MPHB still the top gaming pick
Operating environment challenging due to competition
PETALING JAYA: The operating environment for Multi-Purpose Holdings Bhd (MPHB) remains challenging due to poor luck factor and higher operating expenses but the stock remains the top gaming stock pick on potential liberalisation moves and capital management.
Alliance Investment Bank Bhd analyst Cheah King Yoong said profit before tax of its gaming operations for the third quarter dipped 7.2% compared to the previous corresponding period although it was higher 15.9% quarter-on-quarter at RM79.4mil on the back of additional special draws and better price payout ratio.
“We also observe that operating environment continues to remain challenging where gaming revenue per outlet eased by about 2% in the first nine months of 2012 compared to the corresponding period last year,” he said in a report last week.
Cheah said the lower revenue despite three additional draws reflected the ongoing competition with the introduction of 4D Toto Jackpot by Sports Toto last June and 6D Jackpot by Da Ma Chai this July.
He has cut core earnings estimates for financial year ending Dec 31, 2012 by 11.4% to RM350.5mil due to the “continued poor luck factor” and higher operating expenses.
Cheah has a target price for the stock at RM4.21, with a “strong buy” call.
Maybank Investment Bank Bhd analyst Yin Shao Yang also has a “buy” call on the stock with a target price of RM4.43.
“At current levels, investors who buy MPHB will hold Magnum, the only Malaysian-listed pure numbers forecast operator going forward, and get MPHB’s property assets for free,” he said.
Yin said the first nine months revenue of RM2.3bil was within expectations at 76% of its FY12 estimate while pre-tax profit was 73% of its full-year forecast.
He added that an interim dividend per share of 6 sen less tax announced was within expectation.
“The demerger of the non-gaming businesses (MPHB Capital) from the gaming business is on track. The former’s prospectus will be issued by year-end and it will be listed in January 2013,” Yin said.