This article first appeared in The Edge Malaysia Weekly on January 19, 2026 - January 25, 2026

LIKE most financial stocks, Hong Leong Financial Group Bhd (KL:HLFG) has enjoyed a strong run in recent months, with its share price climbing 28% over the last six months and nearly 10% year-to-date.

Despite the rally, analysts remain positive on the counter. Bloomberg data shows that all four analysts covering HLFG maintain a “buy” rating. One of them, from AmInvestment Bank Research, is particularly bullish, having recently raised its target price by 44.4% to RM31.20, from RM21.60. The other three analysts have target prices ranging from RM21.56 to RM22.61.

HLFG closed at RM20.82 last Thursday (Jan 15), for a market capitalisation of RM23.89 billion. The financial conglomerate is controlled by veteran businessman Tan Sri Quek Leng Chan, who also has property and manufacturing interests.

“It provides deep value play and is one of the most inexpensive listed banks in Malaysia, trading at only 0.58 times price-to-book value (PBV) and 6.1 times price-to-earnings ratio (PER),”AmInvestment Bank Research says in a Jan 5 report on HLFG.

The research house’s banking analyst believes HLFG deserves a re-rating. He notes that although the holding company has moved into a net cash position, HLFG’s sum-of-parts (SOP) valuation discount has widened to 39% compared with its five- and 10-year averages of 35% and 29% — a gap he considers “unwarranted”. 

An investment holding company, HLFG owns a 64.4% stake in banking group Hong Leong Bank Bhd (KL:HLBANK), a 70% stake in insurer Hong Leong Assurance Bhd (HLA) and an 81.3% stake in Hong Leong Capital Bhd (KL:HLCAP), which owns investment banking, stockbroking and asset management businesses.

“We retain our ‘buy’ call on HLFG but with a higher target price of RM31.20 — now using the Gordon Growth Model (GGM) method instead of the typical SOP valuation employed by [other analysts] — based on 0.95 times FY2027 PBV. In our opinion, the stock deserves a re-rating given [the] holding company has turned net cash and the market is underpricing its strong potential yield upside.”

(The GGM method of valuation determines a stock’s intrinsic value based on expected future dividends growing at a constant rate. It is useful for analysing companies with stable dividend growth.)

About 90% of HLFG’s earnings come from HLBB. Hence, its fortunes are closely tied to the bank’s prospects. HLBB is currently among the most frequently cited top stock picks of analysts.

The analyst at AmInvestment Bank Research notes that the ability to invest directly in HLBB is often cited as a key reason for the valuation discount applied to HLFG. However, he argues that this view overlooks HLFG’s stronger potential yield upside.

“The group currently pays out just 60% of dividends received from its operating companies (five-/10-year average: 64%/63%); if this is raised to 100%, HLFG’s yield could expand to a blue-sky 7.1%. Even now, the stock is already offering dividend yield of 4.3%, above its 5-/10-year average of 3.4%/2.9% — and it is still not yet widely owned by investors,” he says.

The holding company structure is also frequently cited as the reason for HLFG’s valuation discount, but the analyst believes this argument is overstated.

“Several listed companies, such as Sunway Bhd (KL:SUNWAY), PPB Group Bhd (KL:PPB), OSK Holdings Bhd (KL:OSK) and even Berkshire Hathaway Inc, do not suffer such steep penalties, with holding company discounts typically below 20%, if any. Likewise, banks with similar structures, past or present — RHB Capital and CIMB — have not encountered the same treatment. So why the steep discount at HLFG?” he highlights when contacted by The Edge.

He says that investors often point to stock illiquidity as a concern, but the data tells a different story. (HLFG has a relatively low free float of 16.1%.)

“We find HLFG’s average daily trading value (ADV) of RM4.3 million a day from 2020 to 2025 is higher versus numerous financial names (including Bank Islam Malaysia Bhd [KL:BIMB], Aeon Credit Service (M) Bhd [KL:AEONCR], Allianz Malaysia Bhd [KL:ALLIANZ] and LPI Capital Bhd [KL:LPI], at between RM0.8 million and RM3 million a day),” the analyst says.

“[Its ADV] also surpasses that of quality real estate investment trusts (such as Pavilion REIT [KL:PAVREIT], Sunway REIT [KL:SUNREIT] and IGB REIT [KL:IGBREIT], at RM2.6 million to RM3.9 million a day), while comparable to high-yielding consumer stocks like Heineken Malaysia Bhd (KL:HEIM) at RM4.4 million a day. HLFG’s narrow bid-ask spread further dispels the illiquid narrative.”

For those reasons, the AmInvestment Bank Research analyst is more optimistic than most about HLFG’s stock prospects.

Another analyst, whose target price for HLFG is close to being met, tells The Edge: “From here, any further upside for HLFG will be dependent on the potential upside for HLBB and the expectation of a narrowing of discount between both their valuations.”

HLFG’s earnings have grown in each of the last five consecutive years, reaching RM3.25 billion in the financial year ended June 30, 2025 (FY2025) from RM1.86 billion in FY2020. Its dividend per share too increased each year, to 72 sen in FY2025 from 38 sen in FY2020. 

In FY2025, HLBB accounted for 88% of HLFG’s profit before tax of RM6.1 billion, with HLA contributing 11% and Hong Leong Capital making up about 1%.

“We like HLFG largely due to HLBB’s strong fundamental outlook and growth prospects. We think improving market conditions should help HLFG with its Hong Leong Capital revenue stream,” MBSB Research says in a Nov 28, 2025 report following the group’s 1QFY2026 results. Its SOP-based target price is RM22.61, reflecting a holding company discount of 35%.

HLFG’s 1QFY2026 net profit fell 0.7% from a year ago to RM841.32 million, mainly because of lower contributions from Bank of Chengdu Co Ltd (BoCD). This was after HLBB’s stake in the Chinese lender dropped to 17.8% from 19.76% before, with the full conversion of BoCD’s convertible bonds.

HLBB recently indicated that it may eventually divest up to a 5% stake in BoCD as it looks to strengthen earnings contributions from its own core business, and analysts expect a portion of the proceeds to be paid out as a special dividend. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.