By Lawrence Yong
Multi-purpose Holdings Bhd (MPHB) presents a buying opportunity as its core gaming division reported a surprisingly strong earnings for 1Q13 ahead of the company’s de-merging of non-core assets into a separate company to be listed by end June, equity analysts said.
MPHB shares fell sharply on Monday as deadline passed for MPHB share buyers to receive rights to the new company MPHB capital (MPHBC), which takes over its non-core assets. However, analysts noted that MPHB shareholders who buy its shares today would still receive a 48.5 sen payout.
“MPHB’s share price fell 38sen or 10% yesterday ostensibly because it went ex-rights for the MPHBC share subscription. However, we believe that this is a good buying opportunity,” Maybank IB Research said.
MPHB said Monday that its 1Q13 core net profit rose 76% year-on-year to RM132.8 million. This was above most analysts’ expectations. The sharp gains were attributed to lower prize payouts as MPHB’s core asset is numbers betting agency Magnum. For its non core segment, the company also reported an extraordinary gain of RM16.4 million, owing to RM15 million profits from selling its stockbroking business and RM 1.4 million from properties sale.
Analysts said the company’s plan to split its insurance and property business from its core gaming business would unlock value and attract attention from investors looking at pure gaming stocks.
Following the de-merger, bank-backed researchers from Alliance, Maybank and Public Investment Bank have issued notes lowering their target price on MPHB. These ranged from RM3.21-RM3.93. MPHB shares were trading at RM3.60 at midday Tuesday on Bursa Malaysia, up 2.6%.
The de-merger, first proposed last August was approved by the Securities Commission (SC) in mid-February on condition that Multi-Purpose’s property assets’ valuation will be updated to reflect market prices. The new company (MPHBC)’s 715 million shares was offered to Multi-Purpose’s existing shareholders for RM1 per piece for every two MPHB shares. Maybank IB research also recommends investors to subscribe to MPHBC’s shares, which they said were worth RM1.99 a share.
MPHBC’s share rights would be distributed on Wednesday and may be traded the day after. The de-merger will also see Multi-Purpose change its name to Magnum to better reflect the nature of its business.
Other research reports such as Alliance Research were less sure of Magnum’s upside after the de-merger. Eventhough its 1Q13 earnings were above expectations, prize payout was expected to normalise going forward, Alliance said.
“We observe that operational environment remains challenging for its gaming operations where gaming revenue per outlet eased by about 1.1% in 1Q13 compared to 1Q12,” Alliance said.
Public Investment Bank (PIVB) research downgraded MPHB shares to neutral with a lowered target price of RM3.21, using discounted cash flow valuation of its remaining gaming operations. However, this target price has not yet accounted for the 48.5 sen payout to come, PIVB said.
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