- We are keeping our HOLD recommendation on MultiPurpose Holdings Bhd (MPHB) with an unchanged fair value of RM4.00/share.

- Our fair value for MPHB after the demerger exercise is RM3.65/share. This is based on the DCF (discounted cash flows) of the lottery operations. We have disregarded the asset value of the insurance and property divisions as they would be listed separately.

- Date of commencement for the trading of rights of offer for sale is 30 May 2013. To recap, MPHB is offering shares in MPHB Capital on the basis of one share in MPHB Capital for every two shares in MPHB. The offer price is RM1.00/MPHB Capital share.

- Listing date of the shares is 25 June 2013. Yesterday, MPHB announced that the prospectus of MPHB Capital has been registered with the Securities Commission.

- In respect of MPHB’s 1QFY13 core net profit, we consider it to be in-line with our expectations as we expect prize payout to normalise in the coming financial quarters. Also, we have revised our earnings forecast downwards to account for only six months of earnings contribution from the insurance division in FY13F and none in FY14F.

- MPHB’s 78.5% YoY jump in net profit in 1QFY13 was underpinned mainly by a lower prize payout and effective tax rate and an RM15mil exceptional gain from the disposal of the stockbroking unit.

- Gaming revenue inched up 0.8% YoY to RM847mil in 1QFY13 on the back of an increase in the number of draws. There were 46 draws in 1QFY13 versus 45 draws in 1QFY12.

- On a per draw basis, ticket sales edged down 1.4% YoY to RM20mil in 1QFY13. It appears that there has not been any improvement in consumers’ spending on ticket sales. We believe that industry ticket sales were flat in 2011 and 2012.

- Pre-tax profit of MPHB’s NFO division surged 49.8% from RM99.1mil in 1QFY12 to RM148.4mil in 1QFY13 due to a decline in the prize payout ratio.

- We estimate that the division recorded a prize payout of 60.8% in 1QFY13 versus 65.2% in 1QFY12.

- Comparing 1QFY13 against 4QFY12, ticket sales per draw rose 12% to RM20mil on the back of the Chinese New Year festive period while prize payout shrank from an estimated 74.3% to 60.8%.

Source: AmeSecurities