Insas Berhad's 23% Total Return Outpaces Share Price Growth, But Earnings Decline Raises Questions

Investors often turn to low-cost index funds for market-average returns. However, a deep dive into individual holdings within a diversified portfolio can reveal surprising divergences. Insas Berhad (KLSE:INSAS) presents such a case: its share price has returned 12% over the past three years, trailing the Malaysian market's performance. Yet, a fuller picture emerges when considering total shareholder return (TSR), which stood at a more robust 23% for the same period, buoyed by dividend payouts.

This discrepancy highlights a core tension in equity analysis. Share prices are swayed by market sentiment, while long-term value is ideally anchored in business performance. A common yardstick, earnings per share (EPS), deepens the puzzle for Insas. During its three years of share price appreciation, the company's EPS actually declined at an annualized rate of 22%.

"The market clearly isn't valuing Insas based on its recent earnings trajectory," notes David Chen, a portfolio manager at Kuala Lumpur-based Meridian Capital. "The sustained share price resilience despite falling EPS suggests investors are either pricing in a significant future turnaround or valuing other assets on the balance sheet. The dividend component has been crucial for total returns."

The company's annual revenue growth of 2.3% offers little explanation for the share price action, making the stock a conundrum for fundamental analysts. Management compensation appears relatively modest compared to industry peers, a positive governance signal, but the focus remains on whether earnings can be reignited.

A more critical perspective comes from Sarah Lim, an independent retail investor active on investing forums. "This is a classic 'value trap' warning sign," she argues. "A rising stock price on falling earnings is unsustainable. The dividends are nice, but they could be at risk if the core business doesn't improve. Investors are being lulled by the TSR figure while ignoring the deteriorating profit engine."

In contrast, Professor Arjun Menon of Singapore's Global Business School urges a broader view. "For diversified holding companies like Insas, reported EPS can be volatile due to one-off gains or losses from investments. The market might be ascribing value to its portfolio of unlisted stakes or real estate assets not fully reflected in quarterly earnings. The 23% TSR over three years is a solid outcome, regardless of the path taken."

While the one-year TSR of 4.0% lags the market, it still beats the company's own five-year average. The future trajectory now hinges on whether operational fundamentals can catch up to the shareholder returns already delivered. Analysts caution that investors should look beyond the headline TSR and examine the sustainability of both the dividend and the elusive earnings recovery.

Market return data reflects the market-weighted average of stocks trading on Malaysian exchanges.