- Yesterday, rumours were circulating that Multi-Purpose Holdings Bhd's (MPHB) proposed demerger exercise could be called off. After checking with management, we understand that the group is trying to find a solution. 

- Recall that recently, MPHB announced that the Securities Commission had approved the
group's proposed offer for sale and listing of MPHB Capital.

- However, the approval came with conditions. These include requiring MPHB Capital to conduct an independent valuation of the property assets and comply with the requirements of the equity and prospectus guidelines.  

- The Board of Directors of MPHB said that they would review the conditions and an appropriate announcement would be made in due course.

- In the best case scenario, we reckon that the demerger exercise would still go through. 

- However, there may be a delay to the timeline of the completion as it would take time to undertake an independent valuation of the property assets. 

- The worst case scenario would be if the entire exercise is called off. 

- The issue with the property assets being injected at the market price into MPHB Capital is that the listing PE may be more expensive. 

- Hence, we wonder if it would be possible for MPHB to inject the property assets into MPHB
Capital at the market price but still keep the indicative IPO price of RM1.00/share. 

- This would maintain the listing PE at 14.2x FY11 earnings. However, the implied P/BV would be lower than the current 0.7x. MPHB Capital's earnings would come mainly from the insurance division.  

- In any case, we believe that delays are inevitable. This is because it would take time to
decide on the next course of action. Maintain a HOLD on MPHB.

Source: AmeSecurities