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Monday July 9, 2012

TA Securities to consider M&A if there is effort to build brand

KUALA LUMPUR: Joint ventures are welcomed but TA Securities is not in a hurry to jump on the consolidation band wagon, said TA Enterprise Bhd managing director cum chief executive officer Datin Alicia Tiah.

“The most important is to add value. What can they bring to the table?” said Tiah who has seen the company's wholly-owned subsidiary, TA Securities Holdings Bhd approached by interested parties.

She said: “People see value in us. They see that we are very well run because we have been in the business for so many years. We have a good system.”

“You can see the benchmark. The valuation is at 1.6 to 1.7 (times book value), the premium they will pay you. If I can earn that back in one or two years, why should I sell the company?” she asked.

“For me, there is no hurry. I am comfortable where I am. I have a fair share in the institutional, corporate finance work and others,” she told StarBiz.

TA Securities sits on the ninth spot of Bursa Malaysia's broker ranking as of June 2012 with a year-to-date trading value of RM16.9bil. It stands at fifth in terms of trading volume.

She added that the other party must be genuine in doing business and building a good brand.

“They may possess skills sets that our people don't have,” she said.

With the merger and acquisition exercise trending in the industry, competition has been stiffer.

TA Enterprise's broking and financial division has recorded an 11.3% decline in net segment results for financial year ended Jan 31, 2012 (FY12) on the back of a flat FTSE Bursa Malaysia KLCI performance.

“The advantage that they (bank-backed investment firms) have is very different because they can have more branches.

“But investment banks are very different from commercial banks. Unless you get funds from the public, the cost is not going to be cheap,” Tiah commented.

TA Securities is one out of six 1+1 brokers in the country that is non-bank backed. A 1+1 brokerage can open branches, provide electronic access facilities and undertake structured products offerings.

“Small firms like us will have to find our own niche. We may not get those glamorous jobs' but we can still be an independent financial advisor to shareholders, participate in some of the corporate finance work, and even do structured products.

“Bursa is trying to promote derivatives so I think that is an area we can look into,” she said on ways to improve its bottomline.

Its derivatives division has seen a 102.2% surge in profit after tax of RM3mil in FY12.

For a brokerage firm that focuses on retail investors (retailers contribute to more than half of its clientele), Tiah said the company's revenue was enhanced by the volatile market.

“There must be volatility for us to make money,” she said, explaining that people buy and sell more actively when the market was volatile, which boded well for its revenue.

“For retail, it really depends on the sentiment of the market. Sometimes, the market is so quiet the retailers don't come in. On certain days, there are more institutional (clients).

“When the market is good, more initial public offerings (IPO) will come up,” she said, citing that brokers would also gain from the listing of successful IPOs such as Felda Global Ventures Holdings Bhd, which was oversubscribed by 6.75 times.

“As long as the market is active and the retailers come in, our profit will go up.

“Sentiment is so important. If sentiment is good, everyone will put money into the market. When sentiment is not good, no matter how good you are, you cannot do anything,” she said.

“We cannot cut out speculation entirely. The market would be dead,” she added.

According to her, different people have different risk appetites but brokers have to ensure that their clients invested responsibly.

She also said a broker's responsibility included knowing their clients.

Emphasising the company's strength, which was its service, she said: “We have very loyal clients who have been with us for a long time. We have a very strong team.”

On the firm's expansion plans, she opined that going abroad did not guarantee returns and that the growth must be manageable.

Drawing an example from its Hong Kong unit, she said: “Our branch there is losing money. Other markets are different. They don't operate like Malaysia.”

“I will try my best to do what I can do. We are still expanding,” she said.

“It is more cost efficient to set up branches with the lower telecommunication set up now as compared to last time. It used to cost RM1mil to set up a branch. It is cheaper now with things like the internet.

“Maybe it costs between RM200,000 and RM300,000 depending on the location,” she said.

The company is setting up its seventh branch in Malacca in August this year.

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