CIMB, Olympia in talks over Jupiter Securities

PETALING JAYA: CIMB Group Holdings Bhd has been in talks with stakeholders and various parties for the acquisition of stockbroking firm Jupiter Securities Sdn Bhd, as part of its proposed partnership with China Galaxy International Financial Holdings Ltd.

In a filing with Bursa Malaysia yesterday, CIMB said it has been undertaking preliminary assessment on its options as part of the proposed partnership which is envisaged to involve multiple countries.
“This entails engaging in exploratory discussions with its stakeholders and various parties,” it said.

In a separate filing, Olympia Industries Bhd confirmed plans to dispose of its equity interest in Jupiter Securities. It said it has been in discussions with interested parties and will make the necessary announcement upon finalisation of the terms of the proposed disposal.

In October last year, CIMB through its wholly-owned subsidiary CIMB Group Sdn Bhd signed a heads of terms with China Galaxy International, a wholly-owned subsidiary of China Galaxy Securities Co, to explore a strategic partnership in the stockbroking business.

It was reported that the acquisition of Jupiter Securities will enable CIMB obtain an additional licence for its stockbroking business to facilitate a merger with China Galaxy Securities.

Hong Leong Investment Bank (HLIB) Research is positive on the new development despite Jupiter being a loss-making firm for several years.

“It will enable CIMB to leverage on the stockbroking license owned by Jupiter, and place all stockbroking businesses in the region under the joint venture (JV) with China Galaxy,” HLIB Research economist Sia Ket Ee said in his report yesterday.

He said the JV will allow CIMB to tap on China Galaxy’s experience and post acquisition, CIMB will focus its efforts in investment banking, capital market products and services while the JV will be positioned as a pure play stockbroker with universal bank client base.

“While the JV may boost CIMB’s presence outside Asia, we believe the deal is primarily targeted to further reduce CIMB’s operating expenditure and drive its CIR to below 53% (reduction of about RM300 million per annum),” he said.

Sia said the stockbroking business posted a loss of about RM30 million in FY15 but made a turnaround with a profit of about RM20 million in FY16.

CIMB owns a stockbroking licence parked under its investment banking arm and the JV will need a new stockbroking licence to operate in Malaysia.

HLIB Research maintained its “hold” call on CIMB, with a higher target price of RM5.60 on the back of a favourable outlook. The stock was unchanged at RM5.65 yesterday. Olympia shares soared 5.5 sen or 40.74% to close at 19 sen.