MPHB continues to surge on talk of Magnum plan
Amid surging interest in numbers forecast assets, such as Tanjong plc’s Pan Malaysian Pools Sdn Bhd and Berjaya Sports Toto Bhd, shares of Multi-Purpose Holdings Bhd (MPHB) continue to advance, sparking market talk that the group could be firming up plans to relist its gaming subsidiary Magnum Corp Sdn Bhd.
However, a person familiar with MPHB believed that the group had yet to firm up plans to relist Magnum Corp but could be negotiating with CVC Capital Partners for a deal to pare down the latter’s stake in the gaming firm, before a potential relisting, to a much lower shareholding in the region of 20%.
“This could possibly mean MPHB buying back some shares in Magnum Corp from CVC. The pricing would be higher (compared with when Magnum Corp was privatised) because Magnum’s performance has improved,” he added, citing that CVC may want to divest some stakes in Magnum Corp given that it has been more than two years since it invested in the privatised gaming outfit in 2008.
MPHB’s stock rose two sen to close at RM2.40 yesterday with 8.13 million shares transacted. It had touched at an intra-day high of RM2.45. The stock came within a whisker of its 52-week high of RM2.48 recorded on April 5.
On Monday, MPHB surged 17 sen or 7.7% to close at RM2.38 with a turnover of 8.28 million shares compared with its last traded price of RM2.21, with 912,300 shares changing hands on Dec 30. The counter had risen about 23% since its July 5 closing of RM1.95.
Data services indicated that MPHB was trading at a consensus estimated price-to-earnings ratio of 10.67 times and a market capitalisation of RM2.58 billion.
MPHB had told Bursa Malaysia last August that it was at a “very preliminary stage” of looking at the possible relisting of Magnum Corp and was exploring various options for it.
The group also said it had the intention to maintain a 51% investment in Magnum Corp in the event the listing exercise was undertaken. MPHB pointed out that when Magnum Corp was privatised in 2008, CVC, which owns a 47% stake in the gaming outfit, had its own exit strategies based on timing and expected return.
MPHB noted then that one of the exit strategies contemplated by CVC was through the relisting of Magnum on the Main Market of Bursa Malaysia. Magnum Corp, the first operator of four-digit numbers forecast betting in the country, was taken private in 2008 in a deal worth RM4 billion.
According to an industry observer, the strong showing in the gaming sector and prevailing market sentiment augured well for CVC to sell its shares but that did not mean MPHB was pushing for a timeline for CVC to exit.
The market observer opined that investor confidence in MPHB was buoyed by the group’s results for 3QFY10 ended Sept 30 (announced Nov 23) which showed improved performances in its gaming, stockbroking and insurance arm.
“The 4D Jackpot game launched in late 2009 took off well and attracted many customers. The game seemed to have increase its presence with the recent expansion of the 4D Jackpot game’s System Bet that improves chances of winning,” he said adding that the group’s 4QFY10 results were anticipated to be another stellar performance.
MPHB’s net profit for 3QFY10 surged 70.5% to RM86.49 million from RM50.72 million a year ago on the back of a stronger revenue of RM850.70 million versus RM813.24 million. It posted basic earnings per share of 8.1 sen while net assets per share stood at RM2.14 as at Sept 30.
The sale of four-digit forecast tickets contributed RM3.02 billion or about 90% of the group’s revenue of RM3.32 billion in FY09. As for FY08, the sale of such tickets accounted for RM2.87 billion of MPHB’s revenue of RM3.13 billion.
An analyst said that it was unlikely that relisting plans were already on the table but believed it was “the right time” for the parties involved to firm up the agenda on the back of a bullish market.
He said it had been three years since the proposed privatisation of Magnum Corp was unveiled with private equity firm CVC coming in, stressing that it was normal for private equity holders to have an investment horizon of between three and five years in a company.
The analyst opined that while there could be many ways to relist Magnum Corp, there was a possibility that the parties involved might explore the possibility of issuing new shares to shareholders as a dividend-in-specie or via placement.
“MPHB can also undertake other forms of corporate exercises if they merely want to raise funds. Relisting of Magnum is just one of the many ways and such talks have been for a while now,” he noted.
According to him, MPHB could also dispose certain businesses under its umbrella which lack “economies of scale” as well as sell several pieces of prime land in the city and its surrounding areas for a handsome price. - by Yong Min Wei, theedgemalaysia.com.
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