Returns On Capital At Hiap Teck Venture Berhad (KLSE:HIAPTEK) Paint A Concerning Picture

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10 hours ago

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Hiap Teck Venture Berhad (KLSE:HIAPTEK) and its ROCE trend, we weren't exactly thrilled.
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For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Hiap Teck Venture Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.00092 = RM1.4m ÷ (RM2.0b - RM492m) (Based on the trailing twelve months to April 2025).
Therefore, Hiap Teck Venture Berhad has an ROCE of 0.09%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 7.3%.
See our latest analysis for Hiap Teck Venture Berhad
Above you can see how the current ROCE for Hiap Teck Venture Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Hiap Teck Venture Berhad for free.
On the surface, the trend of ROCE at Hiap Teck Venture Berhad doesn't inspire confidence. Around five years ago the returns on capital were 4.2%, but since then they've fallen to 0.09%. And considering revenue has dropped while employing more capital, we'd be cautious. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.
In summary, we're somewhat concerned by Hiap Teck Venture Berhad's diminishing returns on increasing amounts of capital. Yet despite these concerning fundamentals, the stock has performed strongly with a 79% return over the last five years, so investors appear very optimistic. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.
If you're still interested in Hiap Teck Venture Berhad it's worth checking out our to see if it's trading at an attractive price in other respects.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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