How to Trade Shares or Stocks in Bursa Malaysia

Its front page in all major newspaper in Malaysia today, 5 February 2008. The purchase of Primus Pacific Partners Ltd (a Hong Kong based investment fund) of 20.2% shareholdings of EON Capital Bhd from DRB-HICOM. Primus major shareholders are the Qatar Investment Authority and the Tsai family that control Taiwan based Fubon Financial company.

Pro Trade Shares decided to break its own promise of not making any comments about listed shares in Bursa. I have decided to comment on the matter of Primus Pacific Partners buying a majoring stake in EON Capital Berhad which own EON Bank. Will this be the first of many to come? I don’t know. Maybe I will, maybe I won’t. Why don’t you guys out there post your comments on this.

The inside information that I received was that since mid 2007, Primus appointed auditors/consultants have been doing its due diligent in EON Bank since they applied to Bank Negara to negotiate on the purchase of a major stake from DRB-HICOM. All budget proposal for 2008 submitted to EON Bank board of directors were scrutinised. All the expenditure proposal has to be approved by the appointed consultants before the bank board can discuss them. This is to ensure Primus’s interest is protected prior to the official signing of the purchase agreement.

A few senior management staff have either ‘retired’ or ‘re-assigned’ in a new organisation structure announced at the end of 2007. Two senior position has been created; Head of Group Finance and Head of Group Operations and IT. The positions are still vacant.

There is a very strong possibilities that these two senior positions will be given to Primus appointed people. The Head of Group Finance is a very important position in the bank. It allow the person to authorise all expenditures or spending or investment by the bank. Therefore the bank board or senior management committee cannot authorise any ‘big’ expenditure spending without the knowledge of Primus (if the person is appointed by Primus).

The last traded price for EON Capital Bhd this morning (5 February 2008) is RM6.40, up 32sen. Still far from the price of RM9.55 per share as paid by Primus to DRB-HICOM.

According to reliable sources, Bank Negara will not allow Primus to increase its stake in EON Capital Bhd as Primus is not a foreign financial institutions such as a bank, unlike the ANZ bank from New Zealand that took a much bigger share in Arab Malaysian Bank last year. Since Primus will not be making anymore offer to existing shareholders of EON Capital Bhd, my guess is that the share price will not move upward to the RM9.55 region. Its share price will continue to be in the region of RM6.00 to RM7.00 unless there are any major announcement on its profitability or its business direction.

There, this is my comments on the purchase of major block from DRB-HICOM by Primus Pacific Partners Ltd. and the very high possibility of Primus placing their people in the senior management position in EON Bank.

To my Chinese readers, I wish you all a very Happy and Properous Chinese New Year, the year of the RAT.

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