Zico Holdings Inc, integrated professional services provider, has placed out 48 million shares at 30 cents (77 sen) apiece and will be listed on the Catalist Board on Nov 11.
Malaysia's biggest law firm has come up with a novel way to tap into capital markets while adhering to local rules that forbid non-lawyers from owning law firms.
Zico’s IPO is targeted at raising S$14.4mil (RM37.18mil) from institutional investors, where net proceeds of about S$12.5mil (RM32.27mil) will fund business growth within South-East Asia via acquisitions and expansions of new services or strengthening of existing ones.
Labuan-incorporated Zico Holdings provides professional services in areas such as trust advisory, business support and advice on syariah.
The holding company, Zico Holdings Inc, is legally separate from Zaid Ibrahim, which is part of a regional network of law firms known as ZICOlaw. However, they are closely linked in terms of business; Zico provides management and business support services to ZICOlaw network firms, which remain status quo in the provision of law services.
“It wasn’t easy leaving my practice behind, but as managing director of the firm supporting ZICOlaw, there’s more flexibility in servicing our clients because of the multi-disciplinary nature of our business,” says Zico managing director Chew Seng Kok, who was formerly Zaid Ibrahim’s managing partner. Chew had to leave the law practice in order to be allowed to run Zico.
ZICOlaw, founded by controversial politician, Zaid Ibrahim, no longer have any interest in the law firm other than his name still appear as brand.. Zaid Ibrahim an ex-Minister in Prime Minister Department of Malaysia during Abdullah badawi era. He resign as a Minister to protest for government use of Internal Security Act (ISA). He joint PKR and fall out with opposition leader anwar Ibrahim when he contest for chairman of PKR. He is one of columnist of The Star
Zico and ZICOlaw firms also “cross-promote” and offer “integrated services” to each other’s customers, reported The Star.
“Most big Asean players are in Singapore. We see ourselves as an Asean player, so this ties in strategically,” Chew says.
Law firms, generally structures as partnerships, are usually limited from raising capital with the lawyers’ own funds or bank borrowings, Chew says.
He points out that law firms are typically owned by lawyer partners. That means that any money needed for an upgrade to a law firm’s information technology systems, for instance, would have to come from its partners.
But with the way the holding company is set up, ZICOlaw network firms can tap capital markets for that funding rather than partners’ pockets, he said.
In fact, it was through ZICOlaw’s network that Chew contrived the idea of creating a holding company that provided support to law firms.
“It worked out beautifully and it was unique because the lawyers were autonomous,” says Chew.
The bread and butter of the business are syariah law cases and secretarial services – typically recurring income.
“These contribute more than 50% of our revenue,” Chew says.
Pre-tax profit came in at RM13mil, up 145% from FY2011.
Zico does own some law firms in South-East Asia, but only in Myanmar and Laos, where law firms are allowed to be owned by non-lawyers. This create an opportunity for non-lawyer to become shareholder of law firm.
“No one else has done this. We have the first mover’s advantage, that’s why we have garnered so much interest,” Chew says. “We foresee other players hopping onto the bandwagon after us.”
Elsewhere in South-East Asia, the ZICOlaw network is present in every South-East Asian country except Brunei and the Philippines.
Managing director Chew Seng Kok says the IPO would also help the company retain talent in those markets by offering stock options to employees.
“We now have the ability to align the interests of shareholders with performance,” Chew says. “As we anticipate a talent war, this gives them something to hold on to. Seeing as we can’t support them enough, equity would be important to them.”
Zico’s margins are healthy at above 50% and reflective of the business it is in, Chew says.
For the financial year ended Dec 31, 2013, Zico achieved revenue of RM19.2mil, up 115.7% from RM8.9mil two years earlier.
“We need the working capital to do more. We need more capital to support our information technology support software, for instance. That would facilitate our replicating the business models,” Chew says.
Chew: ‘We need more capital to support our information technology support software, for instance.(pic from The Star)
