Asia plus aims to cash in on booming M&A

Mergers and acquisitions is becoming a money-spinner for the securities business this year, and Asia Plus Securities, among the country's top three houses, hopes to capitalise on that market to make up for the lack of large initial public offerings (IPOs).

"The trend of M&A transactions in Thailand around this period will be aimed at business expansion more than debt-restructuring because of the economic recovery," CEO Kongkiat Opaswongkarn told The Nation recently.

As soon as the Bt6 billion stake of Padaeng Industry  shares was completed last month, Asia Plus not only booked a Bt10million brokerage fee but also an advisory fee.

With the target of becoming a major income source this year, Asia Plus has been paying more attention to M&A. A reason for this is that the brokerage wants to smooth its 2008 full-year earnings after the number of large IPOs started shrinking.

Kongkiat, who is keen on business matchmaking, said the company is working on about 10 M&A deals involving both listed and non-listed companies. Each of them is in the small- to medium-size range with market capitalisation of Bt5 billion to Bt10 billion.

Asia Plus represents more buyers than sellers, and most of the deals would be friendly rather than hostile, he said.

The move follows Asia Plus' new business model that wants to put the company in the position to survive in any market condition.

With the new model, Kongkiat has steered Asia Plus on the right track. Its 2007 earnings were in the black, jumping 21.6 per cent to Bt444.95 million in spite of the sluggish economy.

"The business model of Asia Plus has been changed a lot," he admitted.

It was designed to cope with the liberalisation of brokerage commissions over the next few years as well as globalisation.

About 66 per cent of Asia Plus's total income comes from trading commissions. Investment for its own portfolio brings 18 per cent, investment banking 3 per cent, asset management 7 per cent and new products 6 per cent.

During an earlier company visit, Asia Plus told analysts that its 2010 business plan calls for brokerage commissions to be reduced to 50 per cent of total income. Other income will be broken down into investment for its own portfolio at 20 per cent, investment banking at 10 per cent, assets management at 15 per cent, and new products at 5 per cent.

This year the company would focus on income from the investment banking business, especially advisory fees for IPOs and public offerings (POs), where investment banking competition is still low.

"Our IPO targets are in the medium-sized range with a high potential for growth," he said.

Large IPOs have disappeared since the Electricity Generating Authority of Thailand was forced to put its IPO on hold in 2005, he said.

However, businesses such as food, IT, auto parts, and transportation and logistics show IPO potential.

"There are a number of listed companies that want to mobilise funds via POs or private placements to expand their business," he said.

It all depends on what services securities houses can provide.

 "We position ourselves as a firm, not just a securities firm, which can serve many things to customers," he said.