Multi-Purpose Holdings set to be the only ‘pure’ number forecasting operator (3859)

HOW things have changed for the country's number forecasting
operators (NFO) in just two years. Where there were three, only one
listed NFO stock will be left on the local bourse once the current
spate of corporate exercises are out of the way.
NFO firms,
traditionally the favourite of investors for their strong cash flows
and dividends, have all undergone, or are undergoing, mergers and
acquisition activity, fundamentally changing the landscape for those
seeking exposure to this sector.
Ananda Krishnan's Tanjong group
was the first to go. In 2010, the tycoon took his flagship conglomerate
off the market for RM4.7bil.
One year down, a star-studded cast comprising Genting's Tan Sri Lim Kok Thay, Hong Leong's Tan Sri Quek Leng Chan, the Lion Group's Tan Sri William Cheng, and Tan Sri Chua Ma Yu took control of Tanjong's gaming arm, Pan Malaysian Pools Sdn Bhd, at the time the third largest NFO operator, in a deal valued at RM2.1bil.
Its sale had purportedly courted an array of suitors, including Datuk Yap Yong Seong, who owns Olympia Industries Bhd, Tan Sri Tiong Hiew King of Rimbunan Hijau Bhd, Ekovest Bhd's Datuk Lim Kang Hoo, and Filipino tycoon Roberto Bobby Ongpin.
Pan
Malaysian Pools runs the Da Ma Cai brand of sports betting and manages
horse breeding and related activities for the National Stud Farm.It was
second only in terms of revenue to Tanjong's power business,
contributing RM721.4mil to the group in 2010.
Then in May this year, Multi-Purpose Holdings Bhd (MPHB)
unveiled a long-awaited plan to separate its gaming unit from its
non-gaming assets. The demerger aims to make MPHB a dividend stock with
a policy to pay out 80% of its earnings. MPHB's non-gaming operations,
meanwhile, would be parked under a special purpose vehicle to be listed
on the Main Market of Bursa Malaysia.
This was followed some three weeks later by Berjaya Sports Toto Bhd's (BToto) announcement that it will spin off its gambling operations into a trust in Singapore called Sports Toto Malaysia Trust.
BToto had proposed to transfer its entire equity interest in Sports Toto Malaysia Sdn Bhd,
which holds the lottery licence, to the trust for 4.43 billion new
units in the latter worth RM6bil as well as a promissory note. As a
result, BToto will have a 90.59% stake in the trust before it goes
public across the causeway.
In addition, BToto said it would
consider distributing all or a substantial portion of its 3.89 billion
shares in the trust to its existing shareholders and propose to
distribute the net proceeds from the restructuring as a special
dividend.
BToto and Berjaya Group executive director Freddie Pang previously told StarBiz
its trust will seek a secondary listing on Bursa Malaysia when the
framework is available here so investors have the option to choose
where to invest.
The trust will return 100% of its surplus operating cash flow annually.
For
now, what all this means is that MPHB, or Magnum as it will soon be
renamed, is set to be the only pure play NFO player here.
Analysts
have lauded the demerger, which will see the removal of its dreaded
holding company discount that has for years caused its shares to trade
at a discount to its peers.
And the market is already reflecting
this. MPHB has gained 36.9% since the announcement and 40.5% for the
year to its highest since 1993 when it came close to RM7.
The
gap between it and rival BToto has also closed, with its
price-to-earnings ratio rising from 5.37 times in 2009 to a forecasted
15.37 times in its financial year ending Dec 31, 2012. Just last week,
MPHB released further details of its exercise that will be carried out
in four parts.
In phase one, the firm will dispose of its non-gaming operations, which include the insurance, hotel and property businesses to MPHB Capital Bhd for RM905.3mil. Its stockbroking arm and 19.9% stake in Philippines Racing Club will remain under the parent.
As payment, MPHB Capital will issue 715 million new shares of RM1 each and settle the remaining amount in cash.
When
that is done, MPHB will undertake a two-for-one offer for sale of the
715 million shares to its shareholders, also at RM1 apiece, after which
MPHB Capital will be listed with a market capitalisation of RM715mil.
This process is expected to take until the end of the year.
Under
the final stages, the net proceeds from the listing, estimated at
RM696.5mil minus expenses, will be distributed back to shareholders via
a capital repayment implied at 48.8 sen a share, and MPHB will assume
the Magnum moniker.
In a report, Alliance Research said the low
price-to-book value ascribed to MPHB Capital indicated that the primary
purpose of this exercise was to “unlock the hidden asset value of the
group to reward its shareholders”.
“We maintain that the
under-pricing of the non-gaming assets for the transfer and subsequent
listing exercise should induce existing shareholders to subscribe for
the offer for sale since the share price of MPHB Cap could re-rate
strongly post listing,” it said, adding MPHB was itself ripe for a
re-rating.

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