$MAGNUM / 3859 (MAGNUM BERHAD)

Sharing from remisier

🔹 Being our NFO top pick within the gaming sector, Magnum’s share price surged 15% in the last one month from RM1.18.

🔸 This presumably reflects recovering dividends payout in tandem with higher ticket sales, besides lingering potentialof U-mobile’s stake monetisation.

🔹 To recall since July 2024, it was said that Maxis has expressed interest in U Mobile and talks are at an early stage.

🔸 The article also says that pricing could be a hurdle to a potential buyout, with U Mobile’s owners seeking a valuation of more than RM10 billion, and there’s no guarantee that a deal will be reached.

🔹Tan Sri Vincent Tan later on said U Mobile was rejecting the buyout offer and planning to file for an IPO.

🔸 To recall, Magnum has 6.3% stake in U-Mobile (book value of RM270m, or 16% of its market cap). If U-Mobile’s IPO is valued at RM10b, Magnum has the potential to fetch c. RM630m or c.RM0.44/share if they are able to monetise their stake, which represents c.32% of their current market cap.

🔹 In a scenario of successful monetisation, Magnum may dole out special dividends. A full payout of these windfall gains may translate up to 32% yield.

🔸 Alternatively, the group may pare down borrowings significantly with the proceeds, and turn into net cash position. To note, Magnum currently has RM776.4m borrowings and RM155.7m cash. This may take away finance cost of c.RM37-40m/year, and adds RM26-28m to 2025-26F net profit (+11-12%).

🔹 Given that Magnum pays out >90% of earnings as dividends, this could increase prospective yield to >10% for 2025-26F. Magnum’s NTA will also increase from current RM1.69 to RM2.13.

🔸 Maintain BUY with unachanged target price of RM1.56, which implies 13x 2025F PE (mean).

🔹 Reiterate Magnum as our “defensive but not passive” pick with lush dividend yield and event catalysts.