The merger of Kenanga Investment bank and ECM Libra Investment Bank can catapult it to the top five Malaysian equities brokerage by trading value.
Bursa Malaysia ranks Kenanga Investment Bank as the seventh-largest equities brokerage by trading value, having managed trades worth about RM20 billion year to date, or a 5.6% market share.
Meanwhile, ECM Libra Investment Bank is currently at 10th place, after managing trades worth about RM14 billion, with a market share of 3.9%.
“The proposed merger of Kenanga Investment Bank and ECM Libra Investment Bank makes sense because as a larger unit, it can compete more effectively with other bigger players that have also gone through a consolidation phase,” an analyst said.
Kenanga Investment Bank had received Bank Negara approval for its proposed acquisition of the entire issued and paid-up share of ECM Libra Investment Bank, as well as the proposed merger of their investment banking business.
Industry observers said the deal could be worth up to RM900 million, effectively valuing ECM Libra Investment Bank at around one times book value.
For the financial year ended Jan 31, 2012, ECM Libra Investment Bank raked in a net profit of RM30.4mil on revenue of RM166.6mil, compared with a net profit of RM63.7mil on revenue of RM207.8mil in FY11.
At end-January, its total assets stood at RM2.7bil compared with RM2.6bil in the preceding year, while total liabilities was worth around RM2bil for the past two years.
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