Journey to Wealth
Multi-Purpose Holdings (2) - Selling AA Anthony? Buy
- According to news reports, Multi-Purpose Holdings Bhd (MPHB) could be selling its stockbroking arm, AA Anthony Sdn Bhd to the latter's management via a management buyout.
- Sources quoted in the news report said that Penang-based AA Anthony Sdn Bhd's management is led by Datuk Lim Tiong Chin.
- We view this development favourably. It appears that MPHB is on track towards disposing its non-gaming assets.
- We believe that the other non-gaming assets, which are up for sale, are the insurance and hotel divisions.
- According to MPHB's 2011 Annual Report, the stockbroking division had a net asset value of RM171.2mil as at end-FY11.
- Assuming a price to net asset ratio of 1.0x, then the disposal of AA Anthony would fetch proceeds of RM171.2mil.
- We believe that MPHB would be using proceeds from the disposal of its assets to pare down borrowings and pay out more dividends.
- As at end-December 2011, MPHB had net borrowings of RM76.6mil at the company level. MPHB's subsidiary, Magnum Corporation had net borrowings of almost RM900mil.
- We reckon that Magnum would be reducing its borrowings through its operating cashflows, which are estimated at more than RM500mil annually.
- We maintain a BUY on MPHB due to its transformation into a purer NFO. This would narrow the valuation gap between MPHB and Berjaya Sports Toto, which is currently trading at FYE April 2013's PE of 14.5x.
Source: AmeSecurities
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