Multi-Purpose Holdings Bhd (Nov 10, RM 2.63)
Initiate coverage with buy at target price RM3.50: Since the launch of 4D Jackpot in 2009, MPHB’s market share has rebounded to 37% in 1H11, almost back to 2002 levels when it was the market leader. With Berjaya Sports Toto (BToto) launching its 4D Jackpot game recently, the overall 4D Jackpot market size grew with a minimal dent seen in MPHB’s sales. 4D Jackpot is still in its infancy (at just 13% of MPHB’s gaming revenue) and should benefit from rising awareness and absence of illegal betting.
MPHB has first-mover advantage and stands to benefit from a lower blended prize payout (4D Jackpot: 55% against traditional 4D: 64.5%). Being a small-ticket item, numbers forecast operators (NFO) are less vulnerable to an economic slowdown and may benefit from the introduction of a minimum wage policy in Malaysia by end-2011.
MPHB is transforming into a purer gaming play post acquisition of a 49% stake in Magnum 4D from CVC Funds for a reasonable RM1.6 billion. With strong three-year earnings compound annual growth rate of 24%, MPHB offers a cheaper exposure to the resilient NFO segment (8.6 times CY12F price-earnings ratio against BST’s 13.5 times).
MPHB’s stockbroking, insurance and hotel units are up for sale. Including recently sold Menara Multi-Purpose, these could fetch RM1.6 billion which it could use to pare down debt (net gearing would drop to 40% from 66%, leading to RM96 million interest savings) and pay special dividends (up to 56 sen per share). Dividend payout could better 2010’s 32% (BToto: more than 75%) given stronger operating cash flows and minimal capital expenditure.
MPHB’s crown jewel is the RM3 billion gross development value (GDV) mixed development in Jalan Imbi, Kuala Lumpur, adjacent to the KL International Financial District (future MRT stop). Its JV with Bandar Raya Development in the Klang Valley and Penang could see RM65 million cash up front plus RM86 million earnings per year from 2014. Its other landbank in Pengerang, Johor (4,641 acres [1,878 ha]), and Balik Pulau, Penang, (208 acres), also have long-term appreciation potential. There could be upside to earnings and revised net asset value if we include contribution from property development and future disposal of non-core assets. — Hwang DBS Vickers, Nov 10
This article appeared in The Edge Financial Daily, November 11, 2011.
Initiate coverage with buy at target price RM3.50: Since the launch of 4D Jackpot in 2009, MPHB’s market share has rebounded to 37% in 1H11, almost back to 2002 levels when it was the market leader. With Berjaya Sports Toto (BToto) launching its 4D Jackpot game recently, the overall 4D Jackpot market size grew with a minimal dent seen in MPHB’s sales. 4D Jackpot is still in its infancy (at just 13% of MPHB’s gaming revenue) and should benefit from rising awareness and absence of illegal betting.
MPHB has first-mover advantage and stands to benefit from a lower blended prize payout (4D Jackpot: 55% against traditional 4D: 64.5%). Being a small-ticket item, numbers forecast operators (NFO) are less vulnerable to an economic slowdown and may benefit from the introduction of a minimum wage policy in Malaysia by end-2011.
MPHB is transforming into a purer gaming play post acquisition of a 49% stake in Magnum 4D from CVC Funds for a reasonable RM1.6 billion. With strong three-year earnings compound annual growth rate of 24%, MPHB offers a cheaper exposure to the resilient NFO segment (8.6 times CY12F price-earnings ratio against BST’s 13.5 times).
MPHB’s stockbroking, insurance and hotel units are up for sale. Including recently sold Menara Multi-Purpose, these could fetch RM1.6 billion which it could use to pare down debt (net gearing would drop to 40% from 66%, leading to RM96 million interest savings) and pay special dividends (up to 56 sen per share). Dividend payout could better 2010’s 32% (BToto: more than 75%) given stronger operating cash flows and minimal capital expenditure.
MPHB’s crown jewel is the RM3 billion gross development value (GDV) mixed development in Jalan Imbi, Kuala Lumpur, adjacent to the KL International Financial District (future MRT stop). Its JV with Bandar Raya Development in the Klang Valley and Penang could see RM65 million cash up front plus RM86 million earnings per year from 2014. Its other landbank in Pengerang, Johor (4,641 acres [1,878 ha]), and Balik Pulau, Penang, (208 acres), also have long-term appreciation potential. There could be upside to earnings and revised net asset value if we include contribution from property development and future disposal of non-core assets. — Hwang DBS Vickers, Nov 10
This article appeared in The Edge Financial Daily, November 11, 2011.
