga Investors Group Malaysia Best House for Alternatives Kenanga Investors Group Malaysia CEO of the Year Datuk Wira Ismitz Matthew De Alwis, Chief Executive Officer/ Executive Director, Kenanga Investors Berhad Malaysia Most Improved Fund House Kenanga Investors Group Refinitiv Lipper Fund Awards Malaysia 2023 Best Malaysia Large-Cap Equity Fund Kenanga Growth Fund Series 2 (USD) Ranked Highly Commended – Top Investment Houses Kenanga Investors Group 2022 Morningstar Awards Malaysia The Asset Benchmark Research, Asian Local Currency Bond Awards for Asset Managers KENANGA FUTURES SDN BHD Bursa Excellence Awards 2022 • Best Institutional Derivatives Trading Participant (Champion) • Best Overall Derivatives Trading Participant (1st Runner Up) Mixed Asset MYR Flexible – Malaysia Provident Funds Over 10 Years Kenanga Managed Growth Fund Mixed Asset MYR Flexible – Malaysia Provident Funds Over 3 Years Kenanga Managed Growth Fund Equity Malaysia Diversified – Malaysia Provident Funds Over 10 Years Kenanga Malaysian Inc Fund Mixed MYR Flexible – Malaysia Provident Funds Over 5 Years Kenanga Managed Growth Fund OUR NOTABLE RECOGNITIONS IN 2022
7 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 CORPORATE STRUCTURE 100% Kenanga Islamic Investors Berhad Registration No. 199701036457 (451957-D) Note: All the above companies are incorporated in Malaysia except for Kenanga Investment Corporation Ltd, Al Wasatah Al Maliah Company and Rakuten Trade Singapore Pte Ltd. 100% Kenanga Investors Berhad Registration No. 199501024358 (353563-P) 100% Kenanga Futures Sdn Bhd Registration No. 199501024398 (353603-X) 100% Kenanga Capital Sdn Bhd Registration No. 199701024604 (440102-V) 100% Kenanga Private Equity Sdn Bhd Registration No. 199701007563 (423059-P) 50% Rakuten Trade Sdn Bhd Registration No. 199301011963 (266701-P) 50% Rakuten Trade Singapore Pte Ltd (Incorporated in Singapore) Registration No. 201433886E 29.6% Al Wasatah Al Maliah Company (Incorporated in the Kingdom of Saudi Arabia) Registration No. 1010241832 100% K & N Kenanga Holdings Berhad Registration No. 199401017181 (302859-X) 100% Kenanga Nominees (Tempatan) Sdn Bhd Registration No. 197301003326 (16778-M) 100% Kenanga Nominees (Asing) Sdn Bhd Registration No. 199301025305 (280043-U) 100% Kenanga Management & Services Sdn Bhd Registration No. 198001007478 (61262-V) 100% ECML Berhad Registration No. 193001000016 (682-X) 100% Kenanga Digital Sdn Bhd (Formerly known as ECML Nominess (Tempatan) Sdn Bhd) Registration No. 193801000015 (938-T) 100% Avenue Kestrel Sdn Bhd Registration No. 198301001914 (97150-A) 100% SSSB Management Services Sdn Bhd Registration No. 199101009010 (219322-W) 45% Kenanga Investment Corporation Ltd (Incorporated in Sri Lanka) Registration No. PB300 100% I-VCAP Management Sdn Bhd Registration No. 200701034939 (792968-D) 100% KUT Nominees (Asing) Sdn Bhd Registration No. 200201001939 (569602-K) 100% KUT Nominees (Tempatan) Sdn Bhd Registration No. 200201001942 (569605-D) 100% Kenanga Funds Berhad Registration No. 200301017657 (620077-K) 20% Kenanga Capital Islamic Sdn Bhd Registration No. 201101010778 (938908-X) Kenanga Investment Bank Berhad Registration No. 197301002193 (15678-H)
8 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information CORPORATE INFORMATION BOARD OF DIRECTORS ISMAIL HARITH MERICAN Non-Independent Non-Executive Director LUK WAI HONG, WILLIAM Non-Independent Non-Executive Director JEREMY NASRULHAQ Senior Independent Non-Executive Director NORAZIAN AHMAD TAJUDDIN Independent Non-Executive Director KANAGARAJ LORENZ Independent Non-Executive Director CHOY KHAI CHOON Non-Independent Non-Executive Director CHIN SIEW SIEW Independent Non-Executive Director YAM TAN SRI DATO’ SERI SYED ZAINOL ANWAR IBNI SYED PUTRA JAMALULLAIL (“YAM Tan Sri Dato’ Seri Syed Anwar Jamalullail”) Chairman/ Independent Non-Executive Director AUDIT COMMITTEE (“AC”) Chairman - JEREMY NASRULHAQ Members - Kanagaraj Lorenz Norazian Ahmad Tajuddin GROUP GOVERNANCE, NOMINATION & COMPENSATION COMMITTEE (“GNC”) Chairman - CHIN SIEW SIEW Members - Jeremy Nasrulhaq Ismail Harith Merican Norazian Ahmad Tajuddin Choy Khai Choon GROUP BOARD RISK COMMITTEE (“GBRC”) Chairman - NORAZIAN AHMAD TAJUDDIN Members - Luk Wai Hong, William Kanagaraj Lorenz Choy Khai Choon Chin Siew Siew EMPLOYEES’ SHARE SCHEME COMMITTEE (“ESSC”) Chairman - CHIN SIEW SIEW Members - Norazian Ahmad Tajuddin Jeremy Nasrulhaq GROUP BOARD DIGITAL INNOVATION & TECHNOLOGY COMMITTEE (“GBDITC”) Chairman - KANAGARAJ LORENZ Members - Luk Wai Hong, William Jeremy Nasrulhaq Choy Khai Choon Chin Siew Siew SHARIAH COMMITTEE Chairman - DR. GHAZALI JAAPAR Members - Dr. Mohammad Firdaus Mohammad Hatta Dr. Fadillah Mansor
9 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 CORPORATE INFORMATION DATUK CHAY WAI LEONG Group Managing Director Kenanga Investment Bank Berhad LEE KOK KHEE Executive Director, Head of Group Equity Broking Business Kenanga Investment Bank Berhad DATUK ROSLAN HJ TIK Executive Director, Head of Group Investment Banking and Islamic Banking Kenanga Investment Bank Berhad CYNTHIA WOON CHENG YEE Head of Group Treasury Kenanga Investment Bank Berhad DATUK WIRA ISMITZ MATTHEW DE ALWIS Chief Executive Officer/ Executive Director Kenanga Investors Berhad GROUP EXECUTIVE COMMITTEE AZILA ABDUL AZIZ Chief Executive Officer/ Executive Director and Head of Listed Derivatives Kenanga Futures Sdn Bhd CHEONG BOON KAK Group Chief Financial and Operations Officer Kenanga Investment Bank Berhad MAHESWARI KANNIAH Group Chief Regulatory and Compliance Officer Kenanga Investment Bank Berhad NIK HASNIZA NIK IBRAHIM Head of Group Human Resource Kenanga Investment Bank Berhad TAI YAN FEE Group Chief Risk Officer Kenanga Investment Bank Berhad WOO KING HUAT Chief Credit Officer Kenanga Investment Bank Berhad VAITHIYANATHAN MADAVAN Head of Group Operations Kenanga Investment Bank Berhad LOW JIA YEE Chief Technology Officer Kenanga Investment Bank Berhad SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR JEREMY NASRULHAQ Email : jeremyn@kenanga.com.my GROUP COMPANY SECRETARY NORLIZA ABD SAMAD (CCM PC NO.: 201908002139) (MAICSA 7011089) REGISTERED OFFICE KENANGA INVESTMENT BANK BERHAD Registration Number: 197301002193 (15678-H) Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Wilayah Persekutuan, Malaysia Tel : +603-2172 2888 Fax : +603-2172 2999 URL : https://www.kenanga.com.my E-mail : kenanga@kenanga.com.my SHARE REGISTRAR BOARDROOM SHARE REGISTRARS SDN BHD Registration Number: 199601006647 (378993-D) 11th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel : +603-7890 4700 Fax : +603-7890 4670 E-mail :BSR.Helpdesk@ boardroomlimited.com Website : https://www.boardroomlimited.com AUDITORS ERNST & YOUNG PLT (202006000003 (LLP0022760-LCA) & AF 0039) Chartered Accountants Level 23A, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, 50490 Kuala Lumpur, Wilayah Persekutuan, Malaysia PRINCIPAL BANKERS • AmBank (M) Berhad • CIMB Bank Berhad • Malayan Banking Berhad • RHB Bank Berhad • Standard Chartered Bank (Malaysia) Berhad STOCK EXCHANGE LISTING BURSA MALAYSIA SECURITIES BERHAD Main Market: Financial Services Stock Name: KENANGA Stock Code: 6483 Listing Date: 2 November 2016
10 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information CHAIRMAN’S MESSAGE Marked by turmoil arising from the Russia-Ukraine conflict, high inflation and aggressive interest rate hikes, as well as looming concerns of recession, 2022 could perhaps be characterised as one of the most turbulent of years. However, I am proud to say that through these challenges, Kenanga Investment Bank Berhad and Its Group of Companies (“Kenanga Group” or “the Group”) demonstrated immense resilience, agility and adaptability that allowed the Group to continue making significant strides in pursuit of sustainable growth. The Group ended the year with a Revenue of RM723.1 million and a Profit Before Tax (“PBT”) of RM74.2 million. Net profit stood at RM55.4 million. DEAR SHAREHOLDERS,
11 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 Promoting Ethics and Good Governance In FY2022, Kenanga Group held its sixth (6th) annual Fraud Awareness Week, which was held in conjunction with the International Fraud Awareness Week organised by the US-based Association of Certified Fraud Examiners. The event served as a platform to raise awareness on the importance of fraud detection and the need for a strong anti-fraud and anti-corruption culture. This year’s theme, ‘Reaffirming Ethical and Moral Resilience for Good Governance’, was highlighted through presentations and activities that engaged industry players and individuals. The event drew a record number of participants demonstrating the growing interest and commitment to combating fraud and corruption. In line with our commitment to ethics and good governance, Kenanga Group continues to invest in internal programmes and training to deepen our employees’ understanding of ethical conduct and corporate governance. Over the past two (2) years, employees have undergone more than 16,000 training hours in areas such as ethics, governance, and compliance. Anticipating what lies ahead, we remain committed to building a strong and resilient financial ecosystem through our efforts to combat fraud and corruption, and our continued investments in ethical and governance programmes. CHAIRMAN’S MESSAGE On the strength of these results, the Board is pleased to declare a dividend of 6.0 sen per share, amounting to dividends payable of RM43.6 million for FY2022. In the Management Discussion and Analysis, Group Managing Director, Datuk Chay Wai Leong will cover a comprehensive overview of the Group’s activities and performance. However, it is imperative that I highlight here, that the growth of Kenanga Group is not just limited to financial gains, but also encompasses a broader commitment towards making a positive difference to our people, communities and environment. Sustainability in Motion Recent years have seen the Group accelerating its sustainability agenda and placing Environmental, Social and Governance (“ESG”) considerations as part of its decision-making processes. Our commitment to sustainability is a key part of our growth story and has become one of the characteristics of the Kenanga brand. Over the course of 2022, I am proud to share that we made tremendous progress on the ESG front, which culminated in Kenanga Investment Bank Berhad’s inclusion onto the FTSE4Good Bursa Malaysia Index in December 2022. With that, we now join the 10% of public listed companies in Malaysia included on this index that is based on global ESG standards and benchmarks. Designed by global index provider FTSE Russell, the inclusion is a welcomed validation of our commitment to sustainability and responsible business practices. In the same year, we were heartened to receive multiple accolades at the UN Global Compact Network Malaysia & Brunei Sustainability Performance Awards, an event initiated to recognise continuous ESG efforts by its member participants. Kenanga Group was commended for our innovative approach to product development that integrates financial growth with social and community impacts; efforts in fostering partnerships and collaborations for financial inclusion; and raising awareness on sustainability issues. It was an honour to share the stage with some of the prominent sustainability stalwarts in the industry and take stock of how far we have come in a short period of time. As we move forward, the Board is dedicated to reinforce our sustainability agenda. We have developed a Three (3)-Year Sustainability Roadmap with specific goals and targets to strengthen our ESG footing, amplify our ESG impact, and improve our sustainability standards. Our steadfast commitment to sustainability will continue to guide our business as we work to create a better future for all. More information on our sustainability efforts can be found in our Sustainability Report 2022. Further information about our efforts in this area can be found in the Ethics and Compliance Statement on page 97 of this Annual Report.
12 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information CHAIRMAN’S MESSAGE Within the organisation, we are committed to prioritising the wellbeing and development of our employees, recognising that they are our most valuable asset. We believe in fostering a workplace culture that supports and encourages our employees to reach their full potential, both personally and professionally. Broadening our view on workplace safety, we are embracing employee mental and emotional wellbeing in addition to physical health. During the year, we kickstarted programmes on mental wellness, with the aim to reduce the stigma of mental-health issues and reinforce a safe and supported workplace for our employees. EMPOWERING PEOPLE AND COMMUNITIES Amid the ongoing effects of the COVID-19 pandemic and its impact on society, we are acutely aware of the growing social and community needs facing Malaysians, particularly those who are most marginalised. During the year, we supported seven (7) organisations via eight (8) projects. We launched the ‘Meals That Give’ campaign with the aim of rallying public support for our long-term social enterprise partner ‘Café Includes’, a café operated by people with disabilities. Through this campaign, Malaysians were able to pledge meals for distribution to the underprivileged, with Kenanga matching each pledge one-for-one. In total, we raised over 2,700 meals for vulnerable communities in FY2022.
13 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 CHAIRMAN’S MESSAGE THE COMING YEAR This coming year, we will be celebrating Kenanga’s 50th anniversary as a proud home-grown brand that has evolved from a humble stockbroking company to the country’s leading independent investment bank. Over the years, we have dedicated to providing exceptional services to our clients, helping them grow their wealth and achieve their financial goals. While we are keenly aware of the significant uncertainties and complexities that continue to persist around the world, particularly with regards to the ongoing geo-political events, supply chain disruptions and escalating inflation, the Board of Directors (“Board”) is confident that the Group’s fortitude, resourcefulness and resilience – its hallmarks that have been honed through the decades – will enable it to navigate the waters. Our journey thus far has been driven by constant innovation and a commitment to staying ahead of the curve. As we enter our next fifty (50) years, we renew our ambition to deliver best possible solutions and services that are inclusive, meaningful and beneficial to our stakeholders, and to do what it takes to further fortify our foundation, upon which we will continue to spur growth and prosperity, in the years to come. BOARD MOVEMENT On behalf of the Board, I would like to express our gratitude to Mr. Luigi Fortunato Ghirardello (“Mr. Ghirardello”) who retired as Non-Independent Non-Executive Director of Kenanga Investment Bank Berhad in May 2022. Throughout his tenure of thirteen (13) years on the Board, he has provided invaluable guidance, ideas and dedication to the organisation and we are grateful for his contribution. Mr. Ghirardello continues to serve as Chairman of Kenanga Futures Sdn Bhd, a wholly-owned subsidiary of Kenanga Investment Bank Berhad. We extend our best wishes to him for all his future endeavour. I would also like take this opportunity to extend a very warm welcome to Madam Chin Siew Siew, who joined our Board in June 2022. She brings to the Board three (3) decades of experience in the digital and technology industry which comes at an excellent time for the Group’s digital strategy. She has served as Country Chief Digital Officer at IBM where she was also ASEAN Services Leader for IBM Multivendor Business. In that capacity, she oversaw the establishment of the IBM Malaysia Centre of Digital Excellence, which connects start-ups, investors, technology partners and government stakeholders. We very much look forward to her contribution to Kenanga Group as we move forward on our digital journey and transformation. APPRECIATION I would like to express appreciation to Kenanga Group Founder Emeritus and Adviser, YM Tan Sri Dato’ Paduka Tengku Noor Zakiah Tengku Ismail. Her friendship and trust have always been a wonderful source of inspiration for myself and for all of us at Kenanga Group. I would also like to thank my colleagues on the Board for their support and advice throughout the year, as well as the Management and employees of Kenanga Group. Their exemplary service and dedication in these challenging times have deepened and enriched the values that continue to define the Kenanga Group as a whole. Finally, I wish to convey my appreciation to our valued clients, business partners, suppliers and shareholders for their trust in the Group, as well as to Bank Negara Malaysia, Bursa Malaysia Berhad and Securities Commission Malaysia for their advice and support. TAN SRI DATO’ SERI SYED ANWAR JAMALULLAIL Chairman
14 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS The macroeconomic and political environment in 2022 were amongst the most challenging in recent history. Capital markets were particularly impacted by aggressive interest rate hikes by central banks globally, implemented to combat inflation caused by global supply chain disruptions. The Russia-Ukraine crisis also started in the early part of the year and is still ongoing. Recession fears loomed on the horizon, exacerbating market jitters. On the domestic front, the Malaysian economy rebounded towards the middle of the year with the easing of restrictions and reopening of borders as it transitioned to COVID-19 endemic phase. While Malaysian Gross Domestic Product (“GDP”) grew 8.7%, the negative global macro sentiments weighed on investors’ appetite, which sparked heavy sell-offs. After two (2) years of exceptional trading activities on the bourse, Trading Volume and Trading Value on Bursa Malaysia dropped by 49.1% and 40.8% respectively. DEAR SHAREHOLDERS,
15 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 Investment Banking Investment Banking division eased its PBT to RM15.8 million in FY2022. Please refer to page 18. Money Lending and Financing Structured Lending and Trade Financing division registered a PBT of RM0.1 million in FY2022. Please refer to page 20. Asset and Wealth Management Asset and Wealth Management division recorded exceptional growth in FY2022 with a PBT of 54.2 million. Please refer to page 19. Listed Derivatives Listed Derivatives division made a return to profitability in FY2022 with a PBT of RM2.1 million. Please refer to page 20. Please refer to page 17. Stockbroking Stockbroking division recorded a PBT of RM2.5 million in FY2022. SEGMENTAL REVIEW GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS RESULTS Profit Before Tax RM74.2 million Dividend Declared 6.0 sen Net Profit RM55.4 million Earnings Per Share 7.5 sen Annualised Return on Equity 5.3% ONE OF OUR BEST YEARS DESPITE HEADWINDS Against these significant setbacks, Kenanga Investment Bank Berhad (“Kenanga” or “the Group”) continued to record one of its best financial years within a decade. Led by record-high performance from our Asset and Wealth Management business, the Group posted a Revenue and Profit Before Tax (“PBT”) of RM723.1 million and RM74.2 million respectively for the Financial Year Ended 31 December 2022 (“FY2022”), while Net Profit for the year stood at RM55.4 million. Our Stockbroking business was naturally affected by the substantial drop in trading activities. Still, the business continued to focus on expanding market presence, driving its retail market share to 27.0% from 24.2% the year before, reinforcing its pole position as one of the largest retail stockbrokers in the marketplace. Its commitment to excellence earned us the coveted recognition of ‘Best Overall Equities Participating Organisation’ from Bursa Malaysia for the third consecutive year. These wins, underpinned by measures of prudence in our lending practices and trading positions in equity and bonds, moderated the impact of the uncertainties and decline in the market.
16 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS In a year shaped by intense headwinds, the enterprising spirit of our people was the cornerstone to many new opportunities that tapped the underserved segments, as well as drove the design of new solutions that responded to changing demands fuelled by the volatile market conditions. This culture of tenacity and growth mindset has enabled us to continue delivering healthy returns to shareholders in the face of a tumultuous year. In this respect, I am happy to report that the Group was recognised by The Edge Centurion Ringgit Club during the year for our performance and was awarded the coveted accolade of ‘Highest Returns to Shareholders Over Three Years’, ‘Highest Growth in Profit After Tax Over Three Years’, and ‘Highest Return on Equity Over Three Years’. I take this opportunity to express my gratitude to every member of Kenanga Group, whose dedication and commitment to a better future have contributed to the growth and strength of the Group today. THE DIGITAL JOURNEY CONTINUES In February 2022, Kenanga launched a fully-automated A.I.-driven robo-advisor, Kenanga Digital Investing (“KDI”). A product licensed by the Securities Commission Malaysia, the platform offers two (2) convenient products – KDI Save and KDI Invest – designed to improve access to savings and investing for Malaysians from all walks of life. Equipped with technology to monitor global markets and to react to new investing opportunities, the platform analyses thousands of data points each day, incorporating information from across continents and asset classes to develop investment portfolios that aim to generate sustainable returns while managing risks. In just over two (2) months, KDI surpassed the RM100 million mark in assets under management (“AUM”) on the back of positive responses from over 6,500 signups. By December 2022, AUM stood at almost RM250 million with 17,000 clients – an encouraging start to the Group’s aim to democratise investing for Malaysians through the provision of better options, better access, and better value in financial products and services. In keeping pace with our digital agenda and ambition to broaden retail participation in investing, Kenanga signed a Memorandum of Understanding with globally recognised digital infrastructure and platform provider Ant Group, to develop and launch Malaysia’s first B2C wealth-centric SuperApp. Positioned to be a game-changer in wealth management, the platform will apply Ant Group’s proprietary tried and tested solution, Mobile Platform as a Service, and integrate a suite of financial products, such as equity trading, digital investment products, e-wallet, crypto trading and foreign currency wallet, onto a single platform and ecosystem. Scheduled for launch in 2023, the SuperApp will be scalable with the potential for diversification and growth to meet changing market demands. Modular and adaptable, this solution will contribute positively to Kenanga’s growing array of products and services, and the enrichment of the Malaysian financial services ecosystem in general. Further to that, we invested in tools and solutions during the year to migrate existing client processes, such as on-boarding and client management to online channels. As a result, we launched a Digital Client On-boarding platform and we expect to roll out a retail-fronting Treasury FX platform in 2023. CORPORATE HIGHLIGHTS The Group completed the divestment of its 49% equity stake in Kenanga Vietnam Securities Joint Stock Corporation in May 2022. The company was inactive, and the divestment will allow the Group to start afresh in Vietnam when opportunities arise. In 4Q FY2022, the Group signed a new joint-venture agreement with Rakuten Securities, Inc. to enable the expansion of Rakuten Trade Sdn Bhd (“Rakuten Trade”) to Singapore, creating the beginnings of a regional presence for the Kenanga-Rakuten franchise. At the time of this report, the Monetary Authority of Singapore is processing our application for an operating license, and we expect to commence business by the end of FY2023. In December 2022, we were pleased to learn that Kenanga Investment Bank Berhad had been included onto the FTSE4Good Bursa Malaysia Index, a testimony of our ESG performance that is benchmarked against global standards. We are cognisant of the urgency and significance of progressing our sustainability agenda and are committed to maintaining momentum in the integration of ESG aspects into our value chain.
17 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL POSITION As at 31 December 2022, the Group and Company capital adequacy ratios were 28.9% and 30.7% respectively, which were in excess of the minimum regulatory capital adequacy of 10.5% set by Bank Negara Malaysia, including a capital conservation buffer of 2.5%. Liquidity Coverage Ratio was 183.0%, well above the regulatory requirement of 100%, while Net Stable Funding Ratio stood at 124.1%, above the mandatory minimum of 100%. The Group maintained A+ and MARC-1 ratings from the Malaysian Rating Corporation Berhad (“MARC”), a reflection of our strong capital position, profitability, and funding profile despite weakened capital market conditions. As always, we will continue to work towards achieving and sustaining the highest ratings through constant improvements to our financial performance. For the same period, our subsidiaries Kenanga Investors Berhad and Kenanga Islamic Investors Berhad maintained MARC IMR-2 ratings, affirming our commitment to well-established investment processes and sound risk management practices. SEGMENTAL REVIEW Despite the easing of COVID-19 restrictions and the rapid normalisation of economic activity in Malaysia and around the world, FY2022 was an intensely challenging year for equities listed on Bursa Malaysia. As mentioned, trading volumes and momentum dissipated sharply. The performance of our joint-venture business Rakuten Trade—Malaysia’s first online trading platform—was impaired by low trading volumes and retail participation in the Malaysian market, with brokerage income falling 63.1% to RM17.9 million. Its newly launched US-based Stockbroking platform contributed 20% of its overall revenue but was adversely affected by the US Federal Reserve’s aggressive interest rate changes throughout the year. Nonetheless, Rakuten Trade grew its customer base by approximately 21,000 new accounts, bringing the total number of accounts since it first launched to more than 257,000. Its client trust cash balance ended 8.5% higher year-on-year at RM443 million, indicating strong confidence among its clients. Despite headwinds, our Stockbroking division recorded a PBT of RM2.5 million in FY2022. It mitigated many of the harsher effects of the year-long challenges by maximising business efficiencies, careful cost management, and the continued development of a well-rounded client base encompassing retail and institutional clients, as well as increasingly diversified income, including its algorithmic trading and Structured Derivatives businesses. In tandem with the Group’s digitalisation journey and strategies to improve efficiency, the division continued to consolidate its physical office presence nationwide with the closure of twelve (12) branches in early 2022. This development had minimal effect on daily operations as clients and remisiers have been steadily migrating to the Group’s online platforms since the beginning of the COVID-19 pandemic. The developments that initially took place as a means to lessen or overcome the negative impact of the lockdown have since translated into significant increases in operational efficiency with no disruption to daily business through the rollout of additional digital products and services in FY2022 such as an e-onboarding platform for clients, which drastically improves and shorten the account opening process, as well as continuous improvements to our remisiers’ portal. We also plan to roll out algorithmic trading platform for our clients in FY2023. The division also continued its efforts to build better investor literacy through public education and outreach for existing as well as prospective customers, with a richer and more comprehensive series of webinars and other digital content on various financial topics. Thus, it is very gratifying to note that its efforts continue to be recognised for excellence in the industry. These include several accolades at the Bursa Excellence Awards 2022 such as ‘Best Overall Equities Participating Organisation’ (Champion), ‘Best Retail Equities Participating Organisation’ (Champion), and ‘Best Online Retail Participating Organisation’ (Champion).
18 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS Meanwhile in the area of corporate debt, the division was appointed as the Principal Adviser, Lead Arranger, Lead Manager and Shariah Adviser and Facility Agent for Gabungan AQRS Berhad’s proposed Islamic Commercial Paper (“ICP”) and Islamic Medium-Term Note (“IMTN”) Programme of RM200 million in nominal value, as well as SkyWorld Capital Berhad’s ICP and IMTN Programme of RM300 million in nominal value. The division also advised on Impiana Hotels Berhad’s Redeemable Convertible Notes Programmes to raise funds for debt repayment and working capital; and Sarawak Cable Berhad’s proposed issuance of Redeemable Convertible Debts with a total value of RM48.4 million. In corporate banking, the division maintained a prudent management approach to monitor its portfolio’s credit risk given the increasingly volatile macroeconomic environment. The division is growing its portfolio cautiously, by undertaking stringent credit assessments for all corporate lending prospects. As such, its loan portfolio currently stands at RM571 million as we cautiously grew in 2022. In Islamic finance, the division’s Shariah Committee continued its role as Shariah advisor to sukuk programmes established by debt capital market clients, including Gabungan AQRS Berhad and Skyworld Capital Berhad. It also assisted the Equity Broking division in developing a new Islamic Securities Selling and Buying Negotiated Transaction product which came on stream in August 2022. Meanwhile, FY2022 PBT for the Group’s Treasury business moderated to RM6.0 million, down RM3.1 million from the year before due to significantly lower interest income amidst a backdrop of rising interest rate scenario which adversely affected the bond market. The prudent stance in reducing its bond portfolio since 2021 has minimised the losses from the bond market and Kenanga’s liquidity ratios remain healthy despite strong competition in the deposit market due to continuing efforts to diversify its client base. Treasury will continue its product diversification initiatives to increase profitability and achieve higher sales volume. With the strongly unfavourable market, the Investment Banking division eased its PBT to RM15.8 million in FY2022 compared to RM20.6 million the previous year. In the equity capital market, the division was instrumental in the successful listing of a pawnshop operator, Pappajack Berhad on the ACE Market of Bursa Malaysia—the first of its kind to be listed on the Malaysian stock exchange, which underscores Kenanga’s strength in bringing non-conventional listing aspirants to Bursa Malaysia. The division had also successfully listed a digital solution and application development specialist, Agmo Holdings Berhad on the ACE Market of Bursa Malaysia with a strong debut of 207.7% premium over its initial public offering (“IPO”) price. In the course of the year, the division also filed for the listing of another three (3) IPOs—Synergy House Berhad (ACE Market), Skyworld Development Sdn Bhd (Main Market), and Neptune Asia Services Sdn Bhd (Main Market)— which are targeted to list by 2Q FY2023. The division also advised on the reverse acquisition of G Neptune Berhad by Southern Score Sdn Bhd, raising a total of RM108.9 million in conjunction with the backdoor listing, and participated as Joint Underwriter in Yinson Holdings Berhad’s RM1.2 billion rights issue, being one of the largest equity fundraisings in the market since the pandemic which was oversubscribed by 22.3%. The transaction was awarded ‘The Edge Deals of 2022: Best Fundraising (Non-IPO)’ award. In addition, the Investment Banking division was also the Joint Underwriter for the RM974 million Capital A’s rights issue, winning the ‘Best Debt Restructuring Deal of the Year 2022’ at the Alpha Southeast Asia 16th Annual Best Deal & Solution Awards 2022. In the debt capital market, the division acted as the Joint Lead Manager and played a significant role in the book building of the RM1.5 billion issuance under Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN)’s existing RM12.3 billion Sukuk Murabahah Programme, as well as Prasarana Malaysia Berhad’s RM1.4 billion issuance under its two (2) existing Sukuk Murabahah Programmes. Investment Banking
19 KENANGA INVESTMENT BANK BERHAD Annual Report 2022 GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS In FY2022 KIG expanded upon its Sustainability Blueprint to include the fixed-income asset class by establishing an in-house ESG assessment to perform positive screening for bonds/ sukuk based on independent and accredited external data sources. On the equity front, a more comprehensive sector/ industry-focused assessment was established for sectors with high ESG risk. To effectively manage and monitor risks, various factors and indicators specific to respective industries such as palm oil, oil & gas, banking & finance, power, and mining were integrated into this process for a more holistic perspective. For its stellar fund performance, KIG won several industry accolades including the 2023 Refinitiv Lipper Fund Awards where the Kenanga Malaysian Inc Fund won ‘Equity Malaysia Diversified for 10 Years’ while the Kenanga Managed Growth Fund won ‘Mixed Asset MYR Flexible for 3, 5 and 10 Years’. KIG itself won the ‘Malaysia Provident Funds Group Award’. At Asia Asset Management’s 2023 Best of the Best Awards, KIG was named ‘Malaysia Best Equity Manager’, ‘Malaysia Best Impact Investing Manager’, ‘Malaysia Best House for Alternatives’, and ‘Malaysia Most Improved Fund House’. KIB’s Chief Executive Officer and Executive Director, Datuk Wira Ismitz Matthew De Alwis was named ‘Malaysia CEO of the Year’. KIG also received recognition at the 2022 Morningstar Fund Awards Malaysia which awarded the Kenanga Growth Fund Series 2 (USD) with its inaugural win with the best ‘Malaysia Large-Cap Equity’ title. The Asset Benchmark Research ranked KIG as Highly Commended on its list of ‘Top Investment Houses’ in the Asian Local Currency Bond Awards for Asset Managers. The FSMOne Recommended Unit Trusts Awards 2022/2023, named Kenanga Growth Fund Series 2 as ‘Sector Equity – Malaysia Focused’ and Kenanga Shariah Growth Opportunities Fund as ‘Sector Equity - Malaysia Small to Medium Companies (Islamic)’. At the Sustainability Performance Awards, the Group’s Sustainable Products award recognised KIG’s multiple ESG-linked funds through the Kenanga Sustainability Series, particularly the first SRI-qualified bond fund in Kenanga Sustainability Series: High Yield Bond Fund. The Group’s Asset and Wealth Management division consists of Kenanga Investors Berhad (“KIB”), Kenanga Islamic Investors Berhad (“KIIB”), and I-VCAP Management Sdn Bhd (“I-VCAP”) collectively known as Kenanga Investors Group (“KIG”), as well as Digital Investment Management and Wealth Management units, where offerings include a range of conventional collective investment schemes, robo-advisory, portfolio management services as well as alternative investments. Despite the overall downtrends in the market, our Asset and Wealth Management division recorded exceptional growth in FY2022, with a PBT of RM54.2 million over RM34.9 million the previous year. These results were due to significantly higher earnings from management and performance fees resulting from the ongoing expansion of KIG’s business and widening of its client base through multi-segmental products and services targeted individually at mass-retail, middle-high-income, and ultra-high-net-worth investors. To meet the diverse demands of its investors, KIG has implemented a multi-segment and multi-product strategy. This was illustrated through the expansion of the Kenanga Sustainability Series with the launch of the Kenanga Sustainability Series: High Yield Bond Fund, the first Sustainable and Responsible Investment (“SRI”)-qualified high yield bond fund in Malaysia and the Kenanga Sustainability Series: World Quality ESG Fund which aims to deliver long-term capital growth by investing in securities that exhibit quality and favourable ESG characteristics. Following KIG’s appointment as the Fund Manager for Dana Wakaf Bencana in 2021, the Kenanga Sustainability Series: Emergency Waqf Musa’adah Fund was launched to generate sustainable returns that will directly benefit disaster victims in the country by helping them return to normalcy. Returns will also go towards providing new or improving existing climate change disaster-control-related facilities or equipment. KIB continues to expand its network of licensed unit trust and private retirement scheme consultants which has grown to nearly 5,500 in FY2022 compared to 4,500 in FY2021. Asset and Wealth Management
20 Additional Information We Are Kenanga Leadership Message Our Sustainability Approach How We Are Governed Financial Statements Shareholders’ Information GROUP MANAGING DIRECTOR’S MANAGEMENT DISCUSSION AND ANALYSIS In FY2022, Kenanga Futures Sdn Bhd (“KFSB”) made a return to profitability, and the division’s operating revenue grew 27% to RM19.7 million on the back of significant increases in both inbound and outbound trading activities—at a composition ratio of 80:20 respectively. KFSB’s execution volumes registered outstanding growth of 95% year-on-year, with an unprecedented nine (9) million contracts. These developments corresponded to a record-breaking year at Bursa Malaysia Derivatives Berhad (“BMD”), with the overall market volume growing 3% to 19.2 million contracts. As a result, KFSB recorded PBT of RM2.1 million in FY2022 over Loss Before Tax (“LBT”) of RM1.8 million in the preceding year. In building up the business profitability momentum and ensuring optimum performance for the year, KFSB consolidated its organisational structure into four (4) departments: Sales & Broking, Dealing Global Market, Business Development & Strategy, as well as Operations & Clearing Services, Listed Derivatives. The formation of the Sales & Broking department was aimed at targeted sales coverage for both Global and Domestic Institutions/ Corporations & Retail/ High Net Worth Individuals segments. As a result, KFSB’s institutional volumes for Crude Palm Oil Futures (FCPO) recorded historical highs in FY2022 compared to the previous year. Meanwhile, the retail volumes for CME Group’s products have seen a significant Listed Derivatives Business The Group’s Money Lending and Trade Financing division registered PBT of RM0.1 million in FY2022 compared to PBT of RM1.6 million the preceding year. The reduction was due primarily to an impairment provision of RM1.8 million— expected to be reversed in 2023, weaker market demand for asset monetisation and structured lending as well as more prudent lending. Given these challenges, the division intensified engagement with other business divisions within the Group to increase the loan book size, which grew to RM109.7 million from RM94.4 million the previous year. These efforts are expected to bear fruit in 2023 as Malaysia, and worldwide economies recover. Money Lending and Financing 50% growth year-on-year compared to the previous year. Besides these developments, KFSB continued to build on its three (3)-year strategic business blueprint, ASCENT 2023, by undertaking annual nationwide retail campaigns in FY2022 to encourage greater retail client trade of BMD and CME Group products. KFSB continued to be recognised as a top Malaysian futures broker with two (2) awards received at the Bursa Excellence Awards 2022, which are ‘Best Institutional Derivatives Trading Participant’ (Champion) and ‘Best Overall Derivatives Trading Participant’ (1st Runner Up). In FY2023, KFSB will focus its revenue-generating strategy towards growing both the inbound and outbound business supported by the increased product offerings as the division aims towards further improving the company’s bottom line and continuing the profitability momentum. The division’s focus on delivering sustainable performance, high-quality advice and exceptional customer service has driven customer satisfaction and loyalty despite the volatilities of the last three (3) years. Moving forward, KIG will continue to focus on offering wealth protection solutions, such as insurance and private trust, to help preserve and grow investors’ wealth. To better serve its clients, KIG will continue expanding its distribution channels, including opening up more branches nationwide, improving upon its existing digital platforms, and growing its agency force. With its multi-segment and multi-product framework, sophisticated ESG blueprint, and commitment to sustainability, KIG is poised to continue delivering value to its investors for years to come.
RkJQdWJsaXNoZXIy NDgzMzc=