Tapping on the Expertise of a Regional Industry Leader

Apex Securities Berhad (ASB) and Yuanta Securities (Hong Kong) Ltd. (Yuanta HK) have officially entered into a 3-year Memorandum of Understanding (MOU) as of March 8, 2024. ASB, a wholly owned subsidiary of Apex Equity Holdings Berhad (AEHB), is set to collaborate with Yuanta HK, a wholly owned subsidiary of Taiwan's Yuanta Financial Holdings Co. Ltd. The MOU, aimed at fostering cooperation between the two entities, may be extended beyond the initial period subject to mutual agreement, while termination can occur with a one-month written notice or immediate effect in cases of non-compliance or breaches. The MOU does not require approval from ASB's shareholders or relevant regulatory authorities.

More About the Yuanta Group

According to the company’s website, Yuanta Financial Holdings boasts a significant market presence in Taiwan. In 2016, it controls an 11% share in the securities brokerage and margin financing business. It also has an edge in the securities margin financing business with a 20% market share. Meanwhile, Yuanta HK is one of the largest Taiwan-funded brokerage firms in Hong Kong, providing a comprehensive suite of financial services, including securities brokerage, margin lending, and investment banking. Operating as a licensed market operator in various countries across Greater China, northeast Asia, and ASEAN, Yuanta HK caters to a diverse clientele of corporate and individual investors globally.

Earnings Impact

We view the collaboration positively. The partnership would position ASB to leverage Yuanta's extensive regional expertise, providing opportunities for growth and collaboration in Malaysia and other ASEAN countries. We foresee potential cross-market prospects in terms of market access, marketing, and various services, thus enabling ASB to unlock fresh revenue streams and expand its clientele base.

Despite the optimism surrounding the collaboration, we expect the financial impact to be negligible, for now. As such, we make no adjustments to earnings estimates. We maintain our FY24/25/26 net profit forecasts at RM8.7/9.0/9.4mn.

Valuation and Recommendation

Tagging a P/B ratio of 0.7x, based on the peer’s average, to AEHB’s FY24e BV, we maintain the TP at RM1.19. BUY reiterated on AEHB.

Source: TA Research - 11 Mar 2024