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E.Sun trust sale wise, but concerns remain: analysts

By Joyce Huang
STAFF REPORTER
Saturday, Jul 19, 2008, Page 12

E.Sun Financial Holding Co’s (玉山金控) decision to sell its securities investment trust subsidiary to Schroders PLC for NT$523 million (US$17.23 million), or NT$15.75 a share, is wise, although there are concerns over whether the smaller company can compete in the market and that may worry investors, analysts said yesterday.

“Such a clear-cut decision is wise if it stops potential losses and the subsidiary isn’t making much of a contribution,” Shen Chung-hua (沈中華), a finance professor at National Taiwan University, said via telephone yesterday.

There should be little impact on E.Sun’s operations since its securities unit would be able to manage the other related businesses, he said.

On Thursday, E.Sun and Schroders said the acquisition would be completed by October. E.Sun may also evaluate the possibility of forming a strategic partnership with Schroders, local Chinese-language media quoted company chief strategy officer Joseph Huang (黃男州) as saying yesterday.

He said the investment trust unit, which manages seven funds with a total size of NT$10.4 billion, accounted for only NT$348 billion, or 1 percent, of the parent company’s assets.

E.Sun shares dropped 5.76 percent lower to close at NT$13.9 yesterday amid concerns that the company’s asset value would fall to NT$796.6 billion after the sale, leaving it with a lower asset base and therefore at more of a disadvantage to the competition in the domestic market than before.

“It’s a pretty good idea to liquidate the unit for some cash,” a securities analyst said, speaking on condition of anonymity yesterday.

The analyst, however, expressed concern over the mid-size financial service provider’s management performance as investors have raised doubts about its ability to compete with other domestic banking giants in the future amid uncertainties and the selling pressure facing financial stocks both domestically and globally.

Susan Chu (朱素徵), a director at Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s Ratings Services, said that she believed “the deal is too small to have any impact or risk on the parent company” or its core banking unit.

And the credit rating company, which tracks E.Sun Commercial Bank (玉山銀行), has no plan to revise its rating on the bank, she said.

Shen, nevertheless, still expressed concern over the size of E.Sun, which he said would eventually be vulnerable as competition heats up.
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