Multi-Purpose Holdings (MPHB) to list its non-gaming business on Bursa Malaysia stock exchange

(MPHB closing price today (23.6.2012) was RM 2.93)

The Multi-Purpose Holdings Bhd (MPHB) group will demerge its gaming and financial services business into two independent entities.

It said on Wednesday the existing MPHB would hold the gaming business while a special purpose vehicle would hold substantially the financial services businesses and the group's other investments.

MPHB said the proposed demerger would see MPHB selling its assets and liabilities to another unit SPV Capital to be satisfied by new shares in the SPV and/or cash to MPHB.

Under the second stage, MPHB would sell all its SPV Capital shares to the MPHB shareholders.

SPV Capital would then be listed while MPHB would also remain listed.

MPHB would then change its name to incorporate the word "Magnum" to better reflect the core business of the new MPHB Group, which is gaming.

Source: www.thestar.com.my

Updated on 24.5.2012- More information on the corporate exercise

Multi-Purpose Holdings Bhd (MPHB) will inject its non-gaming assets into a special purpose vehicle (SPV Capital) and list it on the Main Market of Bursa Malaysia.

The non-gaming assets include financial services business held under Multi-Purpose Insurans Bhd, stockbroking operated by A A Anthony Securities Sdn Bhd and hotel investments.

The assets' net book value are estimated to be RM941.4 million as at end-2011.

MPHB said in a statement yesterday it is planning to split its gaming business, operated by Magnum Corp Sdn Bhd, and its non-gaming assets to create two separate entities.

The gaming business will remain listed under MPHB, while the non-gaming assets will operate under SPV Capital.

MPHB managing director Datuk Surin Upatkoon said the non-gaming assets, including the liabilities, will be transferred to SPV Capital via the issuance of new shares and/or cash.

As part of the proposed demerger and listing, MPHB will make an offer for sale (OFS) for all its shareholdings in SPV Capital to entitled shareholders at a price to be fixed later.

MPHB will then distribute all the net proceeds from the OFS via a capital repayment.

Surin said the demerger will allow MPHB to position itself as a "gaming-dividend" stock with a sustainable dividend payment policy of at least 80 per cent of its profit annually.

This, however, is subject to the gaming business' prospects, growth or expansion, and adequacy of reserves.

He said the exercise will also provide a platform for both MPHB and SPV Capital to separately pursue different and more tailored business strategies.

"It offers MPHB's shareholders the choice to partake in the financial services and other investments by investing directly in SPV Capital while concurrently preserving their holding in MPHB, which would be dividend-centric," Surin explained.

At the group's shareholders meeting yesterday, director T. Vijeyaratnam said that with the assets demerger, MPHB will become a pure gaming player.

"Gaming is our principal business ... the direction of the group will be much clearer now," he said.

For its fiscal year 2011, MPHB posted a net profit of RM482.03 million on revenue of RM3.54 billion, of which Magnum had contributed around 75-80 per cent and more than 80 per cent, respectively.

Meanwhile, AmResearch Sdn Bhd said spinning off the non-gaming assets is a faster way of selling off the assets, compared to looking for a buyer and then negotiating on the pricing.

The firm has maintained its "buy" call on MPHB due to potentially higher dividend payouts.

MPHB closed two sen higher to RM2.93 yesterday.

Source: www.btimes.com.my

Multi-Purpose Holdings: Week 19 (7-11 May) Stock Picks Commentary

Stock Picks #1

Multi Purpose Holdings (MPHB)

Week high : RM 3.02 (Up 14 sen – 4.9%)

On 8 May, MPHB's finance executives (who are involved in the corporate plan) told TheEdge that Datuk Lim Tiong Chin is negotiating for a management buyout for MPHB's stockbroking firm AA Anthony which analysts estimates to worth around RM 170 million.

On 9 May, Kenanga Research initiated coverage on MPHB and estimated its non-gaming assets to worth RM 1.44 billion (equivalent to RM 1.77 per share).

Their analysis showed that if the entire non-gaming assets are disposed under their asset rationalisation exercise, the proceeds is enough to repay their entire debts and borrowings to a net cash position of RM 805 million. This position gives them the ability to pay a special dividend of up to 56 sen per share.

Kenanga Research favours MPHB’s move to become a pure NFO play citing that this will trigger the market to re-assess MPHB’s valuation to be up to par with current favourite Berjaya Sports Toto Bhd’s valuation.

MPHB is currently traded 23% discount in terms of valuations against Berjaya Sports Toto.

Market reacted positively on MPHB’s ongoing asset rationalisation exercise where non-gaming assets are planned for disposal to enable MPHB fully focus on its Number Forecast gaming business and proceeds from sale of assets will enable MPHB to pare down its borrowings or to be repaid to its shareholders.

It currently has a 100% stake in Magnum, which is one of the largest Number Forecast Operator (NFO) in Malaysia.

MPHB stock rose 4.9% (14 sen) since 8 May to week’s highest RM 3.02 on the same day and closed at RM 2.91 at the end of this week.

Click Here for all latest posts on MPHB

Kenanga Research estimates that proceeds from MPHB's disposal of non-gaming assets worth RM 1.44 billion is enough to pay a special dividend of 56 sen per share, even after redeeming all outstanding debts, target price RM 3.72, Outperform

(MPHB opening stock price today (9.5.2012) was RM 2.98)

Kenanga sees three key catalysts in Multi-Purpose Holdings Bhd (MPHB) at this juncture, which is likely to re-rate the stock further.

First, the stock is cheap. Second, it is transforming into a clean-cut number forecast operator (NFO) play. And third, there could be a special dividend to reward investors. MPHB is now in the middle of an asset rationalisation exercise to dispose off non-gaming assets. The proceeds should be enough to raise its already-attractive dividend payout as well as a one-off special dividend payment of 56 sen.

More importantly, with the disposal, it will become a pure NFO play, which will force the market to push its valuation probably up to par with current favourite Berjaya Sports Toto Bhd’s valuation, which is 23% discount now.

In addition, at its current price of RM2.88, one is actually buying the stock for almost free the worth of its non-gaming assets of RM1.77. Hence, the stock is clearly undervalued at this stage.

We are thus initiating coverage on MPHB with an “outperform” conviction. Our target price of RM3.72 per share is a 10% discount to its revised net asset value.

Through its subsidiaries, MPHB is involved in the gaming, stockbroking, financial services, hospitality and property sectors. About 75% of MPHB’s earnings are derived from its NFO business, with the insurance unit being the second-largest earnings contributor at about 12%.

Its hospitality and property division contributes about 10% to the group, with stockbroking being the smallest unit.

MPHB is trading at 11.2 times calendar year 2012 price/earnings ratio, a 23% discount to another listed NFO player, Berjaya Sports Toto Bhd. This, we believe, has been mainly due to MPHB being an investment company, which typically commands lower valuation compared with a single-purpose business entity.

Since Dec 2011, MPHB has completed the disposals of Menara MPHB and Flamingo Downtown in Pudu, Kuala Lumpur. Apart from the re-rating catalyst, MPHB is expected to raise funds from the disposal exercise. We have estimated that based on net book value, its non-gaming assets are worth about RM1.44bil.

If MPHB were to use the proceeds to redeem all its outstanding debts, it will become a net cash company. With a net cash of RM805mil, MPHB would be able to distribute 56 sen as a special dividend to reward shareholders, in addition to its already-attractive regular gross dividend yield of 6% to 7%.

We expect core earnings to grow at 14% three-year compound annual growth rate over the next three years, mainly led by its NFO business under wholly-owned Magnum Corp Sdn Bhd.

Our earnings model still includes contributions from the non-gaming businesses at this juncture, although as mentioned, their disposals are likely to result in a better valuation for the stock. The asset rationalisation exercise is the key to unlocking MPHB’s value.

We believe it is a good time to buy MPHB now at its undemanding valuation before it gets re-rated after the completion of the exercise.

Source: www.thestar.com.my

Datuk Lim Tiong Chin is negotiating for a management buyout for MPHB's stockbroking firm AA Anthony which analysts estimates to worth around RM 170 million - MPHB's financial executives told TheEdge

(MPHB opening stock price today (8.5.2012) was RM 2.88)

AA Anthony Sdn Bhd’s management led by Datuk Lim Tiong Chin is negotiating a management buyout (MBO) for the Penang-based stockbroker with its parent Multi-Purpose Holdings Bhd (MPHB), financial executives involved in the corporate plan said.

The proposed MBO, which is expected to be finalised by mid-June, is part of MPHB’s rationalisation to focus its business on gaming. Also, Lim, who bought the stockbroking company in 1990, has long been keen to bring the company back into his family holdings, the financial executives said.

Pricing details remain sketchy, but several analysts who track MPHB estimated AA Anthony to be worth around RM170 million in terms of shareholders’ funds.

Lim declined to comment for this article. But one financial executive close to the businessman said the deal is “very much a handshake transaction between” Lim and MPHB’s controlling shareholder, Datuk Surin Upatkoon.

The Thai-born MPHB boss, who is better known by his Chinese name, Lau Kim Khoon, and Lim were key players in the takeover of the diversified conglomerate in 2000. At the time MPHB held stakes in a financial institution and property group Bandar Raya Developments Bhd, interests which were later sold.

AA Anthony merged its operations with JB Securities Sdn Bhd in 2002, but the performance of the enlarged stockbroking entity has been mixed. The segment saw a 37.52% annual growth in its profit before tax of RM16.53 million in 2011. But compared with MPHB’s pre-tax profit of RM678.3 million, it only represents a 2.4% contribution.

The sale of AA Anthony — a company which began operations in the 1830s as an exporter of nutmeg and coconuts to India before venturing into share trading in the early 1990s — is part of MPHB’s asset rationalisation plan to focus its interest in gaming.

MPHB completed the sale of Menara Multi-Purpose for RM375 million in December and a month later disposed of a 13.07% stake in Philippine Racing Club Inc for an estimated RM51.6 million. It currently holds a 19.94% interest in the Philippine venture and the two disposals helped the company realise total gains of about RM217.3 million, which were used to pare down borrowings.

UOB KayHian Research believes that the group’s monetisation exercise could generate over RM600 million cash by end-2012, which represents 16% of its current market capitalisation.

The research firm said it expects MPHB to sell its 6.33% stake in U-Mobile, estimated to be worth RM209 million, and in the remaining interest in Philippine Racing Club, which is valued at around RM90 million.

In February last year, MPHB announced plans to acquire 47% of Magnum from private equity firm CVC Asia Pacific Ltd and the other 2% from certain members of Magnum’s management for a total consideration of RM1.64 billion. Following this, the company was quick to note that it intends to focus on its gaming business and pare down its borrowings by raising RM1 billion through non-core assets sale.

Source: www.theedgemalaysia.com