Enterprise value is a measure of a company’s total worth.
Mathematically, EV = Market
Capitalisation + Total Debt – Cash and equivalents
When a company’s EV is negative, this means it has more cash than it would cost to buy all its outstanding shares and pay off all its debts. Put another way, one could acquire the company for less than its cash holdings. At face value, this looks like a clear arbitrage opportunity. But we know that markets are efficient and therefore, rarely misprice. Indeed, when something looks too good to be true, it often is. That said, while rare, -EV situations do exist for several reasons. And this is why we have termed it as “unrational” instead of “irrational”, because while it may be beyond reason at first impression, it is not necessarily wrong. They generally fall into a few broad categories (that are not necessary mutually exclusive) including:
See also: Strategic rationale behind the recent restructuring of our portfolios
- Start-ups after large fundraising exercise, with expectations the company will continue to burn cash in the foreseeable future and investors lack confidence in a clear path to profitability;
- The principal or underlying business of the company is in distress, fundamentally unprofitable operations with limited visibility on turnaround and prospects;
- Major regulatory and litigation overhang that will likely eat into cash holdings;
- Lack of confidence that management will deploy cash in the best interests of shareholders, that is, governance issue; and
- Short-term market distortions such as panic selling and very low-liquidity micro-caps.
We filtered the stocks listed in the US, Malaysia and Singapore for -EV companies. What is most interesting about the results is that the reason for their existence is quite distinct in the three markets. In Malaysia, we see companies with large -EV in absolute terms and this phenomenon is more prevalent — 4.4% of all companies listed on Bursa Malaysia. By comparison, there are only 2.0% of listed companies across all exchanges in America with -EV. In Malaysia, governance concern is the most common reason for -EV.
In Singapore, the majority are micro-caps, stocks with very low liquidity and in most cases, their -EV is very small in absolute terms. In the US, stocks with -EV are mostly biotech companies, whose business models are such that they will burn cash continuously for research and development (R&D) and clinical trials, with no guarantee of commercialisation and limited visibility on future profitability.
See also: Leading enterprises in China’s rapidly evolving AI ecosystem
Malaysia’s value traps
Table 1 shows 10 Bursa-listed companies with the largest -EV in absolute terms (net cash – market cap). There were 49 companies with -EV at the point of analysis, out of a total 1,107 listed companies. Three of the 10 stocks are unprofitable — hence, their -EV is likely the market signalling that their core businesses will continue to destroy value for shareholders. Some of the companies though are in fact profitable, indeed, trading at low price-earnings (PE) multiples. Rather than bargains, we think this indicates a lack of confidence in the board of directors, management and major shareholders.
Many companies on the list are in “old” businesses, loss-making and seem unable or incapable of either turning the business around or monetising the assets of the business. There also appears little interest in maximising shareholder value or returning excess cash to ALL shareholders. We suspect a few major shareholders are probably looking at privatising the company instead.
Take asset-rich Insas Bhd as an example. As at June 2025, it held approximately RM1.1 billion net cash. Its 12.8% stake in Inari Amertron Bhd alone was worth RM1.22 billion. Combined, that’s RM2.32 billion in value (before taking into account its other businesses and assets) against a market capitalisation of just RM557 million. Why the huge “undervaluation”, especially since Inari is also listed?
One of the biggest reasons we think is the company’s lazy balance sheet — asset-rich but cash flow and returns poor. Insas is simply hoarding cash, not deploying them to productive uses to generate returns for all shareholders. At an Minority Shareholders Watch Group Q&A in late 2024, management said the cash was held to “provide flexibility” for “any good investment opportunities”. But that growing cash pile has sat idle for years on end. In fact, we are stumped as to how its interest income on cash — averaging 1.8% per annum in the past decade — has been lower than fixed deposit rates. If no good investments can be found after such extensive search, then the appropriate action must surely be to return excess cash to shareholders. Just a reminder — the company is owned by ALL shareholders. At the very least, raise dividend payouts. Instead, dividend yield currently stands at a relatively low 3%, even as its cash pile grew.
Its share price, meanwhile, has gone nowhere in the past 10 years — in other words, shareholders lost real value taking into account inflation. As a result, its warrants, set to expire in February 2026, are near worthless. The exercise price of 90 sen is higher than Insas’ current share price of 84 sen (1:1 conversion ratio).
For more stories about where money flows, click here for Capital Section
This raises another puzzling question. The warrants were a “sweetener” attached to 132.6 million redeemable preference shares (RPS) issued in February 2021. The RPS raised RM132.6 million in proceeds, which was used to repay a bridging loan. Here’s our question: Why issue RPS and pay 3.8% interest cost on it when the company was sitting on cash totalling RM827 million in June 2020, which then grew to RM1.1 billion ($346 million) by June 2021? Particularly given that Insas was earning a mere 1.4% interest income on its idle cash. It doesn’t seem rational to us. But of course, we don’t know Insas’ underlying intentions. Clearly, neither does the market. Hence, the lack of investor confidence in the company and its poor share price performance.
Not every cash-rich company leaves minority shareholders stranded. To be clear, we are not suggesting that companies trading at -EV or low price-to-book should be made to delist or make unreasonably low-priced general offers to take private valuable assets. That will only benefit the controlling shareholders, at the expense of minorities. Companies should strive to monetise and unlock value in their assets and distribute the proceeds fairly to all shareholders.
Kuchai Development Bhd is one example of controlling shareholders unlocking value for minorities. The company has proposed a 44.8 sen per share dividend payout totalling RM55.4 million, which is almost equal to its RM58.1 million cash pile. The move will precede its voluntary delisting from Bursa, marking a clear contrast with companies that let cash sit idle.
Two other companies on the list are Star Media Group Bhd and Media Chinese International Ltd. Both publish daily newspapers but face a structural decline in print media as readers and advertising revenue continue to shift online. Like many legacy publications, the companies are struggling to reinvent in the digital era.
Yet both companies remain cash (assets) rich, a testament to their past success. Media Chinese has RM300 million in net cash, almost double its market capitalisation. Star Media shows a similar mismatch, where its net cash of RM343 million is larger than its market capitalisation of RM271 million (at the time of writing).
Until the companies can come up with a credible plan to turn around their core business and/or deploy their cash productively into new viable businesses, the market will continue to price them as businesses in decline. That is, they will continue to destroy shareholder value. Additionally, we believe not all the cash is “available” as there are obligations such as staff costs in the event of restructuring or liquidation.
Here’s a question to management and boards of directors: Perhaps the major or controlling shareholders have reasons to maintain a loss-making business to serve their other ambitions. But does it serve the interests of all other shareholders? Your fiduciary duty is to the company, not the controlling shareholder.
Singapore oversight and enforcement in action
Across the Causeway, the picture looks very different (see Table 2). There are fewer companies with –EV: 20 out of a total 613 listed, or under 3.2%. Those that do trade below their cash holdings are micro-caps (market cap less than S$50 million) with very thin liquidity. Many have prior history including stints on regulator watch lists and lawsuits. And the -EV in absolute amounts are much smaller, in tens of millions, compared with that in Malaysia, where they go up to hundreds of millions. One reason, we think, is because its capital market has stricter regulatory and governance oversight. More importantly, there is real enforcement. People do end up in jail for life, literally.
Case in point, Malaysian businessman John Soh Chee Wen was found guilty of 180 charges including forced trading, price manipulation, deception and witness tampering in Singapore, for orchestrating the 2012-2013 Blumont Group, LionGold Corp and Asiasons Capital penny stocks manipulation. He was sentenced to 36 years’ imprisonment by the Singapore High Court in 2022, and the conviction was upheld by the Court of Appeal in October 2025. His co-conspirator, Quah Su-Ling, received a 20-year jail term. Back in 2002, Soh was charged with securities fraud in Malaysia — in a scheme to defraud Omega Securities of more than RM500 million that eventually led to its collapse. He pled guilty and was fined a mere RM6 million. Yes, he paid RM6 million after stealing RM500 million — a very profitable venture. It is little wonder he became a repeat offender. But not anymore; Singapore took care of it. The message from Singapore is clear. Don’t you dare do it in Singapore.
The standout in Table 2 is Cordlife Group Ltd. In November 2023, Singapore’s Ministry of Health (MoH) flagged serious lapses at the company’s cord blood storage facilities. Several storage tanks and a “dry shipper” (a specialised container that transports cord blood at cryogenic temperatures) were found to be at high risk of adverse impact due to temperature warming events. An estimated 5,300 cord blood units from Tank B and the dry shipper were deemed non-viable. Investigations traced the failures to errors during maintenance, and the MoH required sweeping rectifications. By August 2024, Cordlife was permitted to resume cord blood banking under tight restrictions. In January 2025, its licences were renewed for one year, conditional on compliance. Cordlife fell into -EV at the outset of the MoH’s announcement when its share price collapsed but recovered somewhat after its conditional licence renewal.
However, in late-September 2025, the MoH issued a notice of intent to suspend its cord blood banking services for a year, following the discovery of new lapses in its operations during a July follow-up audit. Cordlife has been directed to conduct a full investigation to address all the non-compliance issues flagged by the MoH. If the suspension proceeds, Cordlife warned of its ability to continue as a going concern. In this case, its cash reserves are now viewed as “insurance” — to cover potential refunds and legal liabilities, regulatory fines and so on — no longer “free” and deployable capital.
Here’s the point: Cordlife underscores how regulators in Singapore enforce accountability. Governance is the line between cash being priced as ammunition or dismissed as deadweight. The broad market and minority shareholders as a whole benefit from better governance and higher investor confidence because lapses are not allowed to slide.
In the US, -EV companies are mostly biotechs
In our analysis of America’s capital markets, the results confirm our belief that in developed markets, companies with deadweight/idle cash very rarely exist in the -EV realm. And where they do, these companies tend to be micro-caps, cash shells or carry idiosyncratic risks. American companies with -EV are not governance traps but businesses where profitability remains ambiguous despite strong cash positions — due primarily to their unique business models. Specifically, biotech companies, where R&D burn rates are high and outcomes binary (see Table 3).
VIR Biotechnology Inc is a case in point. Once known for its Covid-19 antibody sotrovimab (developed with GSK), it has pivoted to oncology and hepatitis delta — a higher-risk clinical pipeline that has yet to deliver. In 2Q2025, the company posted a net loss of US$111 million ($144 million) against net cash of US$892 million, with revenue of just US$1.2 million. Management guidance promises a cash runway until mid-2027 (before it runs out of cash) but clearly, investors are not willing to pay up without proof of progress.
Fulgent Genetics Inc tells a similar story. Its pandemic windfall from Covid-19 testing left it with a sizeable securities portfolio, but its core diagnostics segment has yet to recover. Its last-12-month operating cash flow was US$25 million as oncology diagnostics and its fledgling therapeutics arm continued to burn cash. Again, investors want proof the business can generate sustainable profitability before they assign value beyond its cash.
Unlike in Malaysia, this type of market scepticism rarely lingers forever. Either the cash runs out, or shareholder lawsuits, activist campaigns and competitive pressure will force these companies to return capital or sharpen execution.
Conclusion: The performance of a stock market is directly affected by governance and enforcement
The analysis above offers some very telling lessons. In Singapore, stronger regulatory enforcement, intervention and investor protection can improve governance and confidence in the capital markets. Cases of -EV are fewer and mostly marginal. In the US, the threat of shareholder lawsuits or activist pressure ensures that cash hoards are quickly put to work.
On the other hand, in Malaysia, the guidelines on corporate governance are general and vague and rarely enforced. Even proven corporate frauds and gross negligence typically carry no more than a slap on the wrist. Shareholder activism is scarce and not actively encouraged by regulators. Minority shareholders have very limited recourse (and limited resources) to challenge unfavourable corporate decisions, especially where the major shareholders (many family-owned) also have dominant control over management and the board of directors. Under such an environment, concerns over governance are high and persistent. Cash can sit idle for years and minority value remains trapped. Hence, most -EV cases are more likely value traps. Make no mistake, governance concerns and lack of trust affect sentiment and confidence not just in the affected companies but the entire stock market.
Different markets, different problems but same outcome: Investors will not pay for cash they do not trust.
So, why are we writing this “offensive” article? It forms the first of a series of articles where we will attempt to explain why the Malaysian stock market has underperformed in the last 30 years (and indeed, achieved the remarkable feat of delivering negative returns over the past decade). Governance is but one reason. And we hope that this will lead to a series of both public and institutional discourse or deliberations where weaknesses are acknowledged, mistakes are admitted, and there will be both intellect and courage to take corrective measures so that the Malaysian stock market may once again be the “tiger” it was in the early 1990s.
The Malaysian Portfolio was up 1.0% for the week ended Nov 12, lifted by gains for Hong Leong Industries (+4.6%), United Plantations (+3.1%) and Kim Loong Resources (+0.9%). Insas Bhd – Warrants C (-33.3%), was the only loser, falling further to just 1 sen per warrant. Total portfolio returns now stand at 190.3% since inception. This portfolio is outperforming the benchmark FBM KLCI, which is down 10.8% over the same period, by a long, long way.
Meanwhile, the Absolute Returns Portfolio gained 2.8% last week. The gains boosted total portfolio returns to 44.6% since inception. The top three gainers were Ping An Insurance - H (+7.3%), Trip.com (+6.0%) and Goldman Sachs (+5.8%). Kanzhun (-2.0%) and Alibaba (-1.0%) were the only two losing stocks.
The AI portfolio ended the week 1.3% higher. Total portfolio returns now stand at 7.5% since inception. The biggest gainer was Datadog, whose shares surged 23.2% after the company reported better-than-expected earnings and robust forward guidance. Shares for Horizon Robotics (+0.1%) traded marginally higher but all other stocks in the portfolio ended in the red. The three biggest losers were Naura Tech (-4.5%), Marvell (-3.8%) and Cadence Design (-3.7%).
Narratives can drive returns before operations do
To complete our analysis on negative enterprise value (articulated in the main article), we performed another search for the opposite: where markets value companies far beyond their cash/assets or revenues, often sustained by the power of storytelling.
In a 2017 paper, Nobel laureate Robert Shiller introduced the idea of narrative economics: the notion that stories and collective beliefs, not just rational data, drive economic outcomes. Narratives shape decisions, spread virally and can move markets in ways fundamentals alone cannot explain.
The most visible modern example of this is the rise of meme stocks. GameStop, AMC Entertainment and Bed Bath & Beyond all surged because retail investors rallied behind stories amplified by social media — despite fundamentally weak operations. GameStop’s rally was fuelled by the short squeeze movement led by “Roaring Kitty” and wallstreetbets, while AMC rode a wave of retail buying despite volatile cash flows.
More recent examples include bitcoin treasury vehicles such as Strategy Inc (formerly MicroStrategy). Their business model is simple but reflexive: buy bitcoin, issue notes (using bitcoin as collateral), use proceeds to buy more bitcoin. Investors pay a premium well above the underlying bitcoin value per share, reflecting belief in the story rather than fundamentals.
Meme stocks and bitcoin treasury companies are very much speculative-driven stocks. However, there are companies with high cash-to-assets ratios and marginal or no revenue at all — that are not purely speculative plays. These stocks combine strong thematic narratives or, in the case of the biotechs, credible clinical milestones — that is, the market has high confidence in future sales and profits. These are the mirror images of -EV companies. Instead of being discounted despite large cash holdings, they command extraordinary premiums sustained by narrative momentum. Notably, many such companies exist in America, but the exact same parameters yielded no result in either Malaysia or Singapore. For our readers’ ease, we separated the stock selections into two tables — Table 1 where the companies have small revenue (less than 5% of market cap) and Table 2 where there is yet any revenue.
QXO Inc illustrates how markets can assign massive premiums to cash/revenue when the story is compelling and leadership is trusted. CEO Bradley Jacobs’ objective is to modernise building-products distribution through acquisitions and by leveraging an artificial intelligence-tech platform to consolidate the fragmented industry and scale rapidly. Investors are backing the plan well before any tangible result. In April 2025, QXO completed its first acquisition (Beacon Roofing Supply) to become the largest publicly traded distributor of roofing and complementary products in the US. More acquisitions are expected. But why is the unprofitable company trading at such a hefty premium over current revenue and assets?
Because this isn’t serial acquirer-entrepreneur Jacobs’ first rodeo. In 1997, he founded United Rentals, one of the world’s largest equipment-rental companies, built through rapid merger and acquisition (M&A) and integration. The company’s most recent quarter saw rental revenue rise 6.2% year on year to US$3.415 billion ($4.1 billion), with the share price up 37% year to date (at the time of writing).
In 2011, Jacobs repeated the formula with XPO Logistics, scaling it through acquisitions and technology investments. XPO proved so successful that two additional listed companies: GXO, a contract logistics leader, and RXO, a freight brokerage provider, were spun out. In total, Jacobs has founded or built six listed companies: United Waste Systems, United Rentals, XPO, GXO, RXO and now QXO.
His track record speaks for itself, and it explains why investors are willing to value QXO at such a premium. The company reinforced this confidence by tying management compensation to performance: no payout unless total shareholder returns exceed the 55th percentile of the S&P 500 companies.
NuScale Power Corp is an example of pre-commercialisation (loss-making with very marginal revenue from front-end engineering/licensing work in Romania) company that is driven purely by a compelling thematic narrative. It is currently the only SMR (small modular reactor) vendor with a Nuclear Regulatory Commission-approved design now at 77 MWe — seen as a tangible moat in a sector where licensing is the tallest hurdle. A first-mover advantage in a potentially high-growth sector — IF SMR becomes mainstream.
Demand for power from AI adoption-data centres is expected to grow exponentially, more than what traditional energy sources can keep up with. Investors are buying NuScale for its future potential, though there is no guarantee on commercialisation, orders and profits — plus high execution risks that are typically associated with nuclear projects.
Oklo Inc trades on the same alternative new energy theme as NuScale. However, unlike its peer, Oklo does not yet have an NRC licence after its first application was denied in 2022. But the company recently broke ground on its Aurora Powerhouse at the Idaho National Laboratory and was selected to participate in the Department of Energy’s new Reactor Pilot Program. Its share rally was further fuelled by non-binding deals: a 12GW framework agreement with Switch, an Equinix arrangement for up to 500MW (with a US$25 million prepayment), and a 50MW letter of intent with Diamondback Energy. In effect, Oklo is being positioned as an advanced nuclear start-up. Clearly, valuations are aggressive and expectations are as high as its execution risks.
Archer Aviation Inc, meanwhile, designs and develops all-electric vertical takeoff and landing (eVTOL) aircraft. In 2024, it received a Part 135 Air Carrier Certificate from the Federal Aviation Administration (FAA), and in February 2025 received a Part 141 certification for a pilot training program for its aircraft Midnight. One of its investors, Stellantis, is also the contract manufacturer, with production targeted at two aircraft per month by end-2025. Archer intends to sell its aircraft to third parties (commercial and military) and also operate an air taxi service.
Its indicative order book includes conditional purchase agreements worth up to US$1 billion with United Airlines, up to 100 aircraft (approximately US$500 million) to Japan Airlines-Sumitomo joint-venture Soracle, as well as others like Ethiopian Airlines. The company had conducted successful test flights in the UAE. One peer, Ehang Holdings Ltd (listed on Nasdaq) recently completed pilotless human flights in Indonesia — reinforcing investor belief that the technology and business models are viable.
For all these companies, current premium valuations are based on the promise of what they might become, not what they are today. In short, markets don’t reward balance sheets, they reward plans (stories) — on how today’s cash turns into tomorrow’s cash flows. Idle cash on balance sheets is simply deadweight — and the stocks, value traps.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
