Karex Berhad’s (KLSE:KAREX) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

Mon, Aug 25, 2025, 6:17 PM 4 min read

It is hard to get excited after looking at Karex Berhad’s (KLSE:KAREX) recent performance, when its stock has declined 15% over the past three months. But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. Specifically, we decided to study Karex 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.

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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 Karex Berhad is:

3.0% = RM15m ÷ RM485m (Based on the trailing twelve months to March 2025).

The ‘return’ is the profit over the last twelve months. So, this means that for every MYR1 of its shareholder’s investments, the company generates a profit of MYR0.03.

See our latest analysis for Karex Berhad

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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 all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

As you can see, Karex Berhad’s ROE looks pretty weak. Not just that, even compared to the industry average of 10%, the company’s ROE is entirely unremarkable. Despite this, surprisingly, Karex Berhad saw an exceptional 50% net income growth over the past five years. We reckon that there could be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Karex Berhad’s growth is quite high when compared to the industry average growth of 8.7% in the same period, which is great to see.