Friday, July 24, 2009

Why I Am Keen On MPHB Now


Why I am keen on Multi-Purpose Holdings now:

Multi Purpose now holds 51% of Magnum, with the other 49% held by CVC Asia, a private equity firm. MP also has 97% of Dynamic Pearl, which holds stockbroking firm A.A. Anthony Securities, and 82% in general insurance entity Multi-Purpose Insurans. MP effectively has a put and call
option to buy the remaining 18% of Multi-Purpose Insurans from Magnum. During the 1Q, MPHB bought back 28.6m shares from the open market at an average price of RM1.103 per share. In 2008, it bought back 44.58m shares at an average cost of RM1.14 per share. These shares are held as treasury shares.

Below RM1.60, MP looks to be ripe for a run that could be supported by some corporate exercises:
a) it could almost announce a 1 for 10 bonus issue by disbursing the shares bought from the open market
b) it could seal up 100% of Multi-Purpose Insurans
c) it could be involved in a corporate exercise with CVC Asia on the remaining 49% of Magnum
d) the contribution from stockbroking will be better and could add RM20m-25m to overall profits in 2009

Considering its hold on Magnum, considering its delayed RM2bn property project next to Berjaya Times Square, considering the higher gaming and financial revenues for most of the year (and probably going forward for the next 12 months at least), considering that it has a massive 67% free float for its 1.077bn shares.... its a good and ripe time to ride on Multi-Purpose for a retest of its 52 week high of RM1.82.

The major shareholder, Casi Management, currently holds 31.3%. The major shareholder of Casi Management, Datuk KK Lau, also controls MWE Holdings, and MWE holds a further 1.2% of Multi-Purpose. Not an entirely convincing or stable controlling shareholding structure.

The last bit is where the story gets interesting, 67% free float ... ripe for another substantial shareholder to take up a strategic stake, maybe with a strategy to takeover the company, thus putting the company in play. For the second half of 2008 corporate finance and M&A activity plus funding have been muted because of the crisis. Better conditions now, even Ananda is coming out to play... I would be shocked if nobody makes a play for Multi-Purpose soon. The break up value is close to RM2.90. Just the gaming business is already RM1.40, that means the rest is almost free. If this does not attract vultures, I don't know what will??!!



3 comments:

Shadow said...

It is not as easy doing a M&A on MPHB cos of Magnum. If i am not mistaken, any takeover of the gaming biz will require MOF's approval.

mavern said...

Comment: I note that MPHB jumped 17 sen or 11.33% to RM1.68 yesterday, the day you posted this article.
Interesting coincidence, if it is a coincidence. Anyway, thanks for the info

emacro said...

A hypothetical way to approach MPHB trade:
http://fkli.blogspot.com/2009/07/20090725-salvatore-deli-of-malaysia.html