CREDIT ANALYSIS REPORT

KENANGA ISLAMIC INVESTORS BERHAD - 2021

Report ID 60538900362 Popularity 555 views 10 downloads 
Report Date Oct 2021 Product  
Company / Issuer Kenanga Islamic Investors Bhd Sector Finance
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Rationale
Rating action     
MARC has affirmed its investment manager rating of IMR-2 on Kenanga Islamic Investors Berhad (KIIB). 

Rationale     
The rating reflects KIIB’s well-established investment management process, supported by a prudent risk management framework that is sufficient for its relatively small-sized asset management business. 

KIIB is a wholly-owned subsidiary of Kenanga Investors Berhad (KIB), the fund management arm of Kenanga Investment Bank Berhad (Kenanga). With a mandate solely focusing on Shariah-investment management services, KIIB is a relatively small asset manager in Malaysia with assets under management (AUM) of RM2.1 billion, amounting to approximately 1% of total Shariah-compliant AUM in Malaysia as at end-June 2021. 

KIIB manages unit trust funds that are delegated to the company by its parent, KIB. As at end-June 2021, the funds are mainly invested in traditional asset classes, with equity funds constituting the majority of total AUM at 65.6%. The remaining AUM comprised money market funds (18.0%), fixed income (14.1%) and balanced funds (2.4%). Over the same period, retail unit trust funds made up 73.0% of KIIB’s total funds. 

KIIB leverages on the infrastructure and resources of its parent, KIB, thus reducing operational costs and strengthening efficiencies. Among the shared resources is a pool of investment personnel who have sufficient experience in the fund management field. In terms of risk management, KIIB adopts the governance and risk management framework of its parent. Its risk management process is supported by an information system that allows for key risk assessments including stress tests, value-at-risk (VaR) calculations and back-testing of investment portfolios. 

MARC views KIIB’s investment management process as robust, supported by clear investment policy goals. The investment manager uses a bottom-up approach for equity investments and a top-down approach for fixed income investments. Its investment strategy is supported by reputable investment analytics systems comprising Bloomberg and a risk analytics system. Its trading and backroom activities are highly automated using Bloomberg AIM and PORTIA systems. These systems allow for timely investment decision-making.

Notably, KIIB’s unit trust funds have consistently performed better than its benchmarks and are at par with its peers. The Islamic fund manager has also received several awards for selected funds. KIIB’s revenue grew to RM5.0 million following a significant spike in performance fees amounting to RM3.4 million and subsequently registered pre-tax profit of RM2.7 million at end-2020 (end-2019: losses of RM0.6 million). In 1H2021, KIIB’s revenue grew 13.2% y-o-y to RM0.90 million (end-June 2020: RM0.80 million). This was driven by growth in management fees to RM0.99 million (end-June 2020: 0.79 million). 
 

Key rating factors
  • Established investment management process
  • Strong governance and risk management framework adopted from parent
  • Relatively small-sized asset management company
  • Moderate financial profile


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