Magnum

Its shares went ex for the 48 sen capital repayment on 02 Aug 2013. This is the first milestone in proving to investors that it is now (Aug 2013) a fully transformed, high dividend-paying, pure gaming company.

Expect a 5%-6% yield with the strong possibility of special dividends.

The key catalyst is fulfilling its minimum 80% dividend payout policy.

The RM696.5mil of proceeds came from the decoupling exercise of Magnum’s non-gaming assets, which were spun off into an initial public offering (IPO) called MPHB Capital.

Investors looking at Magnum from this point onwards (Aug 2013 onwards) can still look forward to a minimum 80% dividend payout.

Market observers do not rule out the possibility of special dividends since the company will be turning net cash in 2013 after being under the debt burden for many years following a leveraged buyout of the gaming business.

Magnum also has up to RM1bil of proposed 20-year medium term notes that it can issue to pay dividends that it has not executed yet.

Investors’ interest in dividends is aligned with that of the major shareholders, especially Asia 4D Holdings, which has 11% of the company. It represents the shares held by the private equity fund CVC Capital Partners, which helped finance the initial leveraged buyout of the gaming business in 2008.

Its prospects are bright due to Magnum is to be fully-transformed to a clean gaming dividend story. The capital repayment is the first step in its new chapter and investors should continue to favour the stock as a high-yield play with the potential for payouts to surprise.