MPHB - Also issuing MTNs BUY

-  Multi-Purpose Holdings Bhd (MPHB) has proposed to issue up to RM1bil 20-year mediumterm notes (MTN). 

-  MPHB has joined a growing number of companies, which have issued MTN, to take advantage of the current attractive funding rates.  

-  Recall that recently, Kuala Lumpur Kepong Bhd (KLK) priced its RM1bil 10-year Islamic multi-currency MTN at 4%. 

-  In June 2012, IOI Corporation sold its US$600mil senior notes at 4.375%. In the same month, Genting Bhd priced its RM2bil 20-year MTNs at 4.42% to 4.86%. 

-  In July 2012, First Resources, which is listed on the Singapore Stock Exchange, issued RM600mil five-year Islamic MTN at 4.45%.

-  In the Bursa Announcement, MPHB said that proceeds from the MTN would be used to refinance existing borrowings of MPHB and its subsidiary, Magnum Corporation. Apart from this, the proceeds may also be used to finance working capital and future investments.

-  We reckon that the RM1bil MTN proceeds would most likely be used to refinance Magnum’s borrowings estimated at between RM1bil and RM1.24bil. Magnum’s borrowings were used to finance its capital repayment of RM3.45/share in FY07.

-  The payment of Magnum’s existing borrowings would result in the group having lighter covenants. This would allow Magnum to return more cash to shareholders. 

-  This is especially relevant since MPHB would be listing its non-gaming assets via a separate vehicle by the end of the year. We estimate MPHB’s dividend yield at 4.5% for FY12F while Berjaya Sports Toto’s dividend yield is forecast at 7.1% for FYE4/13F.

-  We have a BUY on MPHB currently. We would be reviewing our fair value for the group.     

Source: AmeSecurities