PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 21 Nov 2019, 11:24 AM


Yong Tai Berhad - Poor Start Continues

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Yong Tai’s lacklustre start to its new financial year is seeing no respite, with the Group continuing to reel from significantly lower-than-expected ticket sales in its Encore Melaka theatre. A net loss of RM5.9m was reported for 2QFY19, with cumulative 1HFY19 net loss now at RM11.1m, missing both our and consensus expectations. While we continue to like the longer-term value proposition of the Group underpinned by its unique product offerings, short term challenges are taking a significant gloss off its prospects. We are now expecting a full-year net loss of RM7.3m for FY19 on lowered ticket sales expectations while FY20 and FY21 numbers are cut by 70% and 38% respectively as we forecast a longer recovery period for the theatre. Our sum of-parts derived target price is now RM0.55 (RM0.82 previously) as we impute a higher 50% discount to a lowered sum-of-parts valuation of RM1.10 in line with the earnings cuts. Despite the potential returns, we are lowering our call to Neutral given the near-term uncertainties surrounding the Group. Upsides could come from quicker-than-expected recoveries in ticket sales.

  • Property development remains the bright spot, with revenue of RM18.2m and pretax profit of RM2.5m recorded in 2QFY19. Cumulative 1HFY19 revenue and pretax profit are RM42.9m and RM5.9m respectively. Earnings contribution will still be underpinned by The Apple, Amber Cove, The Dawn and Impression U-Thant projects, with no new launches planned in the near future. Unbilled sales are a healthy RM391m, providing visibility for the next 2 years at least.
  • Encore Melaka is the obvious drag, with a hugely-disappointing RM2.5m revenue recorded in 2QFY19, a period coinciding with year-end school holidays, domestically and overseas (for most). Pretax losses of RM9.5m were subsequently reported for the quarter. Cumulative 1HFY19 revenue and pretax losses are RM5.9m and RM17.0m respectively. We gather only about 80,000 tickets (people) went through the turnstiles in the first 6 months of operations, significantly below its annual capacity and/or breakeven point. Weaknesses have been attributed to the momentarily lower-than-expected Chinese tourist arrivals, which may very well be the case. We are increasingly worried over its seeming lack of traction with tourists from other countries however.
  • Another key re-rating catalyst could come from resolution of the Terra Square impasse. The Group remains in advanced stages of discussion with a particular party for the sale of the entire project. While we appreciate the intricacies of such discussions (ie. pricing, etc), we are increasingly weary over the inordinately long time being taken to conclude.

Source: PublicInvest Research - 26 Feb 2019

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