That the company is to commence negotiations on a strategic tie-up on the insurance front is certainly a positive.
Assuming a P/BV of 2.2x, this would lift MPHB’s SOP value by 11% to
MYR2.35 (+42% upside). Disposal of the Balik Pulau land would add
another 27sen lifting SOP to MYR2.62 (+58%).
Not only is MPHB’s landbank undervalued, but it also now offers
potentially stronger growth in its insurance division if this tie-up
materialises.
What’s New
Bank Negara has given MPHB its permission to commence preliminary
negotiations with an interested party in relation to the possible
disposal of a minority equity interest in its insurance arm.
What’s Our View
Certainly a positive development that has materialised sooner than we
expected. MPHB has five years to 2018 to pare its stake in
Multi-Purpose Insurans (MPI) to less than 50% to be exempt from Bank
Negara’s financial holding company ruling. As such, we think that a
minority interest here could be 49% at first, with a view to crossing
the 50% threshold at a later stage.
MPI is currently valued at a historical P/BV of 1.6x in our SOP
computation. Assuming a P/BV of 2.2x, the average valuation for some
recent general insurance M&As, this would lift our SOP by 11% to
MYR2.35, and to MYR2.62 if we factor in another 27sen from the isposal
of the group’s 208 acres in Balik Pulau, Penang, at MYR25psf versus the
MYR7psf assumption currently imputed in our OP (the deal has yet to be
completed).
Currently a mid-sized general insurer that ranked 13th of 25 general
insurance companies in 2012, MPI could certainly do with scale, and a
strategic partner, particularly a large foreign one, would no doubt
provide this. We remain upbeat on the stock – BUY.
No comments:
Post a Comment