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Saturday, May 17, 2014

MPHB Capital - Call option for majority stake in MPI


Bank Negara approval paves the way for eventual disposal of majority stake in MPI - positive to MPHB and the buyer.

Revaluation of MPI to a P/BV of 2.2x versus 1.6x in our SOP would lift the SOP by 23sen to MYR2.65. BUY.
What’s New

MPHB has announced that Bank Negara has no objection in principle to its potential strategic partner being granted a call option for a majority stake in Multi-Purpose Insurans (MPI).
What’s Our View

To recap, MPHB had announced in Jan 2014 that it was to commenced negotiations with an interested party in relation to the disposal of a minority equity interest in its insurance arm, MPI.

In our earlier report dated Jan 23rd, we had highlighted that MPHB has five years to 2018 to pare its stake in MPI to less than 50%, to be exempt from Bank Negara’s financial holding company ruling. We had also stated that a minority interest here could be an initial 49%, with a view to crossing the 50% threshold at a later stage.

This approval from Bank Negara is thus positive to (i) MPHB in that it affirms the company’s ability to eventually pare its shareholding further in MPI and (ii) the buyer in that it provides assurance of eventual control over the insurance company. The disposal of a 49% stake in MPI at a historical P/BV of 2.2x versus 1.6x in our SOP computation would lift our SOP by 23sen to MYR2.65.

MPHB Capital’s cancellation of its final 2013 DPS of 5sen is a temporary setback, but the group remains cash rich, particularly with the recent sale of the Balik Pulau land for MYR180m, and it will soon be receiving about MTYR20m in proceeds from its development at Minden Heights.

Source: Maybank Research - 16 May 2014

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