Multi-Purpose - Declining ticket sales HOLD

- We are keeping our HOLD recommendation on MultiPurpose Holdings Bhd (soon to be renamed as Magnum Bhd) with an unchanged fair value of RM4.00/share.

- The listing of MPHB Capital is scheduled to take place at end-January 2013. The entitlement date for the proposed offer for sale is expected to be end-December 2012. 

- The entitlement date for the proposed capital repayment is targeted to be end-April 2013. The capital repayment would be completed by mid-May 2013. 

- Excluding the non-gaming assets, MPHB would be trading at an FY13F PE of 14.5x. In arriving at MPHB’s FY13F EPS, we have assumed a prize payout of 63% and ticket sales per draw increase of 2%.

 

- MPHB has proposed to pay out at least 80% of its net profit as dividends after the demerger exercise. 

- Based on the current share price, this would translate into a gross DPS of 20.5 sen or a dividend yield of 5.5% for FY13F. 

- MPHB’s 9MFY12 core net profit (excluding gains on fair value adjustment and sale of shares in associate) was within our expectations but below consensus estimates. 

- Revenue of the NFO division shrank 1.8% YoY to RM2.3bil in 9MFY12 in spite of a higher number of draws. There were 134 draws in 9MFY12 versus 131 draws in 9MFY11. 

- On a per draw basis, ticket sales declined 4% YoY to RM19mil in 9MFY12. 

- We believe that MPHB’s ticket sales were affected by competition from Berjaya Sports Toto’s lotto games, which have had jackpot prizes snowballing to exciting levels.  

- Pre-tax profit of the NFO division fell 20.7% YoY to RM247mil in 9MFY12 due to an increase in the prize payout ratio. 

- We estimate prize payout at 66.2% in 9MFY12 against 62.7% in 9MFY11.  

- Comparing 3QFY12 with 2QFY12, ticket sales per draw slid 3.5% from RM18.7mil to RM18.1mil while prize payout eased 2.2-percentage points from 67.8% to 65.6%.    

Source: AmeSecurities