Bonus Issue Bursa Malaysia: Technicalities, Strategy, and Why Investors Love "Free" Shares
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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Who doesn't love free things, right? In the world of stock investing on Bursa Malaysia, the term "Bonus Issue" or Terbitan Bonus is always a hot topic in WhatsApp and Telegram stock groups. Many investors, especially newcomers, get excited when their favourite company announces bonus shares.
But is it truly a "gift" that will double your wealth overnight? Or is it merely an accounting technique to spruce up the financial statements?
In this article, we will thoroughly unpack everything about Bonus Issues — from the basic definition right through to strategies on how you can make the most of them.
In short, a Bonus Issue is the distribution of additional shares to existing shareholders for free. You do not need to spend a single sen to receive these extra units.
The company does not conjure new shares out of thin air. Instead, it converts a portion of its Retained Earnings or Company Reserves into share capital. In simple terms, the company takes money from its own "savings account" and gives it to you in the form of share units.
Simple Analogy:
Imagine you own a large pizza cut into 4 slices. The company then decides to cut that pizza into 8 slices. Now you have 8 slices of pizza, but the overall size of the pizza remains the same. You haven't received any extra pizza — you've just got more slices!
If the total value of the company doesn't change, why does the management go through all this trouble? Here are the main reasons:
This is the most important part. Many investors panic on the Ex-Date when they see their share price "plunge" and their portfolio turn red. Don't panic! This is a price adjustment.
The share price is adjusted based on the ratio set. You can use the formula below:
Adjusted Price = (Cum-Price x Old Units) / New Units
Example Scenario:
Company XYZ announces a Bonus Issue with a ratio of 1-for-2. This means for every 2 shares you hold, you will receive 1 bonus unit (Total new units = 3).
After Ex-Date:
To qualify for bonus shares, you need to understand the Bursa Malaysia timeline:
Every corporate action has two sides of the coin. Let's compare:
| Advantages | Risks & Side Effects |
|---|---|
| Quantity Increases: You own more units for your long-term strategy. | Dividend Per Share (DPS) May Drop: If the company's profit remains the same, the dividend per share may appear smaller. |
| Bullish Sentiment: The market usually welcomes bonus issue news positively. | Dilution: Earnings per share (EPS) will be adjusted downward because the number of units has increased. |
| Capital Gain Potential: The "cheap" price after adjustment often attracts new buying interest that pushes the price back up. | No Guarantee: If the company's fundamentals are poor, the price will continue falling even after the bonus. |
Many people confuse the two. Visually, the effect is the same (more units, lower price). However, from an accounting perspective on Bursa Malaysia:
How should you as a retail investor act?
If you want to learn more about other corporate exercises such as rights issues, share splits, share consolidation and many more, read:
Complete Guide to Corporate Exercises on Bursa Malaysia: What Investors Need to Know
A Bonus Issue is not "magic" that will make you rich overnight. It is a corporate tool to improve trading efficiency and provide a psychological reward to investors.
The key to success in investing in companies that issue bonuses is to ensure the company has consistent earnings growth. Without profits, additional share units will only weaken the value of your holdings in the long run.
Why not start learning and investing in stocks on Bursa Malaysia yourself? If you are still a complete beginner and don't know how to start, you can begin by opening a CDS account under Mahersaham. Tuan Maher is a registered dealer's representative under Broker Mplus.
If you are interested in opening a CDS account, click: OPEN CDS ACCOUNT
A Bonus Issue is when a listed company distributes additional shares to existing shareholders for free by converting its retained earnings or reserves into share capital. You receive more units without paying anything.
No. While the number of units increases, the share price is adjusted proportionally downward. Your total investment value remains the same immediately after the Ex-Date. The real gains come if the company's fundamentals drive the price back up over time.
A Bonus Issue involves converting reserves or retained earnings into share capital, which signals financial strength. A Share Split simply divides existing shares into smaller units with no impact on reserves — it is purely cosmetic.
You must own the shares at least one day before the Ex-Date. If you purchase on the Ex-Date itself, you will not be entitled to the bonus shares.
No. Always focus on the company's fundamentals first. Ask yourself whether you would still invest in the company even without the bonus issue. If the answer is yes, the bonus is simply an added benefit.