Multi-Purpose Holdings - 3Q12 results reveal no surprises

Period    3Q12

Actual vs.  Expectations  The 3Q12 net profit of RM72.4m came in within expectations, bringing the YTD 9M12 core profit to RM281.8m. The YTD core earnings accounted for 76% of our FY12 full year estimate as well as 74% that of the market consensus. 

Dividends   A 6 sen GDPS was declared in 3Q12 (ex-date: 10 Dec 2012; payment date: 21 Dec 2012) vs. a 5 sen GDPS in 3Q11. This brought the YTD 9M12 GDPS to 11 sen vs. 10 sen last year. 

Key highlights  The 3Q12 headline net profit plunged 46% QoQ to RM72.4m from RM134.6m previously as the earlier 2Q12 results were fuelled by 1) a RM8.9m tax write-back; 2) a lower taxation rate (effectively 6%) due likely to a one-off factor from the demerger exercise and 3) RM17.9m one-off gains from the disposal of an associated company.

 Despite the revenue inching up by only 1%, the 3Q12 net profit actually jumped 14% YoY from that of RM63.2m in 3Q11 as the effective tax rate a year ago was 35% vs. just 25% currently.

 Segment-wise, NFO posted an improved 3Q12 PBT by 16% QoQ to RM79.4m although its revenue went down marginally by 1% on an improved luck factor as the prize payout ratio (EPPR) fell to 67.3% from 68.9% previously. YoY, NFO’s PBT contracted 7% as the luck factor was extremely good at 62.7% last year. The 3Q12 average ticket sales per draw dropped 4% to RM18.1m from RM18.7m in 2Q12 but was 2% higher compared to RM17.7m last year.

 There were no earnings surprises from the Financial Services and Corporate & Others divisions

 The pending-for-sale stockbroking business reported a pre-tax loss of RM1.6m in 3Q12 from a PBT of RM0.4m in 2Q12 and RM2.0m last year. Its 3Q12 revenue dropped to RM4.0m from RM5.0m in 2Q12 and RM6.5m in 3Q11.

Outlook   Its demerger exercise is expected to unlock the group’s value with the dividend 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    Our price target is 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