Proposed merger with Inter-Pacific Securities to benefit Kenanga

By DASHVEENJIT KAUR / Pic By MUHD AMIN NAHARUL

Kenanga Investment Bank Bhd’s bid to merge with Inter-Pacific Securities Sdn Bhd will enable the merged entity to benefit from the latter’s in-house business and retail trade.

“Kenanga wants the deal, probably to get Inter-Pacific’s proprietary traders business and the corporate business it gets from Berjaya Corp Bhd.

“Inter-Pacific doesn’t get deals from the government or institutional businesses who tend to use bigger institutional-backed investment banks.

“Nevertheless, it’s a decent set-up and larger than other smaller brokers like SJ Securities Sdn Bhd or PM Securities Sdn Bhd,” said a fund manager with a local investment bank.

Kenanga is ranked second by trading volume and fourth by trading value year-to-date, according to data from Bursa Malaysia. Data on Inter-Pacific was not available.

Kenanga said the proposed merger would create one of the largest stock-brokers in the country and further strengthen its leading position in the retail broking space.

Group MD Datuk Chay Wai Leong (picture) said the potential acquisition will make Kenanga the second-largest stock broker in Malaysia, with a combined market share of over 10% and retail market share of about 25%.

“Inter-Pacific is a reputable and well-established independent stockbroking company with a robust track record and strong retail focus.

“We are looking forward to a smooth and fruitful negotiation process, and aim to conclude within the next six months,” he said.

Bank Negara Malaysia has given the brokers six months from May 16 to complete the deal, which is likely to be a combination of cash and equity.

Kenanga operates 32 branches nationwide and boasts the largest remisier network in the country, while Inter-Pacific, an indirect subsidiary of Berjaya Capital Bhd, has five branches across Kuala Lumpur, Penang and Johor Baru, and a paid-up capital of RM250 million.

Kenanga’s three largest shareholders as at March 30, 2018, are Cahya Mata Sarawak Bhd with a 25.38% stake, Tan Sri Tengku Noor Zakiah Tengku Ismail with 14.16% and Tokai Tokyo Financial Holdings Inc with 5.05%.

Kenanga bought ECM Libra Investment Bank Bhd for RM875.1 million in 2012, of which RM659.61 million was in cash and the rest in shares and loan stocks.

In that same year, Kenanga also acquired ING Funds Bhd, which brought the investment bank to where it is today.

Kenanga saw its net profit surge more than eight times to RM15.44 million in the first quarter ended March 31, 2018, from RM1.89 million a year ago.

The increase was mainly due to bad debt recovery from a court case settlement and higher net brokerage and management fees income generated, the company told Bursa Malaysia in filing last week.

Its stockbroking business generated a pretax profit of RM11.8 million, while its investment banking activities contributed RM2.7 million.

As at Dec 31, 2017, Kenanga had RM1.35 billion in cash with total assets worth RM6.49 billion, while total liabilities stood at RM5.6 billion.