Friday 24 May 2024
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KUALA LUMPUR (April 7): CIMB Group Holdings Bhd’s investment bank, CIMB Investment Bank Bhd, inked a deal earlier on Friday (April 7) to acquire KAF Equities Sdn Bhd from KAF Investment Bank Bhd (KAF IB), sources said.

KAF Equities, formerly known as KAF-Seagroatt & Campbell Sdn Bhd, is one of the oldest stockbroking firms in the country.

“A sale and purchase agreement was inked at Menara Chulan [in Kuala Lumpur] today (Friday),” a source familiar with the matter told The Edge. KAF IB is based in Menara Chulan.

Details of the deal are not immediately known, although sources say the valuation was between 1.3 times and 1.5 times price-to-book (PBV) value. Recall that, back in 2016, KAF-Seagroatt was privatised at a PBV of 1.38 times or about RM324 million.

“CIMB is unable to comment at this juncture,” CIMB Group said in response to questions from The Edge seeking confirmation of the deal. KAF IB chief executive officer Rohaizad Ismail could not immediately be reached for comment.

The Edge Malaysia weekly had, in its Feb 20 issue, reported that CIMB Group was close to acquiring KAF Equities. “The deal is pretty much confirmed. It’s just a matter of time,” it reported a source as saying at the time.

CIMB Group already has a stockbroking business through CGS-CIMB Securities, its joint venture (JV) with China Galaxy Securities Co Ltd (CGS), one of China’s largest stockbrokers.  

However, it is widely known that CIMB Group and CGS will soon be ending their equity partnership, as CGS is expected to exercise a call option to take full control of CGS-CIMB Securities. The two parties may continue to collaborate in other ways.

As it stands now, CIMB Group’s equity interest in CGS-CIMB Securities is about 25%, with CGS holding about 75%. Their JV is on two fronts — the regional stockbroking business and the Malaysian one.

Industry sources have indicated that CGS’ plan to acquire the remaining 25% in CGS-CIMB Securities is pending regulatory approval from China.

It is understood that CIMB Group is acquiring KAF Equities, so that it will continue to have a Malaysian stockbroking business once it exits the JV. According to industry sources, several analysts from CGS-CIMB Securities will be leaving to join KAF Equities, which could be renamed CIMB Securities Sdn Bhd.

According to sources, Ruzi Rani Ajith, the CEO of CGS-CIMB Securities, has resigned and will end up heading KAF Equities. Last month, CGS-CIMB Securities appointed Azizah Mohd Yatim as its new CEO (designate).

Analysts said KAF IB was likely willing to sell its stockbroking business to raise funds and focus on its yet-to-be-launched digital bank.

A KAF IB-led consortium was one of five recipients of a digital bank licence from Bank Negara Malaysia last year. The KAF IB consortium included car e-commerce platform Carsome and financial technology firms MoneyMatch and Jirnexu.

Apart from stockbroking, KAF IB does investment banking, Islamic banking and fund management, among others. It also owns a research outfit, KAF Research Sdn Bhd, and an Indonesian stockbroker, PTKAF Sekuritas Indonesia.

KAF Equities’ net profit declined 98% year-on-year to RM111,000 for the financial year ended May 31, 2022, as revenue fell 43.3% to RM20.55 million. Pre-tax profit declined 95.4% to RM303,000, a company search on CTOS showed.

The stockbroking business is an increasingly tough business to be in, given heightened competition and low margins. However, CIMB Group likely wants to continue to have a stockbroking business in Malaysia for strategic reasons — it would complement its wealth management and investment banking businesses.

CIMB Group’s share price was down 10 sen or 1.9% at RM5.16 at the midday break on Friday, giving the company a market capitalisation of about RM55 billion.

Edited ByKathy Fong
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