CIMB keeps ‘outperform’ for Magnum on dividend payout

Business & Markets 2013
Written by Jeffrey Tan of theedgemalaysia.com
Friday, 15 November 2013 11:39
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KUALA LUMPUR (Nov 15): CIMB Investment Bank Research has maintained
its ‘outperform’ call on Magnum Bhd on delivering a 100% dividend payout for
the third interim dividend per share (DPS) of 5 sen.
In a note today, the research house said key catalysts for the gaming stock are
Magnum’s 80% dividend and its propensity to leverage up and pay special
dividends as the business turns net cash.
CIMB IB research analyst Lucius Chong said he made no change to his
earnings per share forecasts and dividend discount model based target price of
RM3.90.
“Magnum has paid out 15 sen DPS year to date and is on track to meet our
FY13 forecast of 20 sen,” said Chong.
“At current levels, it is offering a 6% yield, among the highest in our gaming
coverage, with strong possibility of special dividends in the future.”
He said Magnum was able to deliver dividends despite the weak topline figures
while 3Q core net profit was in line with his expectations.
This was underpinned by lower depreciation and net interest expense as the
business turned net cash faster than expected, he elaborated.
“We believe the trend in industry revenue growth should return to its steady
state of 3% next year,” said Chong.
“The impact of GST looms in 2015, but we expect the working class to absorb it
relatively well since it replaces the sales tax and has exemptions on essential
goods.”