An industry source said an agreement has been reached for BCorp to sell a 70% stake in Inter-Pac to Kim Eng after the latter completed the necessary due diligence.
It is learnt that the deal would be in the form of cash plus a share swap, with a premium to be paid for the stockbroking licence. However, details of the pricing are not known and it is believed that the parties have yet to sign on the dotted line.
BCorp declined to comment on the matter when contacted by The Edge Financial Daily.
Industry observers said it made sense for the Kim Eng group to acquire a local stockbroking firm as Malaysia was probably the missing piece in the puzzle for its regional presence.
Kim Eng is currently one of the leading brokers in Thailand. It already has a presence in Hong Kong, Indonesia, the Philippines and London. In Kuala Lumpur, Kim Eng only has a research outfit, Kim Eng Research Sdn Bhd.
In fact, apart from Inter-Pac, speculation had also been rife that Kim Eng was in talks with ECM Libra Financial Group Bhd and the MUI group’s PM Securities Sdn Bhd, a unit of Pan Malaysia Capital Bhd.
“Inter-Pac is a so-called one-plus-one broker. It has the licence to open as many branches as it wants; this will fit well for Kim Eng should the Singaporean stockbroker buy into Inter-Pac,” said an industry player.
“A wide branch network will enable Kim Eng to grow its clientele locally,” he added.
Industry observers reckon the rationale for Kim Eng’s acquisition is more towards offering a regional trading platform for Malaysian retail investors rather than merely aiming at commissions from trading on Bursa Malaysia.
By the same token, should it materialise, the divestment would allow BCorp to tap into Kim Eng, which has a solid reputation in the the stockbroking business, towards expanding the securities division, observers say.
Singapore brokers looking for acquisitions
Compared to investment banks (IBs), some quarters believe the “one-plus-one” securities firms are probably more appealing to foreign brokers who want to expand their business in Malaysia.
Furthermore, the one-plus-one stockbrokers, like TA Securities Holdings Bhd and JF Apex Securities Bhd, can also do corporate advisory jobs. The major difference is that such stockbrokers cannot take deposits from the public, which IBs are allowed to do.
It has been the talk of the industry for quite a while that a number of Singapore-based stockbroking firms are looking for prospective sellers of local brokers to build up their clientele and presence locally.
Apart from Kim Eng, Philip Securities Pte Ltd and OCBC Banking group are believed to be scouting for acquisition targets as well after the Malaysian government liberalised foreign ownership of the local stockbroking industry.
In June last year, Prime Minister Datuk Seri Najib Razak announced raising the cap on foreign ownership of local stockbrokers and retail unit trust management to 70% from 49% previously. Foreign investors can also wholly own wholesale fund management firms.
Currently, the six “one-plus-one” local brokers in the country are Inter-Pacific, TA Securities, AA Anthony Securities Sdn Bhd, JF Apex Securities Bhd, M&A Securities Sdn Bhd and Mercury Securities Sdn Bhd.
The IBs are ECM Libra, CIMB Investment Bank Bhd, OSK Investment Bank Bhd, Kenanga Investment Bank Bhd and KAF Investment Bank Bhd.
In addition, there are also some standalone brokers, namely BIMB Securities Sdn Bhd, FA Securities Sdn Bhd, Innosabah Securities Sdn Bhd, SJ Securities Sdn Bhd, Jupiter Securities Sdn Bhd and Malacca Securities Sdn Bhd.
IBs seen as less attractive targets
That ECM Libra is up for sale is not news to those in the financial services industry.
But some industry players believe it is not easy for the group to find a buyer simply because of the premium pricing that some of its substantial shareholders are believed to be asking for.
It is natural for IBs to ask for a premium since they have paid a hefty sum to obtain the IB licence.
Besides putting a deposit of RM500 million in Bank Negara, the IBs have to pay some RM52 million to transfer their universal broker licence to an IB licence. This is in addition to the large premiums they had paid many years ago for the mergers of at least three stockbroking licences to qualify for universal broker status.
However, the foreign brokers may not be willing to pay that high a premium for a shareholding in an IB if they could make do by owning the one-plus-one securities firm. And perhaps another alternative is to acquire two standalone stockbroking firms, which will widen their reach and may still cost less than buying into an IB.
Some standalone stockbroking firms are up for grabs as well, according to some industry players, given the tough operating environment.
The stockbroking business today is vastly different from that of the super bull-run days of the early to mid-1990s.
It is apparent that the industry is facing challenges like shrinking retail interest, which currently accounts for 30% of total volume, versus 60% previously, and narrowing profit margin due to intense competition and falling brokerage rates.
The decline in retail interest in the local bourse is posing a threat to smaller stockbrokers, which are usually largely dependent on individual investors. “In a nutshell, it seems everyone is fighting for a tinier pie,” said a stockbroker.
This article appeared in The Edge Financial Daily, August 16, 2010.
No comments:
Post a Comment