KUALA LUMPUR (March 5): MPHB Capital Bhd said it is still in talks with Generali Asia — a subsidiary of Italian Generali Group — about the sale of its stake in its insurance arm MPI Generali Insurans Bhd.

The little-traded MPHB has stepped into the limelight when its share price hit limit up on Thursday, it shot up 29.6% or 32 sen to a three-year high of RM1.40. The leap in share price has added RM207.35 million to the company’s market capitalisation.

The sudden spike on MPHB’s share price has sparked speculation that the group might be sealing a deal to divest the stake in its insurance arm.

“MPCHB is currently still in the midst of negotiation with Generali Asia on the potential disposal and the parties have not come to an agreement nor have finalised any terms on the potential disposal,” said MPHB Capital in a filing with Bursa Malaysia when the company was queried by the stock exchange after the sharp rise in its share price.

On a back-of-an-envelope calculation, based on the previous valuation of MPI Generali, the 21% stake will be worth RM152.49 million, while a 51% stake would be worth RM370.33 million.  

It has been over five months since Bank Negara Malaysia (BNM) had given the greenlight for the company’s wholly-owned subsidiary Multi-Purpose Capital Holdings Bhd (MPCHB) to commence negotiations with Generali Asia regarding the divestment of its stake in MPI Generali Insurans.

The Central Bank’s permission for negotiation was granted on Sept 29 last year. The news lifted MPHB’s share price by more than 50% from 81 sen in late September to RM1.23 in December.

Some quarters view that the negotiations might not be that straightforward on the pricing, noting that BNM’s 70% cap on foreign ownership is likely to be an issue on the negotiating table.

It is worth noting that in August last year, MPHB had submitted another application to BNM to seek permission to divest its remaining 51% stake in MPI Generali to Generali Group, after its first application for the 21% stake sale.

Interestingly, MPHB was granted the greenlight to commence negotiations a month later. In the bourse filing, MPHB said BNM has no objection for MPCHB and Generali Asia to commence discussion on MPCHB's potential disposal of its equity interest in MPI Generali to Generali Asia

“BNM has no objection for MPCHB and Generali Asia to commence discussion on MPCHB's potential disposal of its equity interest in MPI Generali to Generali Asia,” said the filing then. However, it did not state the size of equity stake that is permitted to be sold.  

In a nutshell, it is not known if the foreign insurer Generali Group has been granted the exception to hold more than a 70% stake in a local insurance firm.

According to MPI Generali's website, the local insurer's core business is underwriting of general insurance business offering innovative insurance products and services which can be customised to the specified needs of individual and corporate customers.

MPHB demerged from Multi-Purpose Holdings — which is now known as Magnum Bhd — and was listed on Bursa Malaysia in June 2013. The demerger was to separate the financial services and other investments from the gaming business to improve the operational and financial efficiency of the businesses.

Interestingly, the major bulk of MPHB’s revenue and net profit are derived from its insurance segment, namely MPI Generali. For the financial year ended Dec 31, 2020 (FY20), the insurance segment made up 89% or RM398.21 million of its total revenue of RM443.25 million.

Meanwhile, its investments segment remained loss making for the second consecutive year in FY20.

MPHB is an asset-rich company. As at Dec 31, 2020, the company’s investment properties stood at RM799.33 million while its investment securities stood at RM1.39 billion.

A question may arise on what would be its core business and income contributor should MPHB manage to sell its entire 51% stake in MPI Generali?