Are Poor Financial Prospects Dragging Down Hextar Retail Berhad (KLSE:HEXRTL Stock?
With its stock down 3.2% over the past month, it is easy to disregard Hextar Retail Berhad (KLSE:HEXRTL). We decided to study the company’s financials to determine if the downtrend will continue as the long-term performance of a company usually dictates market outcomes. In this article, we decided to focus on Hextar Retail Berhad’s ROE.
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 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 Hextar Retail Berhad is:
0.5% = RM1.1m ÷ RM208m (Based on the trailing twelve months to December 2024).
The ‘return’ refers to a company’s earnings over the last year. So, this means that for every MYR1 of its shareholder’s investments, the company generates a profit of MYR0.01.
Check out our latest analysis for Hextar Retail 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 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.
As you can see, Hextar Retail Berhad’s ROE looks pretty weak. An industry comparison shows that the company’s ROE is not much different from the industry average of 0.6% either. Given the circumstances, the significant decline in net income by 9.0% seen by Hextar Retail Berhad over the last five years is not surprising.
So, as a next step, we compared Hextar Retail Berhad’s performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 6.1% over the last few years.
KLSE:HEXRTL Past Earnings Growth March 30th 2025
Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock’s future looks promising or ominous. If you’re wondering about Hextar Retail Berhad’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Story Continues
Hextar Retail Berhad’s high three-year median payout ratio of 113% suggests that the company is depleting its resources to keep up its dividend payments, and this shows in its shrinking earnings. Paying a dividend higher than reported profits is not a sustainable move. To know the 4 risks we have identified for Hextar Retail Berhad visit our risks dashboard for free.
Additionally, Hextar Retail Berhad has paid dividends over a period of at least ten years, which means that the company’s management is determined to pay dividends even if it means little to no earnings growth.
In total, we would have a hard think before deciding on any investment action concerning Hextar Retail Berhad. Specifically, it has shown quite an unsatisfactory performance as far as earnings growth is concerned, and a poor ROE and an equally poor rate of reinvestment seem to be the reason behind this inadequate performance. Up till now, we’ve only made a short study of the company’s growth data. You can do your own research on Hextar Retail Berhad and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
