Yu’s foray into financial services

Khoo

DATUK Dr Yu Kuan Chon’s move to take over Pan Malaysia Holdings Bhd (PMH) is puzzling to most observers. The loss-making company had long fallen off the radar of investors.

But Yu, who is forking out RM77.12mil for a 70% stake in PMH, says he’s in it for the long term and expects to make a decent return on his investment.

“There is significant potential in these businesses, and we intend to build up the businesses in PMH,” a spokesperson for Yu tells StarBizWeek.

PMH, which reported a loss of RM1.9mil for the nine months ended Sept 30, 2014, has a universal brokerage licence, an asset management division and a hotel, namely the Corus Hotel in Port Dickson.

Of all the businesses, Yu seems most excited about the brokerage business, which is surprising considering the many challenges that industry faces, such as razor thin margins and competition from bank-backed brokerages.

“We are starting from a low base. Furthermore, we feel that there is increasing interest among retail investors to invest in the market. So we plan to build up this business, by hiring the right people. There is a lot of potential,” Yu’s spokesperson adds.

The same applies to the asset management business, for which Yu’s spokesperson reckons, is managing some RM100mil of investments.

“As for the hotel, we intend to keep that too, as it provides some decent cash flows,” he adds.

The plan, he says, is also to maintain the listing status of PMH. Yu, who had already accumulated some shares in PMH prior to proposing to buy this block, will end up with at least 73% of the company following the completion of the deal.

However, considering that the share price of PMH has risen significantly above Yu’s proposed acquisition price of around 12 sen per PHM share, it is unlikely that his mandatory general offer for the rest of PMH shares will yield any result.

PHM shares have shot up to a 52-week high of 30 sen per share as of Friday, earning an “unusual market activity” or UMA query from Bursa Malaysia in the process.

Does the market really believe that Yu could turn around the ailing PMH?

“This is not an easy business to delve into. While the retail investor base may be growing, the competition is quite stiff in both the brokerage business as well as asset management. Yu’s team would have to come up with distinct plans to differentiate themselves,” says a seasoned broker.

On the other hand, Yu seems to be getting this asset cheap. “This asset has been up for sale for some time. We consider this a distress asset sale and took the opportunity to put in a bid for it,” Yu’s spokesperson says.

The PMH stake is being sold by Malayan United Industries Bhd (MUI), which will use the proceeds to lower its debts. MUI is controlled by businessman Tan Sri Khoo Kay Peng (pic).

The PMH venture by Yu would be his first foray into financial services. What he has achieved so far is a reputation of being a savvy investor, having taken a timely position in Hong Leong Capital Bhd. But will that be sufficient for the medical doctor turned entrepreneur to turn PMH around?

“Yu is an active investor and is very familiar with what investors want. It is with this knowledge and the belief that there is a fast growing market of people wanting to invest in the stock market, that he is making this foray. However, don’t rule out possible mergers and acquisitions going forward with other stand-alone brokerages,” notes a person familiar with the matter.