What Is a Stock Split? Understanding Share Splits on Bursa Malaysia

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A stock split or share split is often seen as "good news" by retail investors on Bursa Malaysia. But does it truly add value to your investment, or is it merely a cosmetic change to make the share price look more attractive?
In this article, we will explain in a simple and straightforward way what a stock split is, why companies do it, and what it means for your pocket as an investor.
Imagine you have a large pizza cut into 4 slices. You feel the pizza is too big to eat at once or too difficult to share with friends. So you cut each slice in half. Now you have 8 slices of pizza.
The question: Did the total size of your pizza increase?
The answer: No. The total pizza remains the same size — only the number of slices has increased.
In the stock market, the "pizza" is your ownership value in the company. When a company performs a stock split, they are not adding value to the company. They are simply dividing the existing shares into a larger number of units at a lower price per share.
You might wonder — if the company's value does not change, why bother doing a stock split? There are three main reasons:
When a company's share price is too high — say RM50 per share — not many retail investors can afford to buy it. By performing a stock split (e.g. 1:10), the share price becomes RM5. This makes it easier for more people to buy and sell, thereby increasing trading volume in the market.
Psychologically, investors are more inclined to buy 1,000 units of shares priced at RM1 rather than 10 units priced at RM100, even though the total value remains RM1,000. A lower price appears more "affordable" and attracts new investors.
Certain indices or institutional funds have specific criteria regarding liquidity and free float. A stock split helps companies meet these criteria to remain relevant on the radar of large institutional investors.
Let us look at the technical aspect. In every stock split announcement, the company will state the Split Ratio. The most common examples are 1-for-2 (1:2) or 1-for-5 (1:5).
Suppose you own 1,000 units of Company ABC shares at RM10.00 before the split.
As you can see, the Market Capitalisation and your portfolio value remain the same. The only thing that changes is the number of units you hold.

Many new investors mistakenly believe they will receive "free shares." This is a myth. However, there are indirect effects you should know about:
If you want to learn more about other corporate exercises such as bonus issues, share splits, share consolidations and more, read:
Complete Guide to Corporate Exercises on Bursa Malaysia
If you hold shares in a company that is about to perform a stock split, you will see these terms in the Bursa announcement:
To help you visualise this more clearly, here is a simulation table comparing two common stock split ratios on Bursa Malaysia.
This scenario assumes you own 1,000 units of Company XYZ shares at RM6.00 per share before the split.
| Item | Before Split | After Split (1:2) | After Split (1:3) |
|---|---|---|---|
| Total Units Owned | 1,000 units | 2,000 units | 3,000 units |
| Price Per Share | RM6.00 | RM3.00 | RM2.00 |
| Portfolio Value | RM6,000 | RM6,000 | RM6,000 |
| Minimum Cost for 1 Lot (100 units) | RM600 | RM300 | RM200 |
To calculate the adjusted price manually, you can use this formula:
New Price = Old Price / Split Factor
Example for 1:3 Ratio: New Price = RM6.00 / 3 = RM2.00
For the number of units:
New Units = Old Units x Split Factor
Both Stock Split and Bonus Issue appear similar because both cause your number of share units to increase and the price per share to decrease. However, from an accounting and market signalling perspective, they have significant differences.
Here is a comparison table to help you understand:
| Feature | Stock Split | Bonus Issue |
|---|---|---|
| Meaning | Dividing existing shares into smaller units. | Giving additional shares for free to existing shareholders. |
| Impact on Capital | No change to the company's share capital. | Increases the company's total share capital. |
| Source of Shares | No funding required — purely a technical split. | Taken from the company's reserves (retained earnings). |
| Main Purpose | Increase liquidity and lower the price to make shares more affordable. | Reward investors and signal that the company has strong reserves. |
| Market Signal | Neutral. Purely to facilitate trading. | Positive. Shows the company is profitable and confident about future growth. |
| Portfolio Value | Remains the same at the time of adjustment. | Remains the same at the time of adjustment. |
Generally, investors on Bursa Malaysia prefer Bonus Issues. Why? Because a company can only issue bonus shares if it has sufficient profits in its reserve account. It is a sign of maturity and financial strength.
Stock splits are typically done by companies whose share prices have become too high (e.g. reaching RM20 and above) to ensure retail investors can still buy the shares in multiples of 1 lot.
Do not buy a stock solely because it is about to undergo a stock split. Remember, it is merely a technical change to the share structure, not a change in business quality.
Always check:
A stock split is a bonus in terms of liquidity, but fundamentals remain king.
Your total number of shares increases according to the split ratio, but the price per share decreases proportionally. Your total portfolio value remains the same.
No action is needed. The adjustment happens automatically. Your broker and Bursa Depository will update your CDS account on the listing date.
No. A stock split does not add any value to your investment. It simply divides your existing ownership into more units at a lower price. For actual "free shares," look at bonus issues instead.
A stock split is a technical division of existing shares with no accounting impact. A bonus issue creates new shares funded from the company's retained earnings (reserves), signalling financial strength.
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