The Return Trends At Kia Lim Berhad (KLSE:KIALIM) Look Promising

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. With that in mind, we've noticed some promising trends at Kia Lim Berhad (KLSE:KIALIM) so let's look a bit deeper.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Kia Lim Berhad, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.087 = RM5.4m ÷ (RM81m - RM19m) (Based on the trailing twelve months to June 2025).

Therefore, Kia Lim Berhad has an ROCE of 8.7%. In absolute terms, that's a low return, but it's much better than the Basic Materials industry average of 6.7%.

See our latest analysis for Kia Lim Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Kia Lim Berhad's ROCE against it's prior returns. If you'd like to look at how Kia Lim Berhad has performed in the past in other metrics, you can view this free graph of Kia Lim Berhad's past earnings, revenue and cash flow.

What Does the ROCE Trend For Kia Lim Berhad Tell Us?

Kia Lim Berhad has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 8.7%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

To bring it all together, Kia Lim Berhad has done well to increase the returns it's generating from its capital employed. Since the stock has returned a solid 65% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to know some of the risks facing Kia Lim Berhad we've found 3 warning signs (1 is concerning!) that you should be aware of before investing here.

While Kia Lim Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.