Analyst: dividend for Tabung Haji expected to be around 3 per cent for 2021

07 Feb 2022 09:07am
Tabung Haji is expected to declare around 3 per cent dividend for the year 2021, according to financial analysts.
Tabung Haji is expected to declare around 3 per cent dividend for the year 2021, according to financial analysts.

KUALA LUMPUR - Following Amanah Saham Bumiputera’s (ASB) announcement of its dividend payout for the financial year ending Dec 31, 2021, many people have been eagerly awaiting Lembaga Tabung Haji’s (TH) profit distribution rate which is expected to be announced anytime during the first quarter of this year.

The question foremost on the minds of TH depositors is whether its profit distribution after zakat for the 2021 financial year will be higher or maintained at around three per cent as was the case in 2019 and 2020.

Putra Business School economic analyst Associate Prof Dr Ahmed Razman Abdul Latiff told Bernama TH’s profit distribution is the main thing the depositors focus on at the start of each year.

"Prior to 2018, TH’s profit distribution rate has been high, especially since 2007 when the rate was always between five and 8.25 per cent, a rate that was rarely matched by other fixed investment entities except for ASB, EPF (Employees Provident Fund) and Bank Rakyat.

"But starting 2018, TH declared a profit distribution rate of only about 1.25 to 3.1 per cent as a result of value depreciation and governance issues. However, it hasn’t stopped depositors from hoping that TH’s profit distribution will return to the past years’ rates,” he said.

He said TH’s distribution rate is also in focus given that its savings can be withdrawn anytime without limit, which helps to relieve the financial burden of depositors. This is unlike EPF where members are only allowed to make withdrawals after attaining retirement age or ASB where withdrawals can only be made during office hours at its headquarters or any branch of a bank it is tied up with.

Meanwhile, some analysts are contending that TH should declare a higher dividend for the financial year ending Dec 31, 2021, considering that there were no haj pilgrimages last year.


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Commenting on this, Universiti Tun Abdul Razak economist Prof Dr Barjoyai Bardai said depositors are hoping for a bigger dividend as it has been over three years since the Islamic financial institution was restructured.

Nevertheless, depositors must accept the reality that their investments in TH (as well as in other financial institutions) were exposed to a rather challenging environment in 2021 due to the effects of the COVID-19 pandemic and closure of various economic sectors to stem the transmission of the virus.

"I expect TH to try its best to declare a profit distribution rate of around three per cent. If we are lucky, TH may maintain its profit distribution rate at 3.10 per cent (TH declared a profit distribution rate of 3.10 per cent for its 2020 financial year) and this is the best we can expect. But then, I won’t be too surprised if TH declares a lower rate of between 2.7 and 2.9 per cent for the year 2021,” he said.

Elaborating on his projection, Barjoyai said it is based on the performance of TH which recorded a 2.2 per cent decline in net profit to RM1.22 billion, after taking into consideration its expenditure and zakat allocation, for the six-month period ending June 30, 2021, compared to its net profit of RM1.25 billion for the corresponding period in 2020.

Last year’s dip in profit has been attributed to the challenging market conditions brought about by the worldwide pandemic which has had an adverse impact on TH’s investment activities in the real estate, equity market and oil palm plantation sectors, among others.

"Its real estate investments are still suffering from the effects of the downturn caused by COVID-19. The economic conditions were much better in the first half of 2021 compared with the second half. In the first half, the nation’s economy grew by 6.1 per cent in March, 39.7 per cent (April) and 19.3 per cent (May); however, growth was negative in June.

"In the second half (of 2021), the economy continued to decline and recorded negative growth of -7.8 per cent in July, -4.7 (August) and -2.1 (September). Estimates point to a slight improvement in the economy in November but it declined again in December,” he said.

Overall, Malaysia’s economic environment was more challenging in the second half of 2021 when the FTSE Bursa Malaysia KLCI (FBM KLCI) fell to between 1,534 and 1,543 after hovering at between 1,600 and 1,575 in the first half.

Barjoyai said the drop in the composite index in the second half implied a narrow market range and a more inactive stock market compared to the first half.


While many depositors are aware of the pandemic’s impact on TH’s financial performance, others are arguing the haj fund management agency is capable of paying out higher dividends in view of the fact that it did not send pilgrims to Saudi Arabia in 2021.

According to media reports, TH’s haj subsidies for pilgrims undertaking the haj pilgrimage usually amount to RM400 million each year. Will TH be able to declare a higher profit distribution rate this time around with the savings accrued from the cancellation of last year’s haj pilgrimages?

"The RM400 million savings are actually gross savings based on opportunity costs. In fact, TH lost a lot of money as a result of the postponement of the 2021 haj session as TH had already paid the commitment fees and deposits in preparation for the 2021 haj season.

"The losses it incurred are huge compared with the cost of performing the haj in Makkah, Madinah, Mina and Arafah. If a net saving of RM200 million is obtained from the postponement of the 2021 haj session, it will only account for about 0.24 per cent of the total additional revenue,” said Barjoyai.

His views were echoed by Ahmed Razman who said that despite the savings from the haj subsidies, depositors need to understand that the majority of TH investments are in the domestic market, either in equities or real estate.

What’s more, the FBM KLCI did not register positive growth in 2021 and this has to some extent hampered TH’s investment returns, thus affecting the Islamic investment institution’s capacity to pay out a higher profit distribution rate even though it did not have to cover pilgrims’ haj subsidies last year.

"I expect (TH to declare) a profit distribution rate of around 3.10 per cent (for the financial year ending Dec 31, 2021), similar to 2020’s. TH may need about RM2.3 billion for that purpose (2021 payout). My projection is based on various factors such as the fixed deposit rate which slipped to below two per cent in 2021 compared with an average of three per cent in 2020... this had a major impact because fixed deposits make up 52 per cent of TH’s investments.

"Apart from that, the equity market’s sluggish performance also caused TH to be more conservative in recording impairment of its assets subject to the International Financial Reporting Standard (IFRS 9),” said Ahmed Razman.

He also said that although TH has foreign investments that usually yield high returns, this segment, however, only accounts for about five per cent of its total investments and, thus, cannot do much to boost its overall performance.


Universiti Kuala Lumpur (UniKL) Business School economic analyst Associate Prof Dr Aimi Zulhazmi Abdul Rashid also expects TH’s profit distribution rate after zakat for 2021 to be the same as 2020’s, that is, 3.10 per cent.

"In my view, profit distribution for 2021 is expected to be the same as 2020 due to several factors. However, it must be noted that TH’s income for the first six months of 2021 was slightly lower (-1.4 percent) compared to 2020.

"Nevertheless, the reopening of the nation’s economy in the fourth quarter of 2021 and hike in palm oil prices to over RM5,000 per tonne had a positive effect and may give a boost to TH in the second half of 2021. This is expected to offset TH’s performance in the first six months of 2021, with its returns returning to the level seen in 2020,” he said.

Aimi Zulhazmi also said that the RM400 million saving from the postponement of the haj pilgrimages was a small sum as it only accounted for 0.46 percent of TH’s assets.

"It’s too small to have a direct impact on this Islamic institution’s return on assets,” he said, adding that TH’s total assets amounting to RM85.92 billion exceeded its total liabilities of RM83.73 billion as of June 30, 2021, while its total operating costs were almost the same as the previous year’s.


Meanwhile, senior lecturer at Universiti Teknologi Mara (UiTM) Johor’s Academy of Contemporary Islamic Studies (ACIS), Dr Mohd Ali Muhamad Don, said the Muslim community needs to understand the purpose behind the establishment of TH. According to him, it was set up not to serve as a financial or investment institution but to provide a facility for Muslims to save their money for the purpose of performing the haj and to extend the necessary services to pilgrims, as well as involve the Muslim community in capital investment and profit generation activities for their mutual benefit.

"Profits derived from TH’s investments in the agricultural, real estate and other sectors are channelled to the depositors through the sponsorship of part of their haj pilgrimage costs covering their flights, transportation, lodgings, food, medical needs, tent stay in Masyair, haj guidance, haj staff and counselling services in the Holy Land in Makkah and Madinah,” he said, adding that through the subsidy or sponsorship extended by TH, the cost of undertaking the haj pilgrimage for first-time pilgrims is reduced to RM9,980 per person. The actual cost of performing the haj for each pilgrim is RM22,900.

He said bearing this in mind, it is important for Muslims to understand the true purpose behind the establishment of TH and, in all sincerity, view their savings in TH as a means to visit the Holy Land and not for worldly gain.

Mohd Ali said they must also understand that TH’s profit distribution is not something that is mandatory. In TH’s context, he added, profit distribution refers to the distribution of part of or the entire profit to the fund owners, which is regarded as an "unconditional gift”.

Under the Wakalah savings contract, TH acts as the depositors’ representative that manages their funds for the purpose of conducting investment and haj management activities as well as distributing the profit from the investments concerned to the depositors after taking into account the haj, zakat and TH management costs.

"By understanding TH’s concept of profit distribution, we hope depositors will not just look forward to the returns in the form of profit distribution but to more than that... (in depositing their money in TH) they are also involved in paying zakat on their savings which will be given to the hard-core poor communities and also used to help other depositors to visit the Holy Land.

"This way, hopefully, not only can the economy of the ummah be improved but they can also fulfill the fifth Pillar of Islam (perform the pilgrimage to Makkah),” he added. - Bernama.