Higher dividend anticipated from Tabung Haji

TH has the ability to give better dividend as a result of its asset surplus that stood at RM2.3b last year, says expert


LEMBAGA Tabung Haji (TH) is expected to declare a higher return, double the 1.25% announced last year, as economists believe the worst is over for the pilgrims fund board.

While TH’s 9.3 million depositors wait anxiously for the dividend announcement, speculations are rife that the fund might declare a less than stellar return.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid, however, said TH has the ability to give better dividend for financial year 2019 (FY19), as a result of its asset surplus that stood at RM2.3 billion last year, a stark contrast to RM1 billion at the end of 2018.

“In that sense, TH has the ability to give better dividend for FY19. As to whether TH would be able to sustain its dividend payment going forward, it will be very much dependant on the prevailing market conditions,” Mohd Afzanizam told The Malaysian Reserve (TMR).

Due to the strong support from the government, TH ended its FY18 with a total asset surplus of RM1 billion compared to a total asset deficit of RM4.1 billion in 2017, while a net profit of RM500 million was recorded in the quarter, bringing the total profit for the first nine months (9M) to RM1.3 billion.

TH also recorded earnings of RM900 million in the same quarter, increasing revenue for the 9M of 2019 to RM2.1 billion.

As at Dec 31 last year, its total assets stood at RM76.5 billion, which is in excess of its liabilities of RM75.5 billion.

However, FY18 was also the year the pilgrimage fund announced its lowest dividend in history, at 1.25%, amounting to RM913 million for all depositors.

Comparatively for FY17, TH had paid a total of 6.25% dividend to its depositors who have not performed their pilgrimage and 4.5% to those who have.

Notably, between FY14 and FY17, the fund announced returns between RM2.9 billion and RM3.24 billion.

“Given that TH is focusing on fixed income instruments, we foresee that its investment income would be stable, given that it is relatively low risk compared to equities.

“This should give comfort to depositors that their future dividend will not fluctuate excessively. Having said that, there should be a change in mindset about TH as their mandate is to facilitate Muslims to perform their haj as the fifth pillars of Rukun Islam,” Mohd Afzanizam said.

He said if the depositors wish to make higher investment returns, they should also consider investment avenues such as unit trust or direct investment.

Institute for Democracy and Economic Affairs senior economist Adli Amirullah, who also echoed Mohd Afzanizam’s views, said if depositors intend to receive high returns, they should go for higher risk investment platform.

“My take on this matter usually comes back to the investors or depositors’ point of view. For the past half-decade, Malaysia’s investment arms like TH and Amanah Saham Bumiputera have been paying a relatively high dividend payout.

“This has actually created an expectation of a highly positive return from investors/depositors. When they have been anticipating higher earnings, this actually creates a problem of unrealistic expectations,” he told TMR, adding that in any kind of investment, there will always be a risk.

Adli said this “risk” component has been forgotten by many of the public.

“There is a saying that ‘there is no such thing as a free lunch’. When it comes to investment, there will be a loss and a return. That is why even if TH’s dividend is not as high as its ‘glory days’, it is the responsibility of the investors/depositors to take the risk.

“If I am not mistaken, the depositors won’t be losing their money like a typical conventional investment, but it may earn little to no earnings, which I think is fine since it is a low-risk safe investment platform,” he added.

At the end of the day, Adli said, those who “invest money in TH”, should not be demanding higher returns since the risk is very low.

“If they want high returns, go for higher risk investment platform,” he added.

TH was in the limelight for the past year when the government had to step in to bail the company, which involved the transfer of a basket of underperforming assets to the government-owned special-purpose vehicle called Urusharta Jamaah Sdn Bhd (UJSB), which had given TH the space for financial recovery.

The underperforming assets had a book value of RM9.7 billion, but they were transferred to UJSB at RM19.9 billion to enable TH to cover the deficit of RM10.9 billion sitting on the balance sheet.

The transfer will be settled via a RM19.6 billion sukuk and RM300 million in cash, thus the financial restructuring has enabled the fund to close the deficit and restore the balance sheet to normal footing.