It plans to focus on property investment following divestment of stake in insurance arm
WITH the completion of the sale of its 49% stake in insurance arm
Multi-Purpose Insurans Bhd (MPIB), MPHB Capital Bhd is gearing up to
unlock the value of its existing land bank to enhance its property
investments.
MPHB Capital, in responding to queries from StarBizWeek, says
with the disposal of the stake in MPIB to Generali Asia NV, the group
will focus on creating value for its existing land bank.
“We will put more resources into property investment rather than
development. Our total land bank measures 2,469.72 acres and spans
across key developed areas in the country which are in great demand,
that is, the central region, Penang and Johor Baru. We will only
consider purchasing more land if it complements our existing land
bank,’’ MPHB Capital adds.
The current contribution from the insurance business as oppose to the
property business for the group is 85% and 15% respectively, the company
says, adding that the proportion should change progressively going
forward.
The company also says it is unfazed by the challenging economic
environment in the property sector as it is not a property developer but
a property investor where its joint venture partners will be selected
based on their specialised skills and financial strengths.
While focus will be on boosting its property investments, the company is
no hurry to scout for more land, according to some analysts.
Analysts says although the group is cash rich, it will be cautious in
undertaking property investments amid the non-conducive property market.
As of Dec 31, 2014, MPHB Capital has RM481.42mil in cash and cash
equivalents coupled with the proceeds from the sale of MPIB, it is in a
comfortable position to pursue its investments in properties and enlarge
its land bank. The group is in a net cash position of RM514.55mil and
total debt during the period stood at RM63.44mil.
MPHB Capital had completed the disposal of its 49% stake in MPIB to
Generali Asia for RM355.8mil valuing the group’s insurance business at a
price to book multiple of about 2.4 times.
It has also granted a call and put options to Generali Asia upon the
completion of the disposal. The call option, which is exercisable within
two years from the completion of the sale, entails an option for the
Italian insurer to acquire up to 21% stake in MPIB.
The put option, on the other hand, entails an option for the disposal of
all the then shares in MPIB held by Generali Asia which may only be
exercised by it after five years from completion of the disposal in the
event the approval from Bank Negara is not obtained (for the exercise of
the call option) or in the event the foreign insurer holds a minority
shareholding in MPIB.
The sale consideration and payments received by MPHB Capital in relation
to the grant of the call and put options amount to RM359.95mil.
Commenting on the completion of the deal, MPHB Capital managing director
Tan Sri Surin Upatkoon says MPIB is expected to become robust, relevant
and resilient.
“By partnering one of the world’s largest insurance companies, MPIB is
better positioned to continue offering its customers the assurance of
reliability.
“The partnership combines the global insurer’s 188-year-old legacy of
stability, solidity and reputation with MPIB’s multi-purpose approach to
actively creating and enhancing values in people’s lives and
businesses,” he says in a statement.
The company is unfazed by the challenging economic environment in the property sector.
Asked about the latest projects and current developments in the Jalan
Imbi, Bukit Bintang and Ampang land in Kuala Lumpur as well as the
Rawang joint venture property development with Bandar Raya Development,
MPHB Capital says: “The Imbi Land is on hold pending the outcome of the
legal suit with one of the vendor. We will make decisions only after the
case is heard in the court. The Ampang land is still on hold pending
further discussion while the Rawang land should be ready for launch in
another two to three months.”
According to a recent note from UOB Kay Hian Research dated Feb 15, the
research house says it expects property launches and the redevelopment
of the company’s Flamingo Hotel by The Lake in Ampang will likely be
delayed to next year.
On the Pengerang land which the company is seeking a civil action
against the Johor state government in relation to an issue of forced
acquisition, MPHB Capital says the legal case was still pending.
It was reported last year that MPHB Capital is taking Petroliam Nasional
Bhd and the Johor government to court over seven plots of land in
Pengerang for the refinery and petrochemical integrated development
project, which it claims was illegally acquired. The company filed the
suit last year.
UOB Kay Hian, which is downgrading the stock to “hold” is raising its
2015 and 2016 net profit forecasts by 1% and 3% respectively. The
brokerage added that MPHB Capital remains asset rich with potential cash
holdings of RM1.00/share level, after it disposes of a 70% stake in
MPIB.
MPHB Capital’s 2014 core net profit of RM67mil according to the
brokerage was slightly above its expectations. “The positive fourth
quarter results (4Q 2014) were mainly due to higher underwriting profit
from the insurance division as well as profit sharing from its JV
property projects. MPHB’s 2014 core net profit of RM67mil was slightly
above our expectations. The positive 4Q14 results were mainly due to
higher underwriting profit from the insurance division as well as profit
sharing from its JV property projects.
“While we are upbeat on the potential growth of MPHB’s insurance
business with the roping in of Generali Asia, the progress of its
monetising activities of undervalued property assets is slower than
expected,’’ UOB Kay Hian adds.
The brokerage also says the joint venture with Generali Asia would,
among others, be on improving backroom operations and the IT system
(particularly for the ebusiness) at the initial stages. MPIB is hopeful
of better retention of its existing customers and will increase its
capacity to underwrite more insurance products, it said, adding that the
company is targeting a 15% gross premium growth annually.
Multi-Purpose Holdings Bhd undertook a corporate exercise in 2013 to
demerge its financial services and other investments from its core
gaming business. Under the exercise, MPHB Capital was listed with its
core business being financial services while Multi-Purpose, which has
been renamed Magnum Bhd, would focus on gaming.
MPHBCAP (5237)
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