Multi-Purpose - Proposes demerger and capital repayment exercise BUY

- Maintain BUY on Multi-Purpose Holdings Bhd (MPHB) with an unchanged fair value of RM3.60/share. MPHB has proposed to demerge its gaming and SPV Capital Businesses to create two separate and independent listed entities.

- There will be an offer for sale of shares in SPV Capital to MPHB’s shareholders at an offer price to be determined later. SPV Capital will be listed on Bursa Malaysia. SPV Capital will hold MPHB’s financial services, general insurance, hospitality operations and other investments. MPHB’s stockbroking business has been identified for sale, and hence it will be excluded from SPV Capital. 

- After the completion of the proposed offer for sale, MPHB will carry out a capital repayment from the proceeds it receives from the offer for sale.  

- After the proposed demerger exercise, MPHB will have an official policy of paying out at least 80% of its annual net profits as dividends. MPHB would be a pure NFO after the demerger exercise. The entire corporate exercise is targeted for completion by end-FY12F.

- Casi Management Sdn Bhd (mainly held by Datuk Surin Upatkoon) will hold 28.4% of SPV Capital while CVC will hold another 11.2% of the company. Public investors will hold the balance 60.4% of SPV Capital. 

- We are positive on the proposed demerger exercise as it would allow MPHB to dispose of its non-gaming assets. Additionally, MPHB would be transformed into a pure NFO and dividend play. 

- Sweetener for MPHB’s shareholders to take up their entitlement of shares in SPV Capital is the proposed capital repayment. If MPHB were to receive proceeds of RM500mil from the listing of SPV Capital, then the potential capital repayment would be 35 sen/share.

- Essentially, shareholders buying into SPV Capital would gain exposure to Multi-Purpose Insurans Bhd. MPHB’s insurance division recorded an operating profit of RM57.4mil in FY11.  

- The only issue is whether MPHB’s shareholders are still entitled to the capital repayment if they do not subscribe to their shares in the SPV Capital. We would have to ask management about this. 

Source: AmeSecurities