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Monday, September 30, 2013

TA Securities... next in line for M&A? (Star)

。。。 Hwang-DBS Research in a report last week highlighted the possibility of an M&A involving TA Securities.

“There has been consolidation among brokers at 1.1 to 1.9 times (x) book value. In our view the founding shareholders (of TA Securities) may warm up to a cash offer of at least 1x price to book value or RM687mil for broking, credit and lending businesses,” Hwang-DBS Research said. This works out to 40 sen per (TAE) share that can be distributed as special dividends,” the research house said.

Other industry players say the group’s shareholders would seek 1.3x to 1.5x book value. This is going by the belief that Hwang-DBS will be sold at a price ranging from 1.1x to 1.6x its book value. To be noted is that while it has been announced that Affin Holdings has entered into an exclusive agreement to acquire Hwang-DBS’ investment banking, futures and asset-management businesses, there has been no official announcement on pricing of the target assets.

Industry players also note that there appears to be a greater focus on property development in the TA group, which in turn supports the idea that the Tiah family might eventually exit stockbroking and fund management to concentrate on property. Since TA Global’s listing in 2009, more than RM1bil has been invested to buy properties locally and abroad and it has a gross development value of some RM11bil from ongoing projects.

It is understood that so far, there have been a number of interested buyers of TA Securities, with discussions having taken place on and off over the last year or so. Some of the buyers were institutions from abroad. However, insiders said that none of the discussions reached a mature stage because the indicative price tag was too high.

Recently though, TA Securities was linked to rival K&N Kenanga Holdings Bhd but market talk that the two were in discussion was dismissed by the TA group. Hypothetically, a merger between K&N Kenanga and TA Securities would boost the former to become the largest in terms of retail base, said analysts.

In an interview with StarBiz last year, TAE managing director-cum-chief executive officer Alicia Tiah said the company welcomed joint ventures, but was in no hurry to consolidate. In July she had said that TA Securities was not for sale, citing timing as one of the reasons as the unit had not done well in the first half of the year due to poor trading activities, which in turn was related to market uncertainties in the runup to the May general election.

However the stock market has since performed better and in the second quarter ended July 31, 2013, the group’s broking income grew 34% with average daily market value surging about 44% to RM2.4bil in May-July, according to Hwang-DBS. TAE recorded a net profit of RM31.90mil in the second quarter ended July 31, up RM6.62mil compared to the previous corresponding period.

So, it is possible that these improved numbers could nudge the owners of TA Securities to pursue talks with interested suitors. The company had yet to reply to StarBiz queries at the time of writing.

TAE shares have been a laggard for some time and at last Friday’s close of 68 sen, it was trading at mere 0.6 times its net asset per share of RM1.77. The stock’s hey days was during the 1993/1994 market bull run when it hit a high of RM3.79 on Sept 30, 1994.

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