Multi-Purpose Holdings - Affected by high prize payout and net insurance claims Buy

- Maintain BUY on Multi-Purpose Holdings Bhd (MPHB), with an unchanged fair value of RM3.60/share. 

- MPHB’s 1QFY12 results were within our expectations, but below consensus estimates. 

- In spite of the weak results, we reckon that MPHB’s share price would remain supported by its demerger and capital repayment exercise.

- MPHB’s profitability was affected by a high prize payout in the NFO division and an increase in net insurance claims.

- MPHB’s NFO division recorded lower revenue and profits in 1QFY12 compared to 1QFY11. NFO revenue shrank 2.7% YoY to RM839.9mil in 1QFY12. 

- On a per draw basis, ticket sales declined by 2.7% YoY in 1QFY12 as the number of draws in 1QFY12 and 1QFY11 were the same at 45. 

- We attribute the decline in MPHB’s ticket sales to  soft consumer spending and competition from Berjaya Sports Toto’s Supreme Toto 6/58 game, which had prize money snowballing to RM58mil early this year.

- Pre-tax profit of the NFO division fell 21.4% from RM126.1mil in 1QFY11 to RM99.1mil in 1QFY12 due to a higher prize payout. 

- We estimate the prize payout at 63.8% in 1QFY12 versus 60.8% in 1QFY11.

- Comparing 1QFY12 against 4QFY11, NFO revenue expanded 4.9% to RM839.9mil. 

- On a per draw basis, ticket sales improved 7.3% to RM20.3mil QoQ in 1QFY12. There were 45 draws in 1QFY12 compared with 46 draws in 4QFY11.

- The QoQ increase in ticket sales in 1QFY12 was due  to seasonal factors. Chinese New Year fell in January  this year.

- Pre-tax profit of the insurance division fell from RM18.5mil in 1QFY11 to RM2.3mil in 1QFY12 due to an increase in net claims. 

- Also, there were fair value gains in 1QFY11, which were not repeated in 1QFY12. Revenue of the insurance division was relatively unchanged YoY at RM57mil in 1QFY12.

Source: AmeSecurities