Multi-Purpose Holdings - 2Q12 core earnings in line

Period    2Q12

Actual vs. Expectations

 The 2Q12 net profit of RM134.6m came in above expectations. This brought 1H12 net income to RM218.3m, which accounted for 59% and 61% of our FY12 full-year estimates and the market consensus respectively. 

 The variance between the actual result and our estimate was due to a tax write-back (RM8.9m) and a lower than expected taxation rate. (effective rate of just 6%, likely due to one-off factors from its demerger exercise) 

 At pre-tax level, the 1H12 PBT of RM251.0m accounted for 50% of our full-year estimates. 

Dividends   No dividend was declared in the quarter.

Key highlights

 2Q12 PBT rose 7% QoQ despite turnover dipping 4% in the quarter. This was led by the stronger 1) Financial Services (FS) and 2) Corporate & Others (C&O) divisions, although they were weighed down by weaker gaming earnings. 

 PBT from FS soared to RM20.6m in 2Q12 from RM2.3m in 1Q12 due to a higher revenue (+11% QoQ) and the normalisation of claims after the 1Q12 was hit hard by high net claims. 

 The C&O unit reported a 2Q12 PBT which leapt 80% QoQ to RM88.0m, driven mainly by a oneoff fair value adjustment gain and sale of shares in an associate company. 

 The gaming segment reported a 2Q12 PBT which contracted 31% QoQ to RM68.5m as revenue dipped 10% in the quarter. This was due to 1) lower ticket sales by 10% QoQ on lesser draw days (44 draws vs. 45 draws) and 2) a higher prize payout ratio to 68.9% from 66.7%. Average ticket sales dropped 8% QoQ to RM18.7m/draw.

 Stockbroking registered weaker earnings with its 2Q12 PBT declining to RM0.4m from RM3.5m as revenue dipped 27% QoQ, due to the drop in brokerage fees and proprietary trading.

Outlook   The demerger exercise is expected to unlock the group’s value while its dividend is set to rise higher on the back of an 80% dividend payout policy.

Change to Forecasts

 No change to our core earnings estimates. 

Rating  MAINTAIN OUTPERFORM

MPHB is our TOP PICK in the gaming sector. 

Valuation    Price target maintained at RM4.31/RNAV share. 

Risks   A rise in gaming tax by the government 

 Weaker than expected ticket sales and a higher than expected EPPR.

Source: Kenanga