KUALA LUMPUR: UOB Kay Hian Malaysia Research views MPHB Capital Bhd as a deep value stock set poised to benefit from the development of its under-appreciated landbank in the Klang Valley and Johor.

It said on Monday MPHB is a general insurance underwriter and is involved in property investments, with two hotels under the Flamingo brand.

The research house said MPHB’s proposed sale of a stake in its insurance subsidiary, Multi-Purpose Insurans (MPIB), could create opportunity for a significant capital management as early as 2015.

“We estimate MPIB would boost its cash level to RM540mil, if it is successful in the partial stake sale. MPHB has the option to pare down its stake further by as early as 2H15 to a minority stake, which paves the way for it to reward shareholders via capital management,” it said.

UOB Kay Hian Malaysia Research noted that this year, MPHB was unable to declare dividends despite having an estimated unencumbered cash of 36 sen a share due to contingent capital required under the Financial Services Act (FSA) which governs MPIB and its holding company.

On the proposed sale of MPIB, it said the long anticipated sale to a foreign multinational insurer was highly positive not only in providing synergistic benefits, but also opened the door for future capital management over the longer term.

“While this positive announcement has been largely discounted by the stock's 48% year-to-date advance, we expect MPHB to deliver more upside in the longer term, particularly in 2015 when more catalysts emerge.

“Maintain Buy. Our target price is RM2.69, based on a 20% discount to our sum-of-parts valuation of RM3.36 a share,” it said.

Last Friday, MPHB Capital announced it had submitted an application to Bank Negara Malaysia (BNM) to seek approval to sell a stake in MPIB, the granting of options to dispose/acquire equity interest in MPIB and the entry into definitive agreements for the above transactions with an interested party.

To recap, BNM allowed MPHB Capital to start preliminary negotiations with an interested party on selling a minority equity interest in MPIB in January 2014 and approved MPHB to grant the said interested party a call option to acquire an additional equity interest in MPIB in May 2014.

If the interested party exercises the call option, it may result in a possible disposal of a majority equity interest in MPIB, said UOB Kay Hian Research.