Multi-Purpose Holdings - Most of previous conditions are the same HOLD

- Multi-Purpose Holdings Bhd (MPHB) announced that Bank Negara has approved its demerger exercise with revised conditions. For example, prior approval from Bank Negara is required before MPHB Capital provides any form of assistance to the non-financial services units in the group.

- Other conditions stipulated in Bank Negara’s approval letter dated 21 December 2012 remain unchanged.

- We are neutral on this development as Bank Negara’s previous conditions are still the same.

- The previous conditions include requiring MPHB Capital to rationalise its non-financial services businesses within three years from the date of the completion of the demerger exercise and requiring MPHB Capital to obtain approval of Bank Negara before paying dividends.

- Also, MPHB Capital has to comply with the individual shareholding limit of not more than 10% within five years from the date of the completion of the demerger exercise or by the effective date of the Financial Services Act 2012, whichever is earlier.

- This means that there is a possibility that MPHB Capital would have to carry out a restructuring exercise in respect of its property assets.

- We reckon that the new entity might have to divest or spin-off its property assets to rationalise the division within three years as per Bank Negara’s conditions.

- In addition, Tan Sri Dato’ Surin would have to reduce his stake in MPHB Capital to below 10% within five years from the date of the completion of the demerger exercise. We believe that this is because Tan Sri Dato’ Surin’s stake in MPHB was acquired after the implementation of the Banking and Financial Institution Act in 1989.

- According to MPHB’s circular dated 9 November 2012, Tan Sri Dato’ Surin would have an estimated indirect stake of 32.94% or 235.5mil shares in MPHB Capital after the demerger exercise.

- We maintain a HOLD on MPHB. Due to Bank Negara’s conditions and the Securities Commission’s requirement that the group updates the valuation of its properties, there are uncertainties in respect of MPHB’s demerger exercise.

Source: AmeSecurities