Multi-Purpose - Ticket sales expected to recover in FY12F BUY

Stock Name: MPHB
Company Name: MULTI-PURPOSE HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 3.60

' Maintain BUY on Multi-Purpose Holdings Bhd (MPHB), with adownward revised RNAV-based fair value of RM3.60/share (vs. RM3.70/sharepreviously). We havereduced our assumption of ticket sales per draw growth from4% to 2% for FY12F. 

' We remain positive on the group as we believe that thefall in ticket sales has bottomed. 

' MPHB's FY11 net profit (including profits from discontinuedoperations but excluding gain on disposal of property) was within ourexpectation but fell 10% short of consensus. Included in the group's net profitwas a RM199.6mil gain on disposal of Menara Multi-Purpose.

' All of MPHB's core divisions reported improved earnings. Inspite of a decline in revenue, pre-tax profit of the gaming division rose 3.7%YoY to RM395.7mil in FY11. 

' This was due to a lower prize payout in FY11. Prize payoutof about 66.3% in FY11 was 0.8 of a percentage point lower than the payout of67.1% in FY10.  

' Revenue of the NFO division shrank 3.4% YoY to RM3.2bil inFY11. Number of draws amounted to 177 in FY11 compared with 175 in FY10. On aper draw basis, ticket sales declined 4.5% from RM20.5mil in FY10 to RM19.6mil inFY11.

' We attribute the slide in ticket sales to competition fromBerjaya Sports Toto's 4D jackpot, which was launched in June 2011 and the 6/58lotto game, which saw a run-up in the first prize winnings to RM57mil.

' Among all of MPHB's non-gaming divisions, thebestperforming was the insurance division, which recorded a 6.9% YoY increasein pre-tax profit in FY11. EBIT of the insurance division was RM63.1mil in FY11versus RM59.1mil in FY10.

' MPHB has declared a final gross DPS of 5 sen for FY11. This,coupled with interim gross DPS of 10 sen, brings total gross DPS to 15 sen(FY10: 9 sen), which implies a yield of 5.4%. 

' We believe that MPHB would be using the bulk of the RM375milproceeds from the disposal of its building to pare down borrowings. Grossborrowings stood at RM2.5bil as at end-FY11 (FY10: RM2.2bil).

Source: AmeSecurities