This article first appeared in The Edge Financial Daily on August 8, 2019

KUALA LUMPUR: Owing to its “strong earnings growth,” Singapore’s OCBC Bank is buying a significant minority stake of up to 19% in local accounting firm YYC Group with a view to helping it expand its operations, and undertake an initial public offering (IPO) within five years.

The purchase, via OCBC Bank (Malaysia) Bhd and Lion-OCBC Capital Fund 1 (LOCAF 1), would entail an investment of approximately RM60 million, some RM40 million for YYC’s “war chest” or future acquisitions.

OCBC Bank Malaysia chief executive officer (CEO) Datuk Ong Eng Bin said the banking group invested in YYC because of the firm’s strong earnings growth.

Moveover, some of the bank’s existing small and medium enterprise (SME) clients are also YYC’s clients and the partnership would make it easier for YYC to expand its existing operations in Malaysia and Singapore, and into new markets such as Indonesia.

“We wanted to partner with a well-established firm that has roots in the Chinese community,” Ong said at a press conference yesterday.

Daniel Kwan, global head of OCBC Ltd’s Mezzanine Capital Unit, which created the LOCAF 1 private equity fund alongside asset management subsidiary Lion Global Investors, said the RM60 million investment in YYC “is on the table for them to achieve quite a bit of their growth plans for the next three years at least.”

YYC aims to list within five years. While Malaysia is its first choice, Singapore and Hong Kong are also possibilities, said YYC executive chairman Yap Zhi Chau.

“We will have to see the regulations and market conditions when we list.

“For now, it is easier for us to list on the ACE Market in Malaysia, but priority will be given to Malaysia as it is our home,” Yap said.

“An OCBC representative said the banking group could “play a more active role” if YYC chose to list in Singapore as the bank has regulatory approvals to do so.

YYC CEO Datin Yap Shin Siang said the firm would use OCBC’s investment to acquire more businesses in the areas it operate in, as well as on marketing efforts to broaden its client base beyond its traditional Chinese language and dialect speaking clients.

Zhi Chau said OCBC would be acquiring “less than 20%” in YYC and that the bank would be an adviser to the firm.

 The LOCAF-1 fund is a private equity fund that focuses on high-growth SME companies in Singapore, Malaysia, Indonesia and China.