Multi-Purpose Holdings Bhd
(May 24, RM3.15)
Maintain buy at RM2.93 with target price of RM3.95: MPHB has proposed to demerge its gaming and non-gaming businesses into two separate listed entities. Although it will take more time to crystallise the value of MPHB’s non-gaming businesses under SPV Capital (against an outright sale of the non-gaming businesses, the ideal situation which would immediately crystalise their values), we believe that this exercise still unlocks value, justifying our “buy” call.
MPHB has proposed to create two separate listed entities. The existing MPHB will hold the gaming business, and SPV Capital will hold the non-gaming businesses (insurance, stockbroking, hotel, various parcels of land and other investments). The mechanics: (i) MPHB will sell all its non-gaming businesses to SPV Capital for new shares in SPV Capital and/or cash; (ii) MPHB will then offer all its SPV Capital shares to entitled shareholders of MPHB; (iii) The net proceeds will be distributed as a capital repayment to MPHB shareholders; and (iv) MPHB will remain listed and SPV Capital will be listed too.
The consideration that SPV Capital will pay to MPHB and the offer price for the offer for sale of SPV Capital shares to MPHB shareholders (likely to be below book value) will be determined later. MPHB intends to submit the draft exposure together with the aforesaid details to the Securities Commission in 2½ months. SPV Capital is expected to list in seven months (end-2012) and the capital repayment will follow in 1 to 1½ months (1Q13) pending a court order.
MPHB intends to incorporate “Magnum” in its name and position itself as a gaming dividend stock. It intends to pay out at least 80% of its net profit against Berjaya Sport Toto Bhd’s more than 75%. MPHB intends to refinance its existing debts in the gaming business with longer-dated debt. — Maybank IB Research, May 24
This article appeared in The Edge Financial Daily, May 25, 2012.
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