MPHB has room to rise further, says ECM Libra

The research house said Multi-Purpose will be re-rated when more details unfold, involving the company's divestments of non-core assets

MULTI-PURPOSE Holdings Bhd (MPHB) (3859)investors may have more reasons to cheer as ECM Libra Investment Research believes the stock has room to rise further.

In a report issued yesterday, the research house said MPHB will be re-rated when more details unfold, involving the company's divestments of non-core assets, which include stockbroking, general insurance, and hospitality businesses.

It also jointly develops its vast landbank with other developers.

"The acquisition of minority interest stake in Magnum does not mean this is the end game for Multi-Purpose. We believe these divestments and landbank development will be the next re-rating catalyst for MPHB," it said in the report.
On Wednesday, MPHB announced plans to buy the remaining 49 per cent stake in Magnum, as well as RM675 million of redeemable convertible loan stocks for RM1.637 million from CVC Capital. This will be satisfied by issuing 360 million new MPHB shares at RM2.30 each and cash of RM809 million.

Upon completion, CVC Capital is expected to hold about 23 per cent of MPHB while Datuk Surin Upatkoon, who had an indirect stake of 33.97 per cent as at May 3 2010, could see his stake fall to about 25 per cent. But this is unlikely to turn off investors.

"The acquisition will immediately be earnings accretive to the existing shareholders of MPHB even after taking into account the additional 360 million new shares to be issued as part consideration for the acquisition," the report added.

It said that MPHB is currently trading at a massive 42 per cent discount to its sum-of-parts (SOP) valuation of RM4.61.

"With Magnum valued at RM3.08 a share, investors are practically buying Magnum at a discount and get all other assets for free. While some may argue that conglomerate should trade at discount to its SOP value, we believe the non-core assets divestment programme and landbank development will narrow this valuation gap".

MPHB stocks closed 1 sen lower at RM2.67 a share, it was traded as high as RM2.74 and as low as RM2.48. - by btimes.com.my