We remain bullish on MPHB as our meeting with management yesterday
revealed a clearer picture of the demerger timeline. With the demerger exercise
near to completion, we believe buying interests will resurface soon amidst the
stock having traded mainly sideways over the past three months. The current
valuation for its gaming assets is estimated at 14x CY13 PER. Coupled with the yield
of 7.6%, MPHB's valuation is fairly in line with that of BToto, while the
additional cheaply priced new MPHBC shares that to be offered the MPHB’s
shareholders soon is a bonus value. Meanwhile, MPHB is poised for a re-rating
for being a pure NFO play while there will also be more upsides for MPHBC upon
its listing early next year. MPHB hence remains our TOP PICK in the gaming
space with an unchanged TP of RM4.31/RNAV share.
Decoupling exercise
to be completed by year-end. We met up with the management of Multi-Purpose
Holdings Bhd (MPHB) yesterday to get the
latest developments on its demerger exercise. We understand that the SC/BNM/MoF
approvals for MPHB Capital Bhd’s (MPHBC) listing is likely due by end of this
month before its planned EGM early next month. The Prospectus will be out by
the year-end, and the listing is expected in Jan 2013. To recap, the demerger
exercise was announced in May 2012 and a Draft Prospectus was released in Sep
2012. The estimated 48 sen/share capital repayment will be distributed to
shareholders likely three months after the listing of MPHBC.
Fair gaming valuation
for now. We estimate that a gaming-only MPHB would make a net profit of
RM322m (81% of our current forecast) in FY13 with a GDPS of 23.9 sen. This
translates into a 14.1x CY13 PER and a 7.6% gross yield, which are fairly in
line with the valuations of Berjaya Sports Toto Bhd (“BToto”, UP; TP: RM3.88)
at 14.3x CY13 PER and 7.8% gross yield. However, we expect a rerating on the
stock post-demerger for being a pure NFO play. The intrinsic value for a
gaming-only MPHB will increase to RM4.00/share from RM2.94/share if we apply
the same Beta of 0.599 for BToto to MPHB’s 1.092.
MPHBC is at deep
discount. To recap, all the shares
of MPHBC will be offered to the shareholders of MPHB under a renounceable
1-for-2 Offer for Sale at RM1.00/share worth RM715m (MPHB is expected to
recognise a RM250m disposal loss). The RM1.00 offer price is 41% below our
estimated MPHBC value of RM1.24b or RM1.73/share, which is already fairly conservative
as we largely based its valuation on just the NBV of its assets. MPHB had
indicated earlier that the discount is mainly to reward its shareholders.
More upsides for
MPHBC. We understand that 2,800acres
of land in Pengerang (60% out of 4.641acres) has been compulsorily acquired two
months ago for the RM60b RAPID project at RM0.93/sft, which is above its average
NBV of its Pengerang land at RM0.39/sft. The acquisition price is, however, a
far cry from the known average compulsorily acquisition price of RM3.00/sft in
the area. Currently, MPHB is appealing the acquisition price. Valuing its
Pengerang land at RM0.93/sft, the value of MPHBC would increase 9% to
RM1.89/share. At RM3.00/sft, MPHBC value would surge by 43% to RM2.47/share.
BUY now to get MPHBC
for free. We see two re-rating catalysts to MPHB now i.e. 1) a rerating of
its gaming assets and 2) the revaluation of the land bank at MPHBC. Even at the
scenario where the valuation for its gaming asset remains status quo (same as
BToto), one will still get the MPHBC share for free as the capital repayment is
almost enough to pay for the share. Hence,
we are maintaining our OUTPERFORM call
and TOP PICK in the gaming sector on
MPHB with a TP of RM4.31/RNAV share.
Source: Kenanga
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