Dear Shareholders,

It is our pleasure, on behalf of the Board of Directors to present the Annual Report and Audited Financial Statements of JcbNext Berhad (“JcbNext” or “the Group”) for the financial year ended 31 December 2023.

FINANCIAL PERFORMANCE

For the financial year ended 31 December 2023, the Group recorded revenue of RM10.91 million, profit before tax of RM41.32 million and a profit attributable to shareholders of RM35.49 million, representing year on year (“YoY”) increase of 14.4%, 61.4% and 50.6% respectively. The growth is brought about by an increase in dividend income from equity investments from RM7.16 million in 2022 to RM7.86 million in 2023. In addition, the Group’s interest income had increased 123.4% to RM1.50 million in 2023 and similarly, gains on financial assets classified as fair value through profit and loss which are mainly in respect of the Group’s investment in money market funds, had increased by RM1.00 million, driven partly by the increase in cash as well as the general increase in interest rates during the year. We also continued to sell shares of 104 Corporation in the open market during the year which contributed gains amounting to RM18.47 million to our bottom line. The Group’s operating expenses had decreased by 11.1% YoY with the decrease attributed to lower staff cost and consolidation of the Group’s subsidiary in Japan for six months as it was sold in June 2023. It is good to see growth in dividends received from our equity investments which is in line with our objective of growing free cash flows which can then be distributed back to you, our shareholders. The higher dividend income also means our dependence on our associates, in particular 104 Corporation, is gradually reducing and we can have a more diversified income base.

To have a balanced picture of the financial performance of the Group during the year, we would also have to look into the consolidated statement of financial position, specifically in equity. Despite net profit attributable to shareholders being RM35.49 million, the Group’s net assets grew by only RM13.35 million or 3.8% YoY. This was mainly due to a decrease in the fair value of the Group’s equity investments designated at fair value through other comprehensive income (FVOCI) during the year by RM15.32 million. The decrease was mainly attributable to the Group’s investments in Hastings Technology Metal Limited and Chinese stocks. After accounting for the payment of the final dividend for 2022 amounting to RM7.92 million, net assets or shareholders’ funds increased from RM348.80 million in 2022 to RM362.15 million in the current financial year.

As at 31 December 2023, our total assets stood at RM371.66 million with shareholders’ funds recorded at RM362.15 million (book value per share of RM2.74), compared with RM350.79 million and RM348.80 million (book value per share of RM2.64) at the end of 2022. With liquid cash and short-term investments in money market funds totalling RM109.57 million, and no debt, we continue to search for acquisition opportunities and believe we are positioned well to enter into long-term partnerships when such opportunities eventually arise.

A detailed discussion of the Group’s financial performance can be found in the Management Discussion and Analysis included in this Annual Report.

DIVIDEND

The Board of Directors is pleased to propose a final single-tier dividend of 6.5 sen per share for 2023 (2022: 6.0 sen). The proposed dividend is subject to shareholders’ approval at the forthcoming Annual General Meeting.

CORPORATE DEVELOPMENTS

2023 was a relatively quiet year for us. During the year, the Group had invested an additional RM6.48 million into its equity portfolio. In a way, this reflects our investment philosophy of patiently building up a collection of good businesses that can provide us with a regular stream of dividends. We will not buy if such buying is inconsistent with our investment strategy and criteria. During the year, the Group had also sold some investments amounting to RM2.68 million and such disposals are more often than not driven by changes in fundamentals so much so that the investment no longer aligns with our investment criteria. I wish to reiterate that JcbNext remains a long-term investor and does not engage in short-term speculative trading of shares.

GOING FORWARD

2024 may be an unpredictable year for equity markets with many variables in play. How the US and advanced economies perform and whether they can tame inflation will affect the direction of interest rates which in turn may have a bearing on equity markets. Recent economic data have shown that inflation may be more stubborn than expected, reinforcing the belief that interest rates may be kept higher for longer. Other questions that do not have clear answers include whether the second largest economy in the world, China will be able to overcome the crisis in its property sector which is weighing down on its economy and dampening household and business confidence. Geopolitical developments ranging from the war in Ukraine, the Middle East and the record number of elections around the world this year may also be a catalyst of turbulence for investors. Despite the uncertain outlook, work continues here at JcbNext, to find undervalued gems: resilient companies with good business fundamentals that will allow them to ride out this storm, and hopefully we will all be able to enjoy the fruits of this effort in the years to come.

SUSTAINABILITY

The Group continues to endorse principles of sustainability in its business operations and corporate activities. We are pleased to present to you our Sustainability Report in the Annual Report where you can find our thoughts on the matter and also some of the initiatives that are already in place.

APPRECIATION

We would like to record our appreciation to all our employees, valued partners, business advisers and shareholders for your continued support during the past year.

Overall performance

Our company recorded a revenue of RM10.9 million in FY2023, an increase of 14.4% from the RM9.5 million in FY2022. Net profit attributable to shareholders rose to RM35.5 million, 50.6% higher than the RM23.6 million figure in FY2022. However, as shared previously, accounting revenue and profitability figures might not truly explain the economic substance of our company due to the nature of our business.

In particular, FY2023 was a year when the growth in our accounting profits – in my opinion – grossly overstated the economic substance of our performance. Among developments captured in the RM35.5 million profit included: i) RM18.5 million accounting gain on disposal of investment in an associate, and ii) RM1.2 million foreign exchange gain. The RM18.5 million gain on disposal was recognised mainly from the sales of a portion of our shareholding in Taiwan-listed associate 104 Corp, at a price higher than its carrying value in our books. I struggle to understand how such a transaction could be deemed to increase our profitability levels as it merely converts our investments into cash. You will likely see such anomalies again whenever we sell investments carried at a lower book value than the sales price.

The following are several key data points that the management focuses on, that I hope would give you a more complete picture of our performance. In short, we managed to increase our free cash generation in 2023, but nothing near the 50% plus growth rate suggested by the growth in our “profits”.

1. Our assets produced dividends, interest and rental incomes of about RM23.6 million in 2023 before taxes, a 10.9% increase from RM21.3 million in 2022. This can be traced back to an increase in dividends received from 104 Corp and the HKEX-listed Lion Rock, offset by a decrease in dividends in our new equity portfolio - primarily due to a one-off special dividend of RM700K that a portfolio company paid in 2022.
2. Staff costs and other operating expenses at our investment holding operations were RM3.3 million in 2023, a decrease of about 8.9% from 2022. This excludes forex gains or losses. The RM3.3 million figure is about 0.7% of our 2022 year-end Net Asset Value (NAV) of RM446.4 million (note NAV definition below).
3. Deducting taxes and making some other minor adjustments, the free cash flow generated by our business is estimated to have increased by about 17.3% from RM14.6 million in 2022 to RM17.0 million in 2023, of which about 50% we would usually pay out as dividends.
4. As at 31 December 2023, the book value (BV) of our company stood at about RM362.1 million, the biggest component of which is RM243.8 million in marketable securities including stakes in our listed associate companies (104 Corp and Innity), RM109.6 million in cash and money market funds and RM18.0 million in investment properties, with no material debt. This book value figure increased by approximately 3.8% compared to 2022.
5. If we had calculated the value of our assets using the market prices of our associates, rather than what is shown on our balance sheet, the figure - which we would loosely call the Net Asset Value (NAV) - would be RM457.9 million at the end of 2023, an increase of about 2.6% compared to 2022.

Larger business investments

As shared in previous annual letters, our aim is to help our shareholders preserve their purchasing power, grow their wealth gradually and provide a regular income stream through a distribution of dividends. We hope to build up a collection of good businesses at JcbNext for us to achieve that, either holding a majority/controlling stake, or more likely a smaller piece of the business. The focus is on improving the amount of dividend per share we could pay out over time, while managing the downside risks of our portfolio by working towards a diversified, conservative and sustainable portfolio.

104 Corp

Our largest investment is 104 Corp in Taiwan, which saw its growth in after-tax profits normalised to 1.4% in 2023 year-on-year, after growing 20.6% in 2022 and 43.2% in 2021. As cautioned last year, despite the tailwind from a strong semiconductor industry in Taiwan, the staggering growth numbers seen in 2021 and 2022 were unlikely to sustain for any extended period given the competitive nature of the capitalist system – as much as we love the 104 business and its management team.

Nonetheless, we remain very happy shareholders in the company and are cautiously optimistic that the current management team will continue to work hard to create value for shareholders like us. For 2023, the company has again announced that they intend to pay out 100% of their 2023 profits as dividends later this year. As shared previously, the nature of 104 Corp’s business has allowed the company to grow without requiring much capital reinvestment, and thus most of its profits can be distributed as dividends to shareholders like us.

Note, based on our cost – our dividend yield from the 104 Corp investment is now about 18.0%! (note: this includes positive impact of TWD appreciation against the Ringgit). We first invested in 104 Corp in 2008 as part of a strategic plan to expand Jobstreet’s online footprint. The current strong double-digit dividend yield will continue to remind us of the merits of investing long-term in good businesses and management teams. Quoting Warren Buffett: “Time is the friend of the wonderful business, the enemy of the mediocre”.

That said, over the last year, we have reluctantly continued selling down a small portion of our holdings in 104. The decision is driven almost entirely by our hope to diversify our portfolio slightly as the carrying value of our 104 shareholding is still about 27.9% of our book value as at the end of 2023. The sales were done through open market transactions and we continue to believe that the buyers should be very happy and proud new owners of such a tremendous business.

Other larger business investments

The business environment in 2023 was challenging for most of our other larger business investments.

Lion Rock in Hong Kong saw profitability decline by 15.8% in 2023 from the previous year, mainly due to the absence of a one-off gain in 2022 from derecognizing London-based publishing company Quarto as an associate – it’s now a subsidiary company of Lion Rock. Lion Rock guided that their publishing clients continue to face post-Covid inventory management issues, having built up substantial stock in the face of global supply chain disruptions in 2022. It also warned overcapacity among Chinese printers has exerted downward pressure on printing margins.

Meanwhile, Hastings in Australia experienced a very challenging year as prices of rare earth elements NdPr plunged, while the global fundraising environment deteriorated as interest rates increased. This double whammy, together with question marks over the repayment of a convertible note due in 2025, has put tremendous pressure on its share price – down about 80% in the past year. In my opinion, the longterm outlook for the rare earth industry remains broadly intact, while we continue to see Hastings management team working on its financing options, as well as its mining operations. However, short-term pressures are likely to persist, raising questions about the company’s viability.

Elsewhere, our ACE market-listed associate Innity reported a MYR 1.1 million loss in 2023, compared to a slight loss of RM0.1 million in the previous year.

As with previous years, my colleague has prepared a much more detailed (and better!) description of the corporate developments for some of our investments in the MD&A segment of this annual report for your reading.

Equity portfolio

In the last year, we continued to build up small stakes in public-listed businesses in the Asia Pacific region. We invested another RM6.5 million into this equity portfolio, bringing our cost of investment in this portfolio to RM91.2 million as at the end of 2023. In the first quarter of 2024, we invested a further RM6.4 million, bringing the total portfolio to RM96.7 million at cost.

Our equity portfolio consists of 30 companies and 2 ETFs as at the end of Q1 2024. It is quite heavily skewed towards businesses that have traditionally paid out a good amount in dividends, with banking and insurance companies in China making up about 31.1% of the portfolio. As at the end of Q1 2024, about 53.5% of this equity portfolio is invested in Chinese companies, and the rest in countries including Malaysia, Hong Kong, Australia and Singapore. A big part of our new investments last year were in Malaysian consumer/ industrial companies. Many of these companies should offer a solid base from which we could build up a long-term portfolio.

Since we started building this new equity portfolio up in 2020, we have only sold RM2.7 million worth of investments from it. By design, our portfolio turnover will be significantly lower than a more traditional fund management firm. As described in my letter to you in previous years: we view such smaller equity investments as part-ownership of good businesses and it’s our intention to hold such investments for the long term. We do not view them as a series of flashing stock tickers, arrows and numbers that we should trade on at every opportunity.

In 2023, this equity portfolio generated RM3.8 million in dividend inflow to us before taxes, from RM4.4 million in 2022, mainly due to a one-off dividend payment from an earlier investment – Favelle Favco - in 2022. We hope that the dividends we receive will grow as we continue building up the portfolio and the underlying businesses continue their recovery/ growth. On a cost of RM91.2 million, the portfolio generated a dividend yield of 4.2% in 2022. While most of these businesses should still experience decent growth, I believe we have invested in them at prices low enough to offer good dividend yields even if the growth does not materialize in last year’s letter, the cash inflow generated by our investments, including companies in this equity portfolio, would be partially distributed as dividends back to our shareholders, and partially reinvested into more businesses. Having a steady flow of dividend inflow would give us more confidence in investing a portion of it into businesses with a higher risk/reward characteristic, or in “deep value” situations where the value of the investment might take a very long time to be unlocked (if at all)

Cash

As at the end of 2023, we held around RM109.6 million in cash and cash equivalents, which is about 30.3% of our net book value, and is up from RM69.0 million a year ago. The percentage figure would be about 23.9% if we calculated it based on our Net Asset Value of RM457.9 million.

As shared last year, we imagine that there could be months or even years when there will not be much buying/ selling actions at our company, but a burst of activities could happen within a few days if the market gives us that opportunity. While we wait for the opportunities, we will continue to build up our database of good businesses and work on improving our investment operations to allow us to be more “nimble” when deploying our cash.

Our mini “Yangtze”

I recently watched an interview of Li Ka-Shing on Bloomberg, in which he explained why he named his company Cheung Kong (長江in Cantonese). He said the Yangtze River can be as majestic as it is because it does not reject water flowing in from even the smallest streams – and the naming of his company reminds him to be “modest” in life so that he can attract other “streams” his way. This is invaluable advice for life and entrepreneurship, but I believe also insightful for our investment activities at JcbNext.

We have said that we want to build up a sustainable dividend inflow from our investments, which we could partially distribute on to JcbNext shareholders. Ideally, these dividend inflows can come from many good, long-term investments we own – rather than from just a handful of larger investments - so that the impact of any unexpected decline of individual companies in our portfolio can be mitigated. If a couple of our dividend “streams” dry up temporarily, we hope to still have many others that remain uninterrupted.

I should add here that trying to build up the many “streams” of dividends/ free cash flow will take time – years or even decades. For us, this will involve developing both the depth and width of our team’s “circle of competence”, building up our database of good, established businesses with strong economic moats - and then having both the patience and conviction to make the purchases at the right time/ prices. We invest for a share of the long-term free cash flow of other businesses, or a share of the dividends when that free cash flow gets distributed. Thus, it is critical that we are cautious with valuations and do not overpay.

There is no guarantee of success as we embark on this journey, but I believe the better our ability to deploy capital into long-term, cash-flow generating businesses, and the longer-term we view our investments - the higher the chances of us building up our own mini “Yangtze”.

At the office

It has been more than 1.5 years since our team fully returned to the office after Covid-19. I am grateful that the transition has been smooth. We started doing company visits and attending analyst briefings in person last year – always enjoyable, and often insightful, meetings that we took for granted before the pandemic.

Thank you

Lastly, allow me again to convey a special thanks to our long-term shareholders. My pledges from previous years still hold – we cannot promise instant results, but we would continue to treat you as “partners”, keep our interests aligned, and continue to build up a portfolio of good businesses for all of us.

CEO
Lionel Liong Wei Li
30th April 2023

OVERVIEW

JcbNext Berhad (“JcbNext”) is an investment holding company. It owned and operated the JobStreet.com online job portal business from 2004 to 2014. In 2014, the job portal business was sold to SEEK Ltd for close to RM2 billion with the net proceeds paid as dividends to shareholders. Today, the Company has stakes in associates, 104 Corporation, the largest job site in Taiwan and Innity Corporation Berhad, a leading provider of interactive online marketing platforms and technologies in Malaysia. It also operates the Autoworld automotive content website. JcbNext also has quoted investments in Malaysia, Hong Kong/ China, Australia, Singapore and Europe and owns an 8-storey office building in Kuala Lumpur.

THE STATE OF THE GLOBAL ECONOMY IN 2023

More than three years after the global economy took an enormous blow from COVID-19, the wounds are still healing, amid widening growth divergences across regions. After a strong initial rebound from the depths of the pandemic, the pace of recovery has moderated. Several forces are holding back the recovery. Some reflect the long-term consequences of the pandemic, Russia’s war in Ukraine, geopolitical tensions and increasing geoeconomic fragmentation. Others include the effects of monetary policy tightening necessary to reduce inflation, withdrawal of fiscal support amid high debt, and extreme weather events. Despite signs of economic resilience earlier in 2023 and progress in reducing headline inflation, economic activity is still generally falling short of prepandemic projections, especially in emerging markets and developing economies.

The strongest recovery among major economies has been in the United States. The US economy defied expectations in 2023 and proved surprisingly resilient. Many forecasters predicted a recession which did not materialise. Instead, the US economy went on a tear and pulled far ahead of other advanced economies. US GDP expanded 2.5% (2022: 2.1%), driven by strong consumer spending, an increase in private manufacturing construction investment and increased state and local government purchases. Sound household balance sheets and a strong labour market are the primary key drivers of US consumer expenditures. Households received larger fiscal transfers early in the pandemic and were able to spend the associated savings more quickly; being better insulated from the rise in energy prices resulting from the war in Ukraine; and feeling relatively confident amid historically tight US labour markets, all of which have supported real disposable incomes. 2023 was another strong year for jobs, labour supply and wage growth in the US. Payroll employment rose by 2.7 million in 2023, less than the increase of 4.8 million in 2022. Yearly job gains over the past three years reveal a steady downshift from the breakneck pace of job gains in 2021 to a more steady, stable pace in 2023. Wage growth overtook inflation in February 2023 and stayed that way for the rest of the year. Unemployment in the US was 3.6% in 2023, with December marking 23 months in a row that it has stayed below 4%, indicative of a persistently strong labour market.

A big theme for 2023 is the tightening of monetary policy by central banks around the world, notably among advanced economies, to combat inflation brought on by large fiscal stimulus during the pandemic, global supply chain disruptions which were exacerbated by Russia’s invasion of Ukraine, causing food and energy prices to soar and surge in demand of goods and services after restrictions have been lifted. The US Federal Reserve began raising interest rates in March 22 and by the end of 2023, it had raised interest rates 11 times for a total of 525 basis points, bringing rates to 5.25%-5.50%. The US economy proved quite resilient despite the sharp rise in interest rates. The aggressive interest rate hikes seemed to have achieved their purpose without bringing the economy to a screeching halt or a spike in unemployment. US inflation moderated to 3.4% in December 2023 from its peak of 9.1% in June 2022. Still some ways to go before hitting its target of 2%, the battle against inflation is very much on the table

The eurozone’s economy stagnated in 2023, underperforming the rest of the world even as the global economy expanded and the US chalked up impressively brisk growth. The eurozone’s underperformance was mostly due to weakness in Germany which has seen its business model of relying on cheap energy from Russia and intense two-way trade with China upended by geopolitical events. As has been the case for much of the world, the eurozone has felt the agony of sharply rising interest rates over the last 18 months, with the European Central Bank battling to bring down inflation from its October 2022 peak of 10.2% to 2.8% in January 2024. In contrast to the US, consumption in the eurozone is suffering much more from the high inflation spike because wage growth has been slow to adjust due to more negotiated wagesetting. That has resulted in a larger decline in real wages. And energy competitiveness has suffered from the energy crisis in the eurozone, resulting in a big difference in industrial performance. Furthermore, while eurozone budget deficits are still sizable, fiscal support is much smaller than in the US.

The United Kingdom slipped into a technical recession in the second half of 2023 following two consecutive quarters of contraction in GDP. For 2023, its GDP grew by a meagre 0.1%, its worst performance since 2009 after the global financial crisis if 2020 is excluded. The UK economy struggled to grow as households and businesses came under pressure from rising borrowing costs, higher taxes and elevated living expenses. The UK has one of the highest inflation rates among G7 countries. The Bank of England raised interest rates from December 2021 to August 2023 by a total of 515 basis points which succeeded in taming inflation to 4.0% in 2023 from its peak of 11.1% in October 2022 (a big part of that was also due to cooling energy prices). The high interest rate environment weighed in on economic growth but the Bank of England has indicated their commitment to keep rates high enough for long enough to bring inflation back to its 2% target.

China’s economy grew by 5.2% in 2023, hitting the government’s official target, but concerns about growth momentum remain amid a protracted property crisis, sluggish consumer and business confidence, and weak global growth. In 2022, China’s economy grew by just 3% as a result of prolonged COVID-19 regulations linked to its zero-COVID policy. After an initial post-pandemic rebound, the economy has been weighed down by the continuing crisis in the property market where the authorities have been trying to rein in massive debts and speculation, as well as record youth unemployment and a global slowdown. Exports – historically a key growth lever – fell in 2023 for the first time since 2016. Geopolitical tensions with the US and efforts by some Western nations to reduce dependence on China or diversify their supply chains have also hit growth. Problems dogging the property market remain unresolved. The industry has long accounted for about a quarter of China’s economy and experienced dazzling growth for two decades. But financial woes at major developers such as Evergrande and Country Garden have left projects unfinished, buyers out of pocket and prices on the decline. Also weighing on the economy is a lack of jobs for the country’s young people. China also faces longer-term questions over its growth potential after it announced its population fell for a second consecutive year in 2023, amid a record low birth rate and a wave of COVID19 deaths after zero-COVID policies were abruptly lifted.

Malaysia recorded GDP growth of 3.7% in 2023, supported by continued recovery in economic activity and labour market conditions. The moderation of growth from 8.7% registered in 2022 was due to the challenging external environment. Current account surplus in 2023 was sustained at 1.2% of GDP, supported by a diversified export structure across markets and products. The strength in external position is also reflected in the external debt, which declined to 68.2% of GDP in 2023 and a higher net international investment position at 6.6% of GDP in 2023. Bank Negara Malaysia highlighted that importantly, the external debt remains manageable given the favourable maturity and currency profiles. It also said onethird of the external debt is denominated in ringgit, limiting currency risk, while around 70% of the debt has medium and longer-term tenures. Exports remained subdued due to prolonged weakness in external demand amid stronger imports. For 2023 as a whole, headline inflation declined to 2.5% from 3.3% in 2022, while core inflation averaged 3.0%. Bank Negara had raised the Overnight Policy Rate just once in 2023 by 25 basis points to 3%.

As 2023 came to a close, a heart-stopping rally in the last two months of the year showed global stock markets with strong annual gains due to investors betting on the fact that major central banks have finally stopped their monetary tightening policies and will indeed cut interest rates in 2024. The MSCI World Index has, since late October 2023, surged by 16%, and, with a flurry of late trading on the 29th of December, showed an annual gain of 22%. This was reflected in data showing that in Western economies inflation is falling faster than expected, which dramatically changed the perception of interest rate changes. Jerome Powell, Chairman of the Federal Reserve, fanned the flames of an equity rally in December by announcing that borrowing costs may have peaked.

The rise in global equities as reflected in the MSCI World Index is the best run on an annual basis since 2019, when a similar run reflected a 25% gain. The S&P 500 finished the year up by 24% which was mainly due to a massive rally in megacap tech stocks. European markets, after a lacklustre 2022, posted positive gains in 2023 with Italy’s FTSE MIB charting gains of 30% and Germany’s DAX coming in with an impressive 20% increase. The overall increase for European equities was reflected on the STOXX 600 charting a gain of 13%. In the United Kingdom, the FTSE lagged behind their counterparts in the United States and Europe by posting a gain of 4% in 2023. Experts suggest that this is down to a stubborn inflation rate, energy companies that are oil-price exposed, and a preponderance of mining companies that are overexposed to and rely on a slowing Chinese economy. Elsewhere all three indexes in Japan posted hefty gains in 2023 with the Nikkei Stock average finishing the year up 28%, this being the best rally since 2013 which reflected a rise of 57%.

The big omission from the global rally in stock markets is China, where the world’s second-largest economy has suffered from problems in its property sector. As a result, the expected recovery has faltered. Indeed, China’s CSI 300, which measures the largest companies listed in Shenzhen and Shanghai, fell by 11.4%. Their flagship financial centre, Hong Kong, has suffered over the years and in 2023 stocks were particularly hard hit, with experts advising the Hang Seng index is the worst performer of 2023.

Bursa Malaysia ended 2023 on a low note, closing at 1,454.66 compared to 1,495.49 on the last trading day of 2022. It was a subdued year for the bourse, influenced by persistent selling pressure throughout the year, largely attributed to the outflow of funds resulting from multiple interest rate hikes in the United States. Sluggish economic conditions in China, a lack of substantial stimulus and the absence of major infrastructure projects also contributed to the lacklustre performance of the local index. Compared to the Asian region, the FBM KLCI is among the indices with negative readings, along with Singapore's Straits Times Index (-1.09 per cent), Philippine Stock Exchange Index (-0.72 per cent) and SET Thailand (-15.15 per cent).

2023 IN REVIEW

During the year, the Group generated revenue from services, rental of office space, dividends, interest and other investment income. The Group’s revenue mix for 2023 and 2022 are as depicted below:-

As the Group is principally in investment holding, the biggest contributor to group revenue is dividends from equity investments at 72% of revenue or RM7.86 million in 2023. This is followed by rental income at 12% and together with dividend income, contribute 84% of group revenue. Services, interest income and investment distribution income combined to contribute the remaining 16% of group revenue. The decrease in the contribution of dividend income from 75% to 72% of group revenue in 2023 was mainly due to the increase in interest income generated on the Group’s cash in line with the increase in interest rates in 2023.

Total revenue had increased by 14.4% in 2023 primarily from an increase in dividend income from equity investments from RM7.16 million in 2022 to RM7.86 million in 2023 and an increase in interest income from RM0.67 million in 2022 to RM1.50 million in 2023. Dividend income from equity investments had increased by 9.80% year-on-year primarily due to an increase in total dividends received from Lion Rock Group Ltd (“Lion Rock”) in 2023 amounting to HKD0.13 per share as compared with HKD0.09 per share received in 2022. During 2023, the Group continued to receive dividends amounting to RM12.90 million from its associate, 104 Corporation, although such dividends are not accounted for as revenue.

Interest income had increased by 123.4% YoY from RM0.67 million in 2022 to RM1.50 million in 2023 driven in part by the increase in cash as the Group continued to dispose shares of 104 Corporation, lower level of acquisitions as well as the increase in interest rates that punctuated 2023. The decision by the US Federal Reserve to raise interest rates by a total of 100 basis points in 2023 benefitted the Group. The proceeds from the disposal of 104 Corp’s shares as well as dividends from investments abroad were deposited into foreign currency term deposits which enjoyed the higher interest rates.

Rental income from investment properties had increased slightly from RM1.25 million in 2022 to RM1.33 million in 2023. The total area leased to the tenant is approximately 23,700 square feet which is about 87% of the net lettable area in Wisma JcbNext. The Group retains approximately 13% of Wisma JcbNext for its own use. As reported in the Annual Report 2021, the tenant for Wisma JcbNext has formally notified the Company of its intention to move out by 28 February 2023, with the option of extending the tenancy by another 6 months if needed. Since then, the tenant has exercised several options to extend the tenancy, with the latest extension taking the tenancy to 31 August 2025. The Group’s other investment property, a 2-storey shoplot office in Johor, remained untenanted throughout 2023 and was eventually sold in 2024 for RM800,000.

The Group derives an insignificant level of revenue from the provision of services predominantly through its subsidiary in Japan which provides consulting services on a small scale. The Group’s 60% stake in this subsidiary was sold in June 2023 for JPY0.88 million (approximately RM28,000). The Group did not invest to expand the Autoworld automotive content website in 2023 but continued to update the website.

The Group’s operating expenses in 2023 amounted to RM4.65 million, a decrease of 11.1% compared with the previous year’s operating expenses of RM5.23 million. The reduction in operating expenses was mainly in staff costs and the direct cost of sales for the operations in Japan. As shown in the table below, other operating expenses in 2023 amounted to RM2.24 million, which is relatively flat compared with the previous year.

Further breakdown of the Group’s other operating expenses is as follows:

Group	2023 RM	2022 RM
Net foreign exchange losses	-	81,402
Professional fees	860,556	866,435
Directors’ fees	356,730	343,738
Office expenses	181,526	210,572
Security costs	173,806	157,995
Utilities	307,474	288,147
Staff benefits	122,173	92,651
Quit rent and assessments	66,733	63,525
Travelling	21,838	6,046
Telecommunication	18,036	21,331
Insurance	44,420	42,921
Miscellaneous	89,335	118,527
	2,242,627	2,293,290

The Group continued to rely a great deal on our associates, primarily 104 Corporation, to contribute to the Group’s earnings in 2023. To recap, 104 Corporation is principally involved in the online job portal business and also provides executive search and HR consultancy services in Taiwan. 104 Corporation has been listed on the Taiwan Stock Exchange since 2006. Taiwan’s GDP grew by 1.4% in 2023, its slowest pace in 14 years, down from 2.59% growth in 2022 due to soft global demand and weak domestic capital investment. Taiwan’s economy relies a lot on trade given its geographical limitations and the global demand for its exports like semiconductors and electronics. Trade has also been one of the largest contributors to Taiwan’s economic growth in the last five years. The value of imports and exports combined has increased over 19% from 2019 to 2023. The height of the pandemic (2021-2022) saw a significant expansion of trade with some of its largest trading partners, in particular. Total trade between Taiwan and the US increased 31% between 2020 and 2022. During that same time, total trade increased 19% with China, 24% with Hong Kong, 21% with Japan and 34% with ASEAN. Before the pandemic, Taiwan’s annual growth in trade was negligible. And in 2023, total trade started to come back down to pre-pandemic levels. Taiwan’s central bank bucked the broader global trend by raising interest rates in March 2024, after seeing its consumer price index hit 3.08% in February, a 19-month high and ahead of an expected rise in electricity rates in April.

Under the aforementioned circumstances, 104 Corporation’s revenue in 2023 had increased marginally by 6.9% to NT$2.33 billion compared with NT$2.18 billion in 2022 with the growth attributed to its Job Bank business. Its profit before taxation increased by 5.0% YoY to NT$549.96 million compared with NT$523.74 million in 2022 while the net profit attributable to shareholders increased 1.4% YoY to NT$451.56 million compared with NT$445.26 million in the preceding year. The balance sheet of 104 Corporation remains solid with cash holdings of NT$2.90 billion at the end of 2023. 104 Corporation has recently announced a dividend of NT$13.61 per ordinary share representing 100% of their net profit attributable to shareholders for the 2023 financial year, which will be paid out later this year. During the year, the Group had continued to dispose a portion of its holdings of 104 Corporation in the open market and in the process, the Group recorded gains on disposal of the said shares amounting to RM18.47 million. It is important to reiterate that the reduction of our stake in 104 Corporation is primarily motivated by risk management as the investment in the company represented a concentration risk on the Group’s balance sheet. It is not a case where we want to ‘take profit’ by selling when the share price is high, or make a ‘trading profit’ by selling some shares now and buying back later. Going forward, the pace and quantum of selling 104 Corporation shares will depend on many factors including the liquidity of the shares and/or interest from third parties. Further, the need to reduce concentration risk will decrease as the rest of our portfolio grows. Our investments, including 104 Corporation, continue to be long-term in nature, with the objective of deriving dividend income and distributing those dividends onward to our shareholders. As at 31 December 2023, the Group has an equity interest of 18.65% in 104 Corporation, down from 21.74% a year ago. In line with the reduction of the Group’s equity interest in the company, our share of profit from 104 Corporation in 2023 amounted to RM13.67 million, down 6.8% from RM14.67 million in 2022. As mentioned earlier, the Group received dividend amounting to RM12.90 million from 104 Corporation in 2023, up 6.2% compared with RM12.15 million received in 2022, despite the lower shareholding.

Our other associate, Innity Corporation Berhad (“Innity”), is principally involved in the provision of technology-based online advertising solutions, to their customers in the Asia Pacific region, using in-house developed technology platforms. Innity’s role in the online advertising process is to serve as a one-stop centre for advertisers and advertising agencies in offering the 3 major functions of the online advertising process, namely Creative, Media and Research. In essence, the group assumes the role of the advertising agency, creative agency, media agency and researcher. Innity has been a listed company since 2008 and currently, its shares are traded on the ACE Market of Bursa Malaysia Securities Berhad (“Bursa Securities”). The group has an established presence in Malaysia, Hong Kong/ China, Indonesia, Philippines, Singapore, Taiwan, Thailand, South Korea, Myanmar, Cambodia and Vietnam.

Innity faced a volatile and uncertain business landscape in 2023. South East Asia’s digital advertising spending has shown a rebound in the second half of 2023 after falling to lower levels in the first half of the year. Innity’s revenue declined by 4.4% to RM114.01 million in FY2023 compared with RM119.22 million in FY2022. Its Malaysia and Philippines business units registered a higher revenue by 10% and 11% respectively in FY2023 whereas lower revenue was recorded in Singapore, Vietnam, Hong Kong and China, Indonesia, Taiwan, Cambodia and Myanmar business units as compared to the preceding year. Its Malaysia business unit remained as the top revenue contributor in FY2023 followed by Hong Kong and Philippines business units. Malaysia, Philippines and Hong Kong/China business units contributed a combined revenue of RM86.44 million revenue, representing 75.8% of total group revenue. The group’s gross profit increased 5.1% YoY to RM52.72 million, reflecting a higher gross profit margin of 46% compared to 42% last year. The marginal increase in gross profit margin was mainly due to the reversal in provision of platform fees arising from the discontinued Visa card-linked program in the Malaysia business unit and reversal in the provision of customers’ rebates that were no longer required in Malaysia and Singapore business units. The group incurred a loss attributable to shareholders of RM1.10 million in FY2023 as compared to a loss of RM0.08 million in FY2022. Despite a higher gross profit recorded in FY2023, rising staff costs, higher depreciation expenses attributed to the depreciation of the right-of-use asset in accordance with the new lease term and share of losses incurred from associate company were the factors that resulted in the higher loss. Our share of loss from Innity in 2023 had increased to a loss of approximately RM231,000 compared with a loss of approximately RM17,000 a year ago. As at 31 December 2023, the Group has an equity interest of 20.98% in Innity.

Overall, the Group’s net profit attributable to shareholders for 2023 surged 50.6% YoY to RM35.49 million from RM23.57 million in 2022. As explained earlier, firstly, this was due to higher revenue in the form of higher dividend and interest income and secondly, lower operating expenses which had decreased by 11.1% YoY. Next, we have the significant increase in the gain on disposal of shares of 104 Corp from RM5.03 million in 2022 to RM18.47 million in 2023 owing to the significantly higher quantity of shares sold in 2023 and at higher prices too relative to 2022. Gains on financial assets classified as fair value through profit and loss are mainly in respect of the Group’s investment in money market funds (“MMF”) and the increase from RM0.46 million in 2022 to RM1.47 million in 2023 was mainly due to the reallocation of funds from Ringgit denominated term deposit to MMF in Malaysia. In addition, there was an RM0.41 million increase in the fair value of investment properties which was attributable to the Group’s shoplot in Johor. Share of profits from associates, however, recorded a 6.8% decrease YoY to RM13.67 million in 2023 compared with RM14.67 million in the preceding year which was mainly due to the decrease in equity interest of 104 Corporation following the continued disposals of shares in that associate. Although earnings per share amounted to approximately 26.88 sen per share (2022: 17.85 sen), the Company will continue to pay dividends based on its free cash flow (“FCF”). The Group’s FCF for 2023 amounted to RM17.05 million, up 16.9% from RM14.58 million in the preceding year. The increase in FCF was attributed to higher dividend received from 104 Corporation and other equity investments as well as the increase in interest income. To this end, the Board has recommended the payment of a final dividend of 6.5 sen per ordinary share to be paid after the forthcoming AGM.

The Group’s net assets attributable to shareholders grew by 5.0% YoY to RM362.15 million as at 31 December 2023 compared with RM348.80 million at the end of the previous year. On a per share basis, this translates to RM2.74 per share with the Company’s shares quoted at a price of RM1.59 as at 31 December 2023.

OVERVIEW OF INVESTMENTS AND CASH RESERVES

The Group’s investments and cash reserves comprise of:

Group	2023 RM’000	2022 RM’000
Investment properties	18,800	18,388
Investments in associatesˆ (at market value)
- 104 Corporation	195,954	211,216
- Innity	14,040	12,139
	209,994	223,355
Financial assets at fair value through other comprehensive income
- Lion Rock	35,035	28,182
- Other investments	93,679	108,945
	128,714	137,127
Financial assets at fair value through profit or loss
- Money market unit trust funds	34,621	22,385
-Other investments	881	-
	35,502	22,385
Cash reserves
- USD	28,591	6,350
- HKD	11,186	4,357
- SGD	31,660	9,098
- RM	2,280	26,464
- Others	351	342
	74,068	46,611
	467,078	447,866

ˆ In the audited financial statements, investments in associates are accounted for using the equity method pursuant to MFRS 128, Investments in Associates and Joint Ventures

The Group’s assets under management, which comprise investment properties, equity investments, associates at market value and cash and cash equivalents, grew 4.3% to RM467.08 million as at 31 December 2023 compared with RM447.87 million in the previous year. The increase in 2023 was mainly attributable to the increase in the market value of 104 Corporation shares which rose from NT$205 per share at the end of 2022 to NT$212 per share at the end of 2023.

The performance of the Group’s associates has already been detailed in the previous section of this report. The carrying value of the investments in associates on the Group’s balance sheet decreased by 9.1% to RM114.23 million in 2023 from RM125.71 million a year ago. Against the Taiwan dollar, the Ringgit had weakened from NT$1:RM0.1428 as at end 2022 to NT$1:RM0.1493 and this contributed to an increase of RM4.76 million in the carrying value of 104 Corporation on our balance sheet. Disposals of 104 Corporation shares during the year also contributed to a decrease of RM16.90 million in the carrying value of 104 Corporation. In addition, while the share of profit from 104 Corporation for 2023 amounted to RM13.67 million, the dividend received from 104 Corporation during 2023 based on its 2022 net profit amounted to RM12.90 million. As mentioned in previous years’ Annual Reports, while the dividend from 104 Corporation being an associate does not benefit the Group’s bottom line, the dividend provides liquidity for the Group to fund its working capital requirements and dividend payment to shareholders. The dividend from 104 Corporation alone account for 62% of total dividends received by the Group in 2023.

The largest investment under the FVOCI category is Lion Rock with a carrying value of RM35.04 million. Lion Rock is principally involved in the provision of printing services to international book publishers, trade, professional and educational conglomerates and print media companies. This is a business that the Group had invested in from 2011 to 2013 at a total cost of RM2.98 million. Subsequently, in 2014, Cinderella Media Group Ltd, the parent company of Lion Rock at that time in which we had a stake in then, rewarded its shareholders by declaring a dividend-in-specie of its stake in Lion Rock and spinning it off as a separate listed company on the Hong Kong Stock Exchange. As a result of that, the Group’s stake in Lion Rock had increased by an additional 36.5 million shares in 2014. At the end of 2023, the Group held an equity interest of approximately 7.0% in Lion Rock. For the financial year ended 31 December 2023, the dividend yield on Lion Rock was 10.0% (2022: 10.9%). During the year, the Group received RM4.06 million in cash dividends from Lion Rock, up 49.6% from the RM2.72 million dividends received in 2022. On 27 March 2024, Lion Rock announced a final dividend of HK$0.08 per share to be paid on 6 June 2024 after the conclusion of its upcoming AGM. The fair value of the Group’s investment in Lion Rock had increased by 24.3% in 2023 in line with the appreciation of its share price from HKD0.92 at the end of 2022 to HKD1.10 at the end of 2023.

Based on the disclosures in Lion Rock’s Annual Report 2023, Lion Rock said the global book market encountered considerable headwinds in 2023, with varying performance across different market segments. The US market, which is the largest book market in the world, saw a slight year-on-year decline in unit sales of printed books. The UK and Australian book markets also experienced a downturn in unit sales of printed books due to readers returning to their normal consumption habits after the surge in demand triggered by the pandemic. In the wake of COVID-19, Lion Rock’s publishing clients struggled with inventory management issues throughout 2023 due to the substantial inventory buildup in 2022 as a result of global supply chain disruptions. Consequently, these clients adopted a more cautious approach to placing print orders. The Chinese book market experienced a 5% increase in unit sales of printed books in 2023 but on the back of a 7% decline in value as publishers and booksellers resorted to aggressive discounting tactics to clear the inventory that had accumulated during the COVID-19 lockdown period. Given the difficult local market conditions in China, Lion Rock noticed a rise in competition from Chinese printers for overseas book printing orders. This overcapacity has exerted downward pressure on printing margins for the industry. While the Red Sea crisis and conflict in the Middle East may result in freight costs going up, Lion Rock opines that the biggest uncertainty faced by Chinese printers is geopolitical risk specifically the movement by the West to reduce reliance on China and to diversify sources of supply. There is a significant risk that politicians in the West may exert more pressure on investors and corporates to comply with such ‘de-risking’ policies and impose further tariffs on goods imported from China and other regions. Lion Rock aims to mitigate this risk with its investment in its plant in Malaysia. Despite the headwinds of a volatile and complex macroeconomic environment in 2023 characterised by geopolitical tensions, inflationary pressures, rising interest rates and a sluggish global book market, Lion Rock managed to achieve a 2.7% increase in revenue to HK$2,562.78 million from HK$2.496.09 million in the previous year. The increase was attributed to the increase in book publishing revenue as a result of the inclusion of the full-year results of the Quarto Group, Inc in 2023 compared with nine months’ results in 2022. Profit attributable to shareholders amounted to approximately HK$185.25 million, down 15.8% from the previous year. This decrease was largely attributable to the HK$31.3 million one-time gain in 2022 from derecognising Quarto as an associate.

2023 was a relatively quiet year for the Group as far as investments go. During the year, the Group had invested an additional RM6.48 million (2022: RM33.60 million) into its investment portfolio. For ease of reference, this portfolio will hereinafter be referred to as the Equity Portfolio and it excludes Lion Rock, Hastings Technology Metals Limited (“Hastings”), the associates and the unquoted investments. Most of the companies in the Equity Portfolio are listed in Malaysia and Hong Kong/ China with a small portion in Singapore, Australia and Europe. As at 31 December 2023, the top 5 holdings made up 39% of the Equity Portfolio while another 28 stocks made up the remaining 61%. These investments as well as other targets emanated from research conducted internally in line with the Group’s investment objectives and are reviewed and approved by the Investment Committee and Board of Directors respectively. Should the prices of these stocks move within our target buy prices, we may increase our investments in these stocks further as well as acquire other target stocks on our buy list. The Equity Portfolio generated approximately RM3.80 million in dividends for the Group in 2023 (2022: RM4.45 million). As at 31 December 2023, the fair value of the Equity Portfolio amounted to RM86.34 million, up 1.3% from RM85.20 million a year ago. To prevent any risk of front-running, the identities of the component stocks will be kept confidential save for any laws or regulations that require the Group to provide full disclosure.

	Cost of Investment RM	Carrying Value RM	Fair Value RM
104 Corporationˆ	61,062,842	101,065,118	195,954,043
Innityˆ	8,487,984	13,162,221	14,040,019
Lion Rock	17,799,453	35,035,375	35,035,375
Other equity investments	113,770,517	94,560,504	94,560,504
	201,120,796	243,823,218	339,589,941

ˆ Accounted for using the equity method pursuant to MFRS 128, Investments in Associates and Joint Venturess

Looking at the table above, the fair value of all of the Group’s equity investments combined including its listed associates as at 31 December 2023 was significantly above total cost owing to the large unrealised gains on 104 Corporation, Lion Rock and to a lesser degree, Innity (please be reminded that the unrealised gains on 104 Corporation and Innity, as associates, have not been recognised in the financial statements at all). The fair value of other equity investments remained below cost at the end of 2023 mainly due to the investment in Hastings and the underperformance of Chinese stocks in general. The fair value of the Group’s investment in Hastings had decreased by 78% during the year as its share price plummeted from AUD3.52 at the end of 2022 to AUD0.74 at the end of 2023. Some of the factors that had affected Hastings’ valuation include the fall in Neodymium and Praseodymium (NdPr) prices, escalation of project capital cost and general uncertainty over the expected commencement of production. As mentioned earlier, Chinese stocks and the Hong Kong stock market did not fare well in 2023 due to sluggish post-Covid recovery, property sector woes and fears of regulatory crackdowns while the US Fed kept raising interest rates. These had negatively impacted the Group’s investments in Chinese stocks which were acquired from late 2020 onwards.

The Group’s treasury management objectives are to ensure there is available liquidity when needed and to preserve our long-term purchasing power to acquire investments. In that respect, the Group has decided that the main currencies that it will maintain are MYR, USD, SGD and HKD. While the holding of such currencies may result in foreign exchange gains or losses and thus volatility to our P&L, the Group does not intend to actively manage or trade currency positions nor engage in any speculative activities. The Group’s MYR cash is placed in current accounts and money market unit trust funds while its USD, SGD and HKD cash are mostly placed in interest-bearing bank deposits. While the Group manages its treasury function conservatively to safeguard the Group’s interests, the focus of the Board and management is still on identifying new strategic investments and/or developing a broad portfolio of investments that can contribute to the future growth of the Group. To be able to capitalise on any opportunities as and when they arise without sacrificing unduly on the Group’s returns on its reserves, the Group will need to maintain an appropriate mix of long and short-term investments and cash.

FUTURE PLANS AND PROSPECTS

Four months into 2024, the world is fraught with geopolitical tensions including the war in Ukraine and conflict in the Middle East. Besides wars and conflicts, the year 2024 stands as a monumental period in the history of global democracy, with over 70 countries scheduled to hold elections and close to 2 billion people poised to cast their votes. However, this democratic spectacle is shadowed by concerns that many of these elections may not herald the strengthening of democratic ideals. Instead, there is apprehension that they could further entrench illiberal rulers, reward the corrupt and exacerbate political polarisation. The 2024 elections are set to have profound economic implications, with the potential to significantly alter the global economic landscape. Goldman Sachs Asset Management highlights that elections in key economies such as the US, UK, South Africa, India, Taiwan and Russia could diverge the global economy from its current trajectory. The world, already grappling with the aftermath of pandemics, wars and economic shocks, faces another layer of complexity as these electoral outcomes may lead to shifts in power balances, major policy changes and increased geopolitical friction. Such developments could exacerbate trade conflicts and political fragmentation, further destabilising an already precarious world economic order and challenging investors to navigate a labyrinth of uncertainty.

March 2024 inflation data in the US showed a jump from February, dampening expectations of an interest rate cut and raising concerns that inflation could be stubbornly high. The US consumer price index rose to 3.5% from February’s 3.2%, still well above the Fed’s target of 2%, reinforcing the narrative that interest rates will stay higher for longer. Meanwhile, China published positive economic data for March and the first quarter of 2024 which showed the second-largest economy in the world growing 5.3% in Q1, higher than market consensus. Fixed asset investment was key to Q1’s GDP outperformance, while last year’s main growth driver of consumption has moderated. Net exports remained weak and have not been a major contributor to growth. China’s property market has yet to confirm the bottom and continues to drag growth. Average new and secondary home prices continued to fall month-on-month in March. Real estate investment slowed further by -9.5% YoY in Q1.

The International Monetary Fund (“IMF”) stated in its World Economic Outlook April 2024 that global growth for 2024 is projected at 3.2%, which is the same rate as 2023. The pace of expansion is low by historical standards, owing to both near-term factors, such as still high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russia’s invasion of Ukraine, weak growth in productivity, and increasing geoeconomic fragmentation. Among advanced economies, the US is set to lead the way with a growth of 2.7% in 2024 while the euro area and the UK are set to grow by 0.8% and 0.5% respectively. In emerging markets and developing economies, growth is expected to be stable at 4.2% in 2024 with growth in emerging and developing Asia expected to fall from 5.6% in 2023 to 5.2% in 2024. Growth in China is projected to slow from 5.2% in 2023 to 4.6% in 2024 as a postpandemic boost to consumption and fiscal stimulus ease and weakness in the property sector persists. The IMF projected Malaysia’s economy to grow by 4.4% in 2024.

Global headline inflation is expected to fall from an annual average of 6.8% in 2023 to 5.9% in 2024, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. The expected fall in global inflation in 2024 reflects a broad-based decline in core inflation especially among advanced economies. The drivers for declining core inflation include the effects of stilltight monetary policies, a related softening in labour markets, and fading pass-through effects from earlier declines in relative prices, notably that in energy.

So, are interest rates coming down in 2024? Quoting IMF Managing Director Kristalina Georgieva, “Making the right policy decisions will define the future of the world economy”, the decision to cut rates is one that each country will have to make after careful consideration of their economies. It is not an easy decision as Kristalina puts it succinctly “The sobering reality is that global economic activity is weak by historical standards. Prospects for growth have been slowing since the global financial crisis. Inflation is not fully defeated. Fiscal buffers have been depleted. And debt is up, posing a major challenge to public finances in many countries.”

The IMF listed several risk factors for an uncertain 2024. The conflict in Gaza could escalate further into the wider region. Continued attacks in the Red Sea and the ongoing war in Ukraine risk generating additional supply shocks adverse to the global recovery, with spikes in food, energy and transportation costs. Such geopolitical shocks could complicate the ongoing disinflation process and delay central bank policy easing, with negative effects on global economic growth. In addition, a slower than expected decline in core inflation in major economies as a result of persistent labour market tightness or renewed tensions in supply chains could trigger a rise in interest rate expectations and a fall in asset prices. Furthermore, the risk that the cooling effects of past monetary tightening are yet to come is plausible, especially where fixedrate mortgages are resetting and household debt is high. Such developments could increase defaults and raise risks to financial stability. And in China, in the absence of a comprehensive restructuring package for the troubled property sector, a larger and more prolonged drop in real estate investment could occur, accompanied by expectations of future house prices declining, reduced housing demand, and a further weakening in household confidence and spending, with implications for global growth. Other adverse risks include excessive fiscal consolidation that is more than necessary to curb debt-to-GDP ratios and rebuild capacity for weathering future shocks, such as a sharp shift to tax hikes and spending cuts, could result in slower-than-expected growth. Lastly, the separation of the world economy into blocs amid Russia’s war in Ukraine and other geopolitical tensions could accelerate. Such intensification of geoeconomic fragmentation could generate more restrictions on trade and cross-border movements of capital, technology and workers and could hamper international cooperation.

Due to the many uncertainties and risk factors as described above, 2024 could yet again be another unpredictable year for equity investments. In this environment of uncertainty, we will continue with our strategy, albeit cautiously, of developing a broad portfolio of long-term equity investments that would generate dividend income at targeted yields which in return can be paid onward to our shareholders. We will also devote time to monitor our existing equity investments for any telltale signs of trouble. We had only begun building our Equity Portfolio in earnest in 2020. In that year, we had invested RM6.39 million which was followed by another RM49.42 million in 2021, RM33.60 million in 2022 and RM6.48m in 2023. Rising inflation that followed the pandemic and the hawkish stand taken by advanced economies exacerbated by weak growth in China and geopolitical tensions have pummelled stock markets in our region where most of our investments are based. During these times, there will be some paper losses on our investments. We will continue to monitor the underlying fundamentals of our investments and make the appropriate investment decisions as necessary. The Group is also ready to seize the opportunity to make further investments if valuations of target stocks become attractive.