Short Position

  • Business
  • Saturday, 17 Sep 2016

Stockbroking mergers

MERGERS and acquisitions (M&A) activity is getting scarce among financial institutions and the stockbroking industry is one example.

Last week, a deal that would have seen businessman Datuk Dr Yu Kuan Chon buying a controlling stake in PM Holdings Bhd fell through. Yu was said to be looking to bring in an institutional shareholder to partner his entry into the stockbroking business after he faced challenges in securing the approval of the regulators. New rules require stronger institutional shareholding among financial institutions. It is likely that Yu failed to secure a deal with the financial groups he was in talks with to jointly buy into PM Holdings.

Stockbroking is an increasingly challenging business, with intense competition leading to a lowering of fees. Technology is also having an impact, as online trading allows the public to trade in a much-protected environment and pay lower commission rates.

It is often said that bank-backed stockbrokers tend to be the ones to survive, although big banks are also looking to pare down their stakes in brokerages, an increasing trend in the region. CIMB Group Holdings Bhd recently said that it was looking to sell part of its brokerage business. It was reported by Singapore media recently that CIMB was in talks to sell at least part of its brokerage in Singapore to a China broking house.

As for standalone brokerages, talk of an imminent shareholding change at Apex Equity Holdings Bhd has been around for a while now. There was reportedly interest from a fairly large China-based firm involved in the same industry and potential buyers from East Asia.

TA Securities Sdn Bhd, one of the last standalone brokers that is owned and run by an individual, was also said to be up for sale at one point and reportedly had a number of interested buyers. However, none of the discussions reached a mature stage.

Consolidation among brokers has taken place with price-to-book value multiples of between 1.1 and 1.9 times.

Under Malaysian rules, up to 70% of interest in securities firms can be sold to foreigners, but in recent times, no major M&As have taken place. Is it because returns are not as lucrative as before?

The last major one was two years ago when Affin Holdings Bhd acquired Hwang-DBS Investment Bhd for RM1.36bil.

The scenario is not unlike banking where mergers are getting more difficult because banks are no longer seen as the most viable investment option, considering the punitive capital requirements.

The University of Melbourne is one of the largest and most productive research organizations in Australia.

At what cost higher education?

DESPITE being an expensive country for students looking to study abroad, Australia remains Malaysian parents’ top study destination, according to survey data released from a new HSBC report.

The report notes that the average yearly undergraduate tuition fees for international students for Australia is about US$26,136 or RM107,828. The United Kingdom and Japan come in next as the preferred choice for higher education with costs at US$29,656 and US$10,978 per annum, respectively. With the ringgit trading at the RM4 level to the US dollar, parents have to fork out more to send their kids abroad as compared to before. But this hasn’t stopped many parents who believe that it will give their children exposure to new experiences, ideas and cultures and raise their level of confidence. The report says that over 59% of Malaysian parents polled chose Australia, while the UK is the preferred choice of 49% of respondents and Japan, 27%.

It notes that 51% of parents with a monthly household income of RM5,000 or above are more likely to consider sending their child abroad for further studies. In all likelihood, the numbers will grow, unless the perception on the quality of local education is addressed. And with the cost of education only expected to rise, parents would need some solid savings and would have to plan their children’s education from a very early age. This excludes the rising number of Malaysian parents who are opting to send their children to private or international schools for their primary and secondary education.

Australia and the UK are preferred choices because they are English-speaking nations. Perhaps, it is time to explore alternative non-English speaking countries to study. Japan is a much cheaper alternative while in countries like Germany, higher education is free for international students who speak German.

Interestingly, research gathered by, the world’s leading marketplace for overseas student accommodation, shows that international students are increasingly choosing to go to China to study for a full degree. It has become the third-largest destination behind the US and the UK and is ahead of Canada in fourth place, Germany is in fifth position and France in sixth. It is expected that China will challenge the UK’s position as the world’s second-most popular destination for international students by 2020 at its current growth rate.

Activity at Empire City

IF there is one property development that has hogged the limelight without the developer having to fork out huge sums of money for publicity, it must be the Empire City project located near Damansara.

The development on a 28-acre site located next to the Puchong-Damansara Highway started five years ago. It was an ambitious project by the Empire group, where it launched 12 tower blocks and started the construction of a giant mall that when completed would be bigger than Pavilion Kuala Lumpur and Mid-Valley Megamall.

However, construction in recent months has moved at a snail’s pace, something that the developer has denied vehemently. Despite complaints from buyers, the developer has said that work to hand over the building is on schedule.

And this week, My E.G Services Bhd (MyEG) added credence to the developer’s argument. MyEG, which provides a wide range of services such as renewal of road tax and insurance renewals for motor vehicles, announced the completion of the acquisition of a 22-storey office block in Empire City.

MyEG stated that the acquisition for RM155.35mil has been completed, following the delivery of the vacant possession of the building together with the relevant certificate of completion and compliance.

In addition, MyEG also announced that it was buying an additional seven floors of a 45-storey building in the same development. The vendor this time was a private company owned by Tan Sri Lim Wee Chai of Top Glove Corp Bhd and two individuals.

The announcements by MyEG bring a fresh spate of positive news for the Empire City development. Finally, the market is seeing some major handovers of buildings taking place in the development.

However, there are many more blocks that are incomplete in the development. Hence, the next question: Will the progressive handover of the other blocks follow suit soon?

There has been speculation that the developer may get a new partner to come in to help speed up the construction work in the project. However, there has not been any development so far.

Perhaps, the developer is in no hurry to get a partner as of now.

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