Saturday August 18, 2012
MPHB share offer a bargain, investors told
PETALING JAYA: HwangDBS Vickers Research sees a bargain in MPHB Capital Bhd's offer-for-sale exercise and recommends investors to subscribe for MPHB Capital, as its offer price is at a 54% discount to its fair value of RM2.16.
Earlier in the week, Multi-Purpose Holdings Bhd (MPHB) announced that it was divesting its non-gaming assets and businesses to MPHB Capital for RM905.3mil to be satisfied by cash and shares.
Of the amount, RM190.3mil will be in cash, while the remainder will be settled via the issuance of 715 million new MPHB Capital shares.
MPHB is undertaking an offer for sale at RM1 per share to its shareholders on the basis of one MPHB Capital share for every two MPHB shares.
“We recommend subscribing for the 1-for-2 offer for sale of MPHB Capital at RM1. This will house MPHB's non-gaming businesses under the demerger exercise to turn into a pure gaming play.
“We value MPHB Capital at RM2.16, assuming a 50% discount to property market values and 2 times price-to-book value for its insurance business,” said HwangDBS Vickers analyst Yee Mei Hui.
Hence, she said that the renounceable rights for MPHB Capital could be worth 58 sen.
MPHB Capital owns prime landbank along Jalan Imbi (6 acres), Pengerang (4,641 acres) and Penang (289 acres).
Yee sees MPHB turning into a yield play.
“Given resilient earnings and minimal capital expenditure for gaming, MPHB intends to raise dividend payout to more than 80% from 57% currently. This works out to 19 sen net dividend per share for 2013 or a 5.7% yield, versus Berjaya Sports Toto's 5.4%,” said Yee.
She added that the separate disposal of its stockbroking unit worth approximately RM444mil and RM190mil cash proceeds from the demerger exercise, potential disposal of investments worth RM700mil, and strong gaming operating cashflows of RM400mil per annum could see MPHB turn net cash soon.
With the split, MPHB's number forecasting operator (NFO) segment was trading at just 8.5 times 2013 price earnings (PE), versus versus Berjaya Sports Toto Bhd's 13.7 times, she said, adding: “MPHB may even command a premium post-transfer of Berjaya Sports Toto's gaming operations into a Singapore business trust, because it would the only listed direct NFO play left in Malaysia.”
She raises her target price (on a cum basis) to RM4.80 from RM4.20.