MPHB ... July 2008

MPHB now owns 51% of Magnum. It is also sitting on a cash pile of Rm500 million, thanks to the privatisation. Being in control of so much cash actually puts MPHB on unfamiliar ground. For years the company battled bulging debts, close to the tune of RM2 billion at one stage.
Now, with its net cash position, no body will dare cast aspersions on its strength.

The RM500 million will be used as MPHB’s working capital of which a significant amount will be pumped into its property development division.

After all, MPHB owns several land parcels in Malaysia, which were acquired at book value. This reduces significantly its holding cost.

Without high holding costs to bear, the company is in a comfortable position to undertake its property development business as it is under no pressure to realise the value of the land.

Its maiden property development project is a 2ha plot located in Jln Sultan Ismail. MPHB is in the midst of obtaining planning approval from the authorities to develop and build a commercial and service residential tower. The project will be one of two large mixed developments that MPHB plans to launch in the Klang Valley in 2009.

Upon completion, these properties (in its landbank) will be rented out which, in turn, will provide them with recurring income.

MPHB not only has stakes in Magnum, it also has a 2.24ha landbank in Malaysia, with the most valuable plots being in Gombak, Rawang and Sepang, Sel;angor. Magnum also owns Mimaland in Gombak and some plots in Sepang, held under West Country Sdn Bhd.

If MPHB opts to delay its property development projects, it has to get its earnings mainly from its gaming division, which is expected to slow down due to the present economic landscape.

Apart from the marginal reduction in MPHB’s effective shareholding in Magnum Corp, after welcoming a new partner in CVC capital Partners (Asia), which holds the remaining 49%, how will its earnings fare in the futrure?

They can still see growth in 2008, but in 2009 will be a challenge. Although MPHB has its stockbroking and insurance divisions to fall back on, they are not likely to outperform in 2009.

Meanwhile, MPHB is still searching for partners to consolidate its insurance arm to comply with Bank Negara Malaysia’s margin solvency requirement. It was reported that MPHB had a suitor but talks fell through as the prospective buyer had not obtained a consensus from its shareholders for the acquisitions.

Nonetheless, with no time frame to dictate when the company is required to consolidate its insurance business, it will take its time in seeking a good partner who will take a stake at the right price.