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Cash-rich ECM Libra to diversify portfolio

KUALA LUMPUR (Aug 1): ECM Libra Financial Group Bhd, which will be left with some RM350 million after the disposal of its investment banking unit to K&N Kenanga Holdings Bhd, is looking to acquire new businesses within and outside Malaysia to diversify its income stream.

ECM Libra chairman Datuk Seri Kalimullah Hassan said the company is looking at opportunities in countries such as the UK and Myanmar. “We are not limited [to] just looking at domestic [businesses].

We’re looking out for opportunities in countries like the UK and Myanmar. We’re looking at UK for real estate, but [there is] nothing firm yet at the moment. Property prices are cheap [now in the UK] because of the euro crisis.

“We’re looking at opportunistic investment. The board will evaluate it and we will come up with the proper announcements when we firm up things,” Kalimullah said after the company EGM.

Kalimullah, who is also a shareholder of Tune Hotels, said ECM Libra may consider buying hotels abroad as there will be appreciation in foreign exchange rates and property values.

Kalimullah: You can rest assured that we will find something good within the next 12 months. Photo: Kenny Yap/The Edge

“These are areas we know we’re good at it,” he said. At the EGM yesterday, the shareholders approved the disposal of ECM Libra Investment Bank to K&N Kenanga for RM875 million to be paid in cash, loan stocks and shares.

Following the sale, ECM Libra proposes to undertake a capital reduction in which shareholders will be rewarded between 63 sen and 68 sen each. Out of the amount, 53 sen will be in cash and the rest is to be paid in Kenanga shares and loan stock.

The disposal of its major profit generating investment bank will leave the company with only its asset management and unit trust business, generating some RM10 million in net profit per year, which is insufficient to sustain the business, Kalimullah said.

ECM Libra will have 12 months after the disposal of its investment bank business to add some new businesses into its portfolio in order to avoid falling into the Practice Note 17 company category.

With zero borrowings on its balance sheet, the company will have the financial muscle for new acquisitions. “You can rest assured that we will find something good within the next 12 months,” said Kalimullah.

When asked if the group’s core business will remain in financial services, he said it is not necessarily the case. “If we wanted it as our core, we wouldn’t have sold off the bank right?

The finance sector is very competitive now. It is hard to compete in financial services without being bank backed. You must be bank backed to to make big deals and big money. Otherwise, you’ll just continue making small money, you won’t be able to grow that way,” he said.

The group’s first quarter ended April 30, 2012, which included profits from the investment bank business, posted a net profit of RM6.04 million, down 56.5% from a year ago. Revenue was also down by 1.8% to RM45.8 million from RM46.6 million a year ago.

This article appeared in The Edge Financial Daily on August 1, 2012.

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