WEBULL

Lim Seong Hai Capital Berhad's (KLSE:LSH) Stock Is Going Strong: Is the Market Following Fundamentals?

Simply Wall St · 1d ago

Most readers would already be aware that Lim Seong Hai Capital Berhad's (KLSE:LSH) stock increased significantly by 15% over the past three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Lim Seong Hai Capital Berhad's ROE in this article.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How To Calculate Return On Equity?

ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Lim Seong Hai Capital Berhad is:

16% = RM103m ÷ RM659m (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each MYR1 of shareholders' capital it has, the company made MYR0.16 in profit.

See our latest analysis for Lim Seong Hai Capital Berhad

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Lim Seong Hai Capital Berhad's Earnings Growth And 16% ROE

To begin with, Lim Seong Hai Capital Berhad seems to have a respectable ROE. Especially when compared to the industry average of 10% the company's ROE looks pretty impressive. Probably as a result of this, Lim Seong Hai Capital Berhad was able to see an impressive net income growth of 44% over the last five years. We reckon that there could also be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Lim Seong Hai Capital Berhad's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 14% in the same 5-year period.

past-earnings-growth
KLSE:LSH Past Earnings Growth December 29th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Lim Seong Hai Capital Berhad's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Lim Seong Hai Capital Berhad Making Efficient Use Of Its Profits?

Lim Seong Hai Capital Berhad has a three-year median payout ratio of 28% (where it is retaining 72% of its income) which is not too low or not too high. By the looks of it, the dividend is well covered and Lim Seong Hai Capital Berhad is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.

Moreover, Lim Seong Hai Capital Berhad is determined to keep sharing its profits with shareholders which we infer from its long history of four years of paying a dividend. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 30%. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 19%.

Summary

Overall, we are quite pleased with Lim Seong Hai Capital Berhad's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.