Equity markets and valuation

Module 7's Section 3 (up to 30% of the paper, with technical analysis and ETFs) covers Bursa Malaysia's equity markets, types of shares and equity hybrids (warrants, ICULS), how corporate exercises change share numbers and prices, classifying shares, valuing them (DDM, P/E, P/NTA, dividend yield) and REITs. Expect TERP, warrant and ratio calculations and short facts about the Malaysian market.

3 min read4 sections

Checked against SIDC Module 7 Study Outline (Jul–Dec 2026) Topic 5; Bodie, Kane and Marcus, Investments; Bursa Malaysia market pages and Rules; Companies Act 2016 s.74; Income Tax Act 1967 s.61A; MFRS 133. Calculations verified in Python. As at October 2026. Independent prep, not endorsed by SIDC or the SC.

Must-know for the exam

Bursa's share markets: Main, ACE (sponsor-driven) and LEAP (sophisticated investors only); the Second Board merged into the Main Market in 2009.
The FBM KLCI tracks 30 large Main Market companies; most shares trade in board lots of 100 units; settlement is T+2 (since 29 April 2019).
TERP = (old shares × cum price + new shares × issue price) ÷ total shares.
Warrant intrinsic value = share − exercise price; premium = (warrant + exercise − share) ÷ share; gearing = share ÷ warrant.
Bonus issues, splits and consolidations change share count and price but not value; past EPS is restated (MFRS 133).
ICULS pay a coupon and convert into shares instead of being repaid in cash.
The SC's Shariah Advisory Council issues the list of Shariah-compliant securities, updated twice a year.
A REIT distributing at least 90% of its total income is exempt from tax on it (Income Tax Act 1967 s.61A).
Gordon model: P0 = D1 ÷ (r − g); implied growth g = r − D1 ÷ P0.
Under the Companies Act 2016 shares have no par value.

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Traps that cost marks

Averaging the two prices instead of weighting by the number of shares.
Reading 1-for-2 as a 1-for-1 issue.
Confusing intrinsic value with the warrant price, or time value with intrinsic value.
Inverting the gearing ratio.
Treating the P/E and the earnings yield as the same number.
Reading the distribution in sen as a yield.
Growing a dividend that is already next year's.
Inverting the ratio or comparing it the wrong way.

The Malaysian equity market

Market	Who lists	Who may invest
Main Market	Large, established companies	All investors
ACE Market	Growth companies, sponsor-driven	All investors
LEAP Market	SMEs, adviser-driven	Sophisticated investors only

Trading is in board lots of 100 units and settles on T+2. Entitlement to dividends is fixed on the entitlement date; shares go ex two market days earlier. Shariah-compliant status comes from the SC's Shariah Advisory Council.

Trap: using old board names or the pre-2019 T+3 cycle.

Takeaway: three markets, 100-unit lots, T+2.

Shares and equity hybrids

Ordinary shareholders vote and share in residual profits but rank last in a winding up. Preference shareholders rank ahead for dividends and capital but usually vote less. Company warrants give the right to subscribe for new shares (exercise creates shares and cash); ICULS convert into shares rather than being repaid.

Example: share RM1.50, warrant RM0.45, exercise RM1.20: intrinsic RM0.30, premium 10%, gearing 3.33 times.

Trap: treating warrant holders as shareholders entitled to dividends, or ICULS as redeemable bonds.

Takeaway: warrants are rights, ICULS are conversions, preference shares are priorities.

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