Will $MAGNUM / 3859 (MAGNUM BERHAD) become the next privatisation target?

$MAGNUM / 3859 (MAGNUM BERHAD) primarily focuses on its licensed lottery business, including 4-Digit numbers forecast betting and various gaming options. As per its FY23 annual report, the company operated 485 sales outlets across Malaysia, but 14 outlets in Kedah (13) and Perlis (1) were closed due to expired trading licenses.

In FY23, MAGNUM saw a revenue increase of 6.4%, totaling RM2.16 billion, with a 17.9% rise in Profit Before Tax (PBT) to RM188.43 million. Despite this growth, management highlighted industry challenges, notably from illegal operators hindering revenue potential due to lax regulations.

Of note, MAGNUM is also owned by Tan Sri Surin. Given the uncertain business landscape, speculation arises whether it might follow MPHBCAP in privatization.

MAGNUM ranks as the second-largest lottery operator in terms of market capitalization, trailing only $KLSE-SPTOTO. Tan Sri Surin's ownership of 36.714% of the company shares, while substantial, falls short of the majority needed to trigger privatization. Despite no recent announcements of share purchases, it doesn't discount the possibility of MAGNUM becoming his next target.

With a track record of successfully privatizing $MWE / 3921 (MWE HOLDINGS BERHAD), speculation arises regarding MAGNUM's potential. Tan Sri Surin's past criteria for privatization typically involve companies with high Net Tangible Assets (NTA). Comparing examples like MWE, where the NTA was RM2.41 and the privatization price was RM1.75, reflecting a 37.7% discount, and $MPHBCAP / 5237 (MPHB CAPITAL BERHAD), with an NTA of RM2.40 and an offer price of RM1.70 (a 41.2% discount), $MAGNUM / 3859 (MAGNUM BERHAD)'s NTA of RM1.69 suggests a potential privatization offer of RM1.21, yielding a mere 6% upside from the current share price.

However, MAGNUM's NTA may underestimate its true value, given that its assets haven't been evaluated in years, some not for decades, as indicated in its annual report. The untapped value of its stake in U-Mobile fuel speculation among investors about MAGNUM's privatization potential.

Overall, the primary stage of bullish market present the last ripe opportunities for major shareholders to privatize companies inexpensively. Given Tan Sri Surin's ties to MAGNUM and MPHBCAP, delving into their histories unveils intriguing narratives, particularly concerning their past affiliations with MCA as Multi-Purpose entities.