MPHB

 Market observers are trying to determine the valuation of the planned IPO of the compnay’s non core businesses.

 

The issue whether the valuation of Newco which will house MPHB’s insurance, property development, hotel investment and stockbroking businesses, should be done at a premium or a discount.

 

The reason for wanting the shares to be given out at a discount is that the exercise is merely to reward shareholders. Also the management realizes that although the new entity will be asset rich, the insurance business will provide the cash flow.

 

Another income stream will be property development. MPHB has tied up with BRDB on some prime land in Selangor and Penang , where the latter will develop the land and give a portion of the profits to the former. The joint development deal is expected to generate a combined GDV of rm4.25 billion.

 

Meantime, if the shares are priced right of the IPO, this may raise concerns over the underwriting of the shares in the merged entity. Nevertheless, MPHB’s MD and major shareholder, Datuk Surin is prepared to underwrite the shares in Newco if the need arises.

 

The group’s vision of becoming a dividend yield stock like rival number forecast operator BJTOTO.

 

The demerger will see MPHB retain the jewel in its crown – Magnum Corp – and park its non core businesses in a SPV in return for shares and/or cash.

MPHB will then undertake an offer for sale of the shares in the SPV to its shareholders at a price that has yet to be determined. The net proceeds from the OFS will then be distributed to MPHB’s shareholders through capital repayment exercise. Effectively the shareholders will be getting shares in Newco for free.

 

The entitled shareholders of MPHB who do not wish to stay with the SPV may sell their entitlements in the proposed OFS on the open market.

 

The exercise will see MPHB morph into a pure gaming company with a dividend policy of paying out 80% of profits, with strong cash flow from its NFO business, Magnum is enjoying steady profits that exceed RM300 million a year.

 

Market observers estimated that MPHB’s non gaming businesses are worth about rm2 billion.

 

The transferring BJTOTO’s gaming operations to a business trust to be listed in Singapore may see investors switching the only listed direct NFO player left in Malaysia – MPHB – which may even command a scarcity premium.