Analysis of the Performance of the Operating Segments of the Group
Continuing Operations
Operating revenue of the Continuing Operations for the six months ended 31 January 2014 is RM20.7 million compared to RM23.8 million in the previous corresponding financial period. On a similar trend, operating revenue for the current quarter under review is lower at RM10.2 million compared to RM11.5 million in the previous corresponding quarter. This was primarily attributed to reduction in interest income and fee based income of the moneylending segment.
Pretax profit of the Continuing Operations of RM1.3 million for the first half year of the financial year 2014 is marginally higher than RM1.2 million posted in the previous corresponding financial period, mainly due to lower loan loss provisioning and net gain on disposals of properties, partially offset by reduction in net interest income, lower fee based income and relatively higher operating expenses. Pretax profit of the Continuing Operations for the three months ended 31 January 2014 is RM0.1 million in contrast to a pretax loss of RM1.2 million in the previous corresponding quarter, mainly attributable to lower loan loss provisioning and net gain on disposals of properties, partially offset by reduction in net interest income and higher personnel costs.
Discontinued Operations
Operating revenue of the Discontinued Operations for the first half year of the financial year 2014 is higher at RM223.3 million compared to RM200.5 million. The increase in operating revenue is mainly driven by higher fund management fee income, increased gains on securities trading activities and higher stockbroking brokerage income, partly offset by unfavourable effects from dealings in foreign exchange. For the current quarter under review, the operating revenue of the Discontinued Operations increased marginally to RM101.2 million from RM99.4 million in the previous corresponding quarter, mainly due to increased gains on securities trading activities and higher stockbroking brokerage income, partially offset by unfavourable effects from dealing in foreign exchange, reduction in interest income and initial service fee income.
Pretax profit of the Discontinued Operations before the exceptional net gain (as disclosed in explanatory note A4) is RM54.4 million for the financial period ended 31 January 2014, representing a 61% increase compared to RM33.8 million recorded in the corresponding six months ended 31 January 2013. The higher profitability is largely contributed collectively by increase in fund management fee income, higher net gain on disposal of securities, net gain on derivatives portfolio coupled with increase in stockbroking brokerage income, partly offset by reduction in net gain on foreign exchange and higher personnel costs. For the second quarter of the financial year 2014, the pretax profit of the Discontinued Operations before the exceptional net gain is RM29.7 million compared to RM20.2 million recorded in the previous corresponding quarter ended 31 January 2013. This was mainly attributed to net gain on derivatives portfolio, higher net gain on disposal of securities as well as increase in stockbroking brokerage income, partially offset by lower net gain on foreign exchange.
The performance of the Group’s key operating segments are analysed as follows:
Continuing Operations
(a) Moneylending
The moneylending segment posted a 71% increase in pretax profit to RM3.1 million compared to RM1.8 million recorded in the previous corresponding three-month period last year. For the first six months of the financial year 2014, pretax profit of the segment of RM7.7 million is marginally higher compared to RM7.2 million recorded in the previous corresponding financial period.
For the current quarter under review, the segment has benefited from the absence of individual impairment loan loss provisioning, which has resulted in higher pretax profit. This was however, partially offset by the decline in net interest income and fee based income.
Discontinued Operations
(b) Stockbroking
The stockbroking segment recorded a pretax profit before the exceptional net gain of RM9.6 million against the pretax loss of RM2.1 million for the corresponding financial period a year earlier. On a similar trend, the segment recorded a pretax profit before the exceptional net gain of RM4.5 million for the current quarter under review against the pretax loss of RM1.1 million for the corresponding quarter ended 31 January 2013.
The stockbroking segment attributed the profitability for the current quarter and financial period ended 31 January 2014 to higher brokerage income and increased net gain on securities trading, partially offset by higher personnel costs. The increase in brokerage income for the current financial period under review is against the backdrop of a 41% increase in Bursa value traded to RM269.31 billion from RM191.22 billion in the previous corresponding financial period.
(c) Investment banking
For the first six months of the financial year 2014, the investment banking segment reported a 16% increase in pretax profit of RM16.8 million compared to RM14.5 million recorded in the corresponding six months ended 31 January 2013. This was mainly attributed to the higher pretax profit of RM12.2 million achieved in the current quarter under review relative to the pretax profit of RM6.8 million for the previous corresponding quarter.
Higher earnings of the investment banking segment for the first half year of the financial year 2014 is largely contributed by net gain on derivatives portfolio, net gain on disposal of securities held-to-maturity, higher net interest income and lower loan loss provisioning, the effects of which are partially offset by lower net gain on foreign exchange for the current financial period. On a quarter-to-quarter basis, the increase in pretax profit is mainly attributable to net gain on derivatives portfolio and net gain on disposal of securities held-to-maturity, partially offset by decline in net gain on foreign exchange for the current quarter under review.
(d) Investment management
For the current quarter under review, the investment management segment turned in a marginally higher pretax profit of RM15.0 million compared to RM14.7 million recorded in the previous corresponding quarter. The cumulative pretax profit of the segment for the period to date amounted to RM29.3 million, a 35% increase from RM21.7 million posted in the previous corresponding financial period. As at 31 January 2014, the assets under management increased to RM24.76 billion (As at 31 January 2013: RM19.69 billion).
The segment's higher profitability for the current financial period under review is mainly driven by increase in fund management fee income, higher initial service fee income and lower agents' commission expenses, partly offset by increase in personnel costs.
(e) Commercial banking
The commercial banking segment posted a pretax profit of RM0.1 million for the current quarter ended 31 January 2014 in contrast to the pretax loss of RM0.5 million in the previous corrresponding quarter. The pretax profit of the segment for the six months ended 31 January 2014 is RM0.5 million against the pretax loss of RM0.8 million recorded in the previous corresponding financial period.
The improved financial performance of the segment is mainly attributable to increase in net interest income supported by growth in loan porffolio and relatively lower loan loss provisioning, partly offset by higher personnel costs. As at 31 January 2014, the loan portfolio of the segment is at RM138.2 million (As at 31 January 2013: RM103.4 million).
Current Year’s Prospects
The Malaysian economy is expected to remain steady, supported by the Government’s Economic Transformation Programs (ETP) and the Central Bank’s accommodative monetary policy.
Continuing Operations
After the Proposed Disposal as disclosed in explanatory notes B7(c) and B7(e), the Board will focus on the growth of the Group’s moneylending segment and continue to develop its marketing strategies and execution capabilities to enhance its clients’ service level. In addition, the Group will pursue and explore other potential new business ventures when the opportunity arises.
Discontinued Operations
The Malaysian stock market will remain volatile given the uncertain global equities outlook as the US begins a gradual tapering process of its quantitative easing program. Nevertheless, any orderly foreign fund outflows will likely be absorbed by ample domestic liquidity. The Group’s stockbroking segment will continue to be driven by erratic trading volume and competitive brokerage rates while the investment banking business will continue to hinge on its treasury and fee-based activities arising from business opportunities in the capital market. Overall, the Group’s stockbroking and investment banking businesses will continue to operate in a challenging industry environment.
The investment management segment will continue to grow its business and will capitalise on its regional growth opportunities to further expand its asset and client base. The segment will continue to remain focus on increasing its AUM and revenue, launching of new and innovative funds, consolidating and re-packaging the existing funds and mandates as well as focusing on growing the Private Retirement Funds in the current financial year under review. The segment will also embark on investing in and strengthening its system infrastructure and distribution channels to meet the various business requirements.
The commercial banking segment will continue to grow its loans and deposits portfolio by concentrating on the retail and housing sectors as well as the SMEs amidst increasing competition within the banking industry in Cambodia.
The Group will continue to maintain its prudent risk management approach and take measures to preserve its asset base.
The Board of Directors is of the view that the Group will perform satisfactorily in the remaining quarters of the financial year ending 31 July 2014.
Financial Report 
