Regent Pacific, the maverick fund manager that made its nameáfrom Russian and Eastern European investments, is reinventing itself on the internet. Deputy chairman Peter Everington saysáthe future of the company, called iRegent, liesábeyond the cyber frontier.
Q: Why change your business?
A: The business that we're in has changed hugely. Regent Pacific became iRegent two days ago. We made that change because we're investing in technology. We have a subsidiary called KoreaOnline [KOL - a financial portal], in which we own 46%. And the value of KOL is at the moment twice that of iRegent.
Q: What are the figures?
A: KOL is now worth $507 million. iRegent's market capitalization is around $240 million. We've invested about $45 million in KOL and it is making about $100 million in profit a year.
Q: How did it all happen?
A: Two years ago we started investing in a securities company called Daeyu in Korea. The business was losing $15 million a year when we bought it. Now it makes between $5 million and $15 million profit a month. So we bought more and more - it's a public company. We now own 71% of it. And then we thought we can do the same thing in other areas, so we bought a bank, an insurance company, we've built an asset management company, and we put them all together on an online platform for the distribution of our products and services. We call it KoreaOnline.
Q: Who are the other investors in KOL?
A: State of Wisconsin, a pension fund, owns 15%. Then Chinadotcom, Rothschild Group, Sir John Templeton and an investment group in Japan. It's still a private company and is going to go public on Nasdaq in the second half of this year.
Q: Who are your underwriters?
A: We can't say that yet.
Q: What about private placement?
A: We've only just finished the private placement three weeks ago.
Q: How much have you raised?
A: $117 million.
Q: How much are you hoping to get for your KOL listing on Nasdaq?
A: The price of KOL? We don't know. But when it's sold to American investors on Nasdaq, it will be a, an exciting Asian company growing very fast in one of the fastest-recovering economies, Korea; b, it will be only the second online insurance company ever available to American investors; c, it will be a profitable internet business. I think all of those three things together make KOL very attractive.
Q: What was the strategic purpose of purchasing Interman [an internet company which invests in non-financial businesses]?
A: It's to accelerate our internet development. In the last two years Regent Pacific only made financial services internet investments. Meanwhile Jim Mellon, our chairman, personally invested in non-financial internet businesses [through Interman]. That separation was very logical. Now it has become clear there's a much bigger opportunity for adding non-financial elements to our online financial platform in Korea, so the distinction between financial and non-financial doesn't make any sense anymore.
Q: How big is your business in Eastern Europe and Russia now?
A: $600 million of assets under management
Q: Mainly in what form?
A: In funds in Eastern Europe. But they're all under Regent Europe. And Recent Europe has been spun off as a separate company two days ago. It's part of Regent Pacific today. But shareholders in Regent Pacific are given the opportunity to end up with one share in iRegent and one share in Regent Europe. Regent Europe will no longer be part of the public company because Russia and Eastern Europe are a confusion to investors when we are trying to explain about our more significant internet business.
Q: What sort of company are you now on the Hang Seng Index?
A: Regent in HK is still a financial services company but we are going to talk to Hang Seng Indexes about moving us from the financial section to the technology section within the indices.
Q: It seems funds management is no longer the focus of your business.
A: Funds management is still very much the focus of our business. We're an asset manager. It's just the sort of funds we run now are mostly direct investment funds. So we're buying private companies, not public companies. We're not significantly in the public funds business anymore.
Q: Two years ago you said you'd put all your money in Russia when Regent was active there. Where do you put your hard-earned money now?
A: Much of my money is in iRegent. KOL is my baby so I put money in it as well. Funny enough, our Russian business was incredibly profitable. But of course you know Russia blew up in 1998. It's very volatile. We started to invest in it in 1994. Russia went up five times and then it crashed. But in the last year and a half, Russia has been absolutely roaring back and I am nicely ahead on my Russian investments again.
Q: Do you see similarities in the internet business and what you went through in Russia?
A: No, not really. Russia crashed because it defaulted, creating a complete market dislocation. The internet is volatile but there's no defaults, no dislocations in the market.
Q: Do you not see many internet companies may just go down and never come up again?
A: Some companies will certainly go bust. That's a commercial risk. That's very different from what Russia did - Russia defaulted completely. They defaulted on their national bonds and then their currency. They stole everyone's money basically. And that, in investing terms, is like being hit by a 100-year wave, a really big wave. To be able to survive that you need to be very strong.
Q: Russia didn't kill Tiger funds, the internet did. Your share price was more than $3.10 in March. Today it's $1.60. What happened?
A: The Nasdaq crashed. Everyone knows that we've been a very big investor in the internet so when they look at Quantum or Tiger, they think we must be losing a lot of money as well. They misunderstood what we've done. The reason we're in the internet business is because of KOL. We haven't lost any money. KOL is making $100 million a year in profit. Daeyu, for example, when we bought it, it was losing $15 million a year. Within four weeks of buying it we eliminated all debt by a massive sell down of assets, we reduced the number of staff from 440 to 260. Now it has no debt. We saved its life.
Q: How closely linked is the future of iRegent to KOL?
A: It's the biggest part of our company. If you look at iRegent's hard asset value KOL is about 60% of our assets. So it's more than half of our business.
Q: Which is your next target market?
A: We're very interested in China. Alec Tsui, currently chief executive of the Hong Kong Stock Exchange, is joining us as our chief executive. I think with Alec's knowledge and connections, our opportunity in the China market is going to be huge.
Q: The direction of your business development in China would be similar to Korea?
A: Very much. And we would like to bring China some more high tech investing.