KurAsia ... Aug10

It is reviving its plan for an insurance venture in Cambodia with a new partner following an earlier stalled collaboration with an institutional partner.

It is applying for insurance licenses in Cambodia but operations are only likely to come onstream in 2011.

At this juncture, they are still in the midst of procuring the necessary licenses in Cambodia. They are also finalizing the business plan and operational road map of the Cambodia JV company with its equity partner.

The Cambodia JV is part of its long term business strategy to expand geographically, particularly in IndoChina.

Apart from extending its geographical reach, its expansion strategy includes diversification to reduce its dependence on its bread and butter motor insurance and plans to widen its distribution channels and reorganize its investment portfolio.

Should Kurnia Asia’s plan in Cambodia materialize, it will join the ranks of early movers in Malaysia’s insurance fraternity

On Aug 2010, it has announced a plan private placement of 148 million new shares, representing 10% of the company’s issued paid up capital of about 1.49 billion.

Assuming an indicative 52 sen per share, the exercise is expected to raise RM77.4 million of which more than half of RM40 million is for the repayment of borrowings while RM35 million will finance working capital needs.

Proceeds from the private placement exercise are expected to be used within six months of the completion of the exercise in 4Q2010.

The shares will be placed out in tranches to individuals and/or institutional shareholders to be indentified.

Earnings dilution due to a larger share capital base post private placement is a concern.

Its net profit fell to RM23.81 million or 11.60 sen a share in 1QFY2010 ended March 31, 2010.

It has borrowings of RM400 million and cash of RM131 million (including indicative private placement proceeds of rm77.4 million), which translates to a net debt position of RM268 million. This suggests a net gearing ratio of 0.8 times based on its shareholders funds of rm331 million.