Kalimullah back in ECM Libra, Tony Fernandes now in

It seemed Dato’ Kalimullah Masheerul Hassan is now back in ECM Libra Avenue as the Executive Chairman, after the so called ‘sold out’ his holding last August. So now it is very clear. Last August’s announcements of Kalimullah and Khairy ‘unloading’ their shareholding in ECM Libra Avenue to ‘so called’ Tan Sri Azman Hashim is just purely, “wayang”. What saddens many, the Public Accounts Committee under the stewardship of Dato’ Shahrir Samad actually ‘bought this lemon’.

Lets quickly re-cap what happened throughout 2006. When the news (proposition) of the merger between ECM Libra and Avenue Capital surfaced since early last year, so much oppositions  were brought upon by too many quarters in the public and too much controversies were unavoidably high-lighted. Right from Prime Minister (Minister of Finance) Dato’ Seri Abdullah Ahmad Badawi’s iconic response “I dunno, I am not involved”, to the much heated Avenue Capital EGM at Kiara Equestrian Club, 18 May 2006 on pertinent issues like “impairment of goodwill”, “unfair pre-merger ECM price valuation”, “SC allowed the MGO to be waived (which drew the Minority Stockholders Watchdog Group’s strong protest)” and of course, irregular meeting procedures. Still Now, the endless on going PAC hearing which many felt was being steered away from the main salient issues.

Now, Dato’ Tony Fernandes is also the new shareholder in ECM Libra Avenue. So, the picture becomes clearer and how Khairy’s relationship with Fernandes crystallized further, for the rest of us. This suspicion had lingered in many minds, ever since Khairy Jamaluddin announced that he would be taking up 3% ECM Libra share sometime late 2005. The rest, there onwards, as they always say, is history. ( A recommended reading on ECM Libra Avenue fiasco is Another Brick in the Wall, www.anotherbrickinwall.blogspot.com) 

Now history is back in the making and unfolding, all over again. Saturday 28 April 2007 (whilst the rest of the people in Klang Valley were focused on the Ijok nail biting by-election), Star Biz (www.thestar.com.my) has the story of this new development:

 Saturday April 28, 2007

Kalimullah and Kian Onn to drive ECM’s next leap

By ANITA GABRIEL

MAIN drivers and founders of ECM Libra group Datuk Kalimullah Hassan and Lim Kian Onn are back in the saddle at investment holding company ECM Libra Avenue Bhd (ECM).

Barely nine months after Kalimullah sold down his stake in ECM and both he and Kian Onn relinquished their executive positions in the company – a move which was perceived by many as the former having succumbed to the pressures of relentless vilification on his business involvements – they appear all set to take up the reins once again.

Although Kian Onn stayed on as director and didn’t sell down his stake in the company, he too had taken a back seat in the group.

Lim and Kalimullah’s ‘return’ to ECM signals that there are bigger plans waiting to unfold for the group in which the two personalities will play a major role

Late Friday, the company announced that Kalimullah, who was appointed as non-executive chairman on June 16 2006, will be redesignated as executive chairman and CEO while Lim, who is currently non-executive director, has been redesignated as managing director.

The appointments are effective May 1st.

The move has piqued the interest of market watchers as the group has assembled a strong team following an aggressive recruitment drive to run its investment banking operations. “The key players to drive the financial business of the group are all in place. Since they are coming in once again on executive positions, it could signal that more things are brewing at ECM,” says an industry wag.

That appears to be closer to the truth than one thinks.

Raja Ali and Jeyaratnam (below, right) have a wealth of experience in the field of investment banking

According to sources, negotiations are being pursued at the moment, which are close to fruition and when completed, will result in ECM adding a new major core business to its current single staple of financial services activity, which will see its business transcend domestic boundaries.

“The new business is involved in a global high growth sector,” says a source. As a result of the deal, it is also believed that ECM will see the entry of a couple of key shareholders who are notable and prominent personalities in the international corporate stage.

It is further believed that Datuk Tony Fernandes of AirAsia Bhd fame will also emerge as one of the key investors in the newly enlarged group.

Sources say that Kalimullah and Lim’s `return’ to ECM signals that there are bigger plans waiting to unfold for the group in which the two personalities will play a major role. At this juncture, no one is quite ruling out the possibility that it may eventually result in them raising their stake in ECM.

Also interesting is that the rumour mill has been churning out speculation that ECM’s investment banking business is up for grabs. However, sources close to the company deny such talks, saying that until the group manages to maximise the value and grow its investment banking business in terms of scale and profitability, it is not likely to be divested.

ECM, borne out of a highly publicised merger between ECM Libra Bhd and Avenue Capital Resources Bhd (ACRB) last June, provides a whole array of financial services namely investment banking, stockbroking, asset management and principal finance and investments.

The holding company of the enlarged group was incorporated on October 24 2005 as Avenue International Capital Bhd to facilitate a reorganisation exercise of ACRB Group, which saw the listing status of ACRB on Bursa Malaysia’s main board transferred to ECM Libra Avenue on June 28 2006.

The shocking exit

In August last year, Kalimullah, ECM co-founder David Chua, as well as Khairy Jamaluddin, son-in-law of Prime Minister Datuk Seri Abdullah Ahmad Badawi, disposed of their stakes in the company. Both Chua and Khairy sold off their entire interest in the group while Kalimullah retained a stake of just under 5%.

At that point, tensions were running high, and there appeared to be much scrutiny among a pocket of society over the individuals’ business involvements, more so in relation to the merger deal that was proposed between ECM Libra and Avenue Capital Resources Bhd.

Both Kalimullah’s and Khairy’s stakes were acquired by Amcorp Group Bhd while Chua disposed of his entire shareholding to a foreign fund management company.

“I am giving up to protect ECM,” Kalimullah had then said in an interview with a business magazine.

However, there appeared to be some disappointment among investors of ECM who bought into the company’s shares on the potential that these well-connected and influential businessmen would be able to drive ECM to greater heights, more so because the investment banking business is very much one that thrives on relationships and networking.

“For as long as these individuals were in the driver’s seat of ECM, investors thought there could be upside to be gained from investing in its shares. But when they left, some investors were nonplussed,” says an observer.

It appears that these individuals, or at least two of them, will soon be back in ECM to make good that promise of potential.

Yet, thus far, ECM has made some good strides and progress in the financial services sector.

For the year ended January 2007, sales rose by about 55% to RM121mil from the previous financial year. Group sales for the fourth quarter increased to RM41mil from RM16mil in the preceding year’s corresponding quarter.

The improvement was largely attributed to better performance of the group’s stockbroking business given the much-improved trading volume in the local bourse and higher placement fees.

Higher operating cost for the year, largely due to the combined costs of the merger (with ACRB), however led the group to post a lower pre-tax profit of RM19mil for the year against RM54mil previously. The decrease was also due to rationalisation expenses of RM17mil.

Considering the market’s euphoric performance so far this year, ECM’s performance for the first quarter of the year is likely to see further improvement, says an analyst.

In addition, the group’s stockbroking subsidiary ECM Libra Avenue Securities Sdn Bhd is awaiting the approval of Bank Negara for an investment banking licence, which analysts reckon will materialise pretty soon and will allow the group to offer a more comprehensive range of investment banking activities which it currently is not able to do namely deposits taking.

According to global deal flow data provider Dealogic ECM Analytics, ECM Libra Avenue Securities ranked top spot in book runners for share placements (in terms of deal value and number of shares) in the primary and secondary market (refer to table).

Beefing up the IB team

The IB team of ECM is currently run by group deputy CEO T. Jeyaratnam who left Aseambankers to join the group in October last year. He replaced Cheah Teik Seng, who stepped down as CEO and is currently involved in a private equity firm.

With over 20 years experience in the field of investment banking, Jeyaratnam brings to the group a wealth of experience in corporate finance knowledge and skills. Chartered accountant Raja Ali Raja Othman, the deputy chief executive officer of the group’s investment banking business, also has a sound knowledge and experience in both financial and corporate advisory services.

“The group has hired many skilled and experienced personnel to drive its IB and equity capital markets business. It’s still on a recruitment drive. Almost everything is in place,” says a source close to the company.

The group has also been in the corporate limelight recently with the emergence of Tan Sri Azman Hashim as the single largest shareholder. He raised his interest in the company from 7.4% to over 22% after acquiring a block of shares in ECM from Aroma Teraju Sdn Bhd – a vehicle of the Minister of Finance Inc in late February this year.

While this has led to speculation that Azman has plans to play a bigger role in the company, other astute market observers say it may more likely be a pure investment opportunity for the banker.

The slew of changes in ECM has also attracted significant interest in the counter. Year to date, ECM shares have fared relatively well and have gained over 40%. It emerged as the third most heavily traded counter on Friday, gaining 7 sen to close Friday at RM1.04.

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So how about we now hear it about AirAsia. Does Khairy’s ultra close relationship with Tony Fernandes, via Jason Lo, has translated to some business arrangements? It is so obvious, with AirAsia’s strong support of Khairy’s MyTeam and their both’s affinity for the Manchester United. Lets see the bigger picture now, plus the “Airline Rationalisation Plan” which saw the national carrier Malaysia Airlines’ strategic advantages are being systematically and structurally ‘cannibalised’ for AirAsia prosperity.