Mega First Corporation Berhad (KLSE:MFCB) has had a rough three months with its share price down 14%. However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. Particularly, we will be paying attention to Mega First Corporation Berhad’s ROE today.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Mega First Corporation Berhad is:
12% = RM426m ÷ RM3.5b (Based on the trailing twelve months to September 2025).
The ‘return’ is the yearly profit. One way to conceptualize this is that for each MYR1 of shareholders’ capital it has, the company made MYR0.12 in profit.
See our latest analysis for Mega First Corporation 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.
To begin with, Mega First Corporation Berhad seems to have a respectable ROE. Further, the company’s ROE compares quite favorably to the industry average of 8.1%. Yet, Mega First Corporation Berhad has posted measly growth of 3.6% over the past five years. This is interesting as the high returns should mean that the company has the ability to generate high growth but for some reason, it hasn’t been able to do so. We reckon that a low growth, when returns are quite high could be the result of certain circumstances like low earnings retention or poor allocation of capital.
Next, on comparing with the industry net income growth, we found that Mega First Corporation Berhad’s reported growth was lower than the industry growth of 7.3% over the last few years, which is not something we like to see.
