Kenanga/TAE rumors

Rumors were also rife that there could be a merger between the EPF’s banking arm RHB Cap Bhd and MBSB but was denied by the officials of RHB. The EPF controls 44.84% stake of RHB Cap.

Speculation that Kenanga is courting TAE although the latter denied any such move.

Speculation surfaced that the major shareholder of TAE was looking to sell its wholly owned subsidiary TA Securities Holdings Bhd to Kenanga.

Sources say that overtures have been made to both parties and that it all boiled down to pricing. At the moment, the difference in pricing is about rm100 million to rm200 million.

The latest benchmark for stockbrokers is Kenanga’s acquisitions of ECM Libra Investment Bank for 1.3 times book value. But TAS is a stand alone stockbroking unit while ECM Libra is an investment bank.

Kenanga’s MD declined to comment on the speculation, he did say that the group would consider mergers and acquisitions locally if there was a good deal.

TAS’ valuations could go up to about 1.6 times.

As at end Jan 2013, the net book value of TAE’s broking business was rm256 million. Based on difference between TAE’s current market cap of rm1 billion and the value of its 60% stake in TAG – the group’s property arm – of rm988 million, the market is assigning only rm12 million to TAE’s broking business.

Should there be a sale the credit and lending business will be tagged along as part of the deal as it complements the stockbroking business.

Total cash proceeds from such a sale are estimated at rm687 million which could potentially distributed to shareholders in the form of special dividends.

If TAE does dispose of its stockbroking unit to Kenanga or anyone else for the matter, it will then be able to focus on its property development business.

Proceeds from the sale could be ploughed back into TAG, which has been on an acquisition trail for hotels. The hotels business contributes about 50% to the group’s operating profit and provides a steadier income stream than the volatiles and market driven stockbroking business.

A catalyst for the property division, and in turn TAE would be the formation of a hospitality and real estate development trust which will unlock the deep latent value of its hotel assets.