Hot Stock MPHB rises 4% to 16-year high on offer for sale

Hot Stock MPHB rises 4% to 16-year high on offer for sale
Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Wednesday, 15 May 2013 11:34


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KUALA LUMPUR (May 15): MULTI-PURPOSE HOLDINGS BHD [] (MPHB) rose as much as 4% to a 16-year high.

The gains came ahead of the ex-date for MPHB's renounceable offer for sale of shares in MPHB Capital Bhd to MPHB shareholders. The ex-date falls on May 27 this year.

At 10:36am, MPHB was up 12 sen or 3.03% to RM4.08 with a trade volume of 2.04 million. At 11.05am, the stock was changed hands at RM4.07.

The stock had risen as much as 16 sen to RM4.12 earlier among top gainers. This is the highest since April 11, 1997 when the stock was traded at RM4.20.

MPHB has proposed to demerge its gaming and non-gaming businesses more than a year ago. Its non-gaming assets will be housed under MPHB Capital which will be listed on Bursa Malaysia this June 25.

The Edge Malaysia reported that MPHB Capitalwill have a market capitalisation of RM1 billion. MPHB, meanwhile, will assume a new name of Magnum Corp Bhd, being the namesake of its gaming brand.

Analysts said there will not be an instant adjustment to MPHB's share price after the ex-date.

“We wish to highlight that the demerger is undertaken via an offer for sale (instead of distribution-in-specie), the listing of MPHB Capital will not lead to an automatic downward adjustment to MPHB’s share price by Bursa Malaysia after the offer for sale ex-date on 27 May,” said Alliance Research analyst Cheah King Yoong in a note today.

However, he said the capital repayment of 48.5 sen by September will result in MPHB’s share price being adjusted downward by such quantum.

“As such, the entire demerger exercise will only lead to a 48.5 sen downward adjustment of MPHB’s share price upon the ex-date of the capital repayment,” said Cheah.

Alliance is maintaining its “buy” call on MPHB with an unchanged target price (TP) of RM4.21.

However, the research house said it will review the TP when the group releases its results for the first three months of the year. The results are expected to be announced on May 23.

“Nonetheless, we now foresee downside risk to MPHB’s share price post the offer for sale ex-date of MPHB Capital… We only ascribe a RM2.90 TP to MPHB’s gaming operations (excluding MPHB Capital). As such, the successful listing of MPHB Cap could lead to selling pressure on MPHB, although the impending capital repayment of 48.5 sen could partially mitigate the downside risk to MPHB’s share price,” he said.