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Author: PublicInvest   |   Latest post: Tue, 25 Feb 2020, 9:35 AM

 

Yong Tai Berhad - Cruise Terminal In Impression City

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Yong Tai announced overnight the planned development of an international cruise terminal at its Impression City development in Melaka Tengah, as well as the entering into of a Memorandum of Understanding (MOU) with Singapore Cruise Centre Pte Ltd (SCC) for the latter to act as terminal operations and management consultant. We are excited over this development, and see this playing a significant part in the turning around of Encore Melaka’s prospects which has been plagued by lower-than-expected ticket sales. While still very much early days, we nonetheless believe the worst is likely behind the Group and see this as marking the Group’s long but certain trek back in terms of regaining investor confidence. Our earnings estimates are left unchanged, with target price of RM0.23 (70% discount to RM0.76 sum-of-parts valuation) also retained. We raise our call to Trading Buy in light of this positive development. . We continue to see value in its long-term proposition, with near term confidence depending largely on the speed in which it manages to turn around its Encore Melaka theatre.

  • The international cruise terminal will be built in very close proximity to the Terra Square development, the latter comprising a linear mall, an outlet mall, a hotel and retail lots. With details (ie. cost, size, etc) of the cruise terminal still scant pending signing of the definite agreements, clinching of this international cruise terminal so close to its Encore Melaka theatre is nothing short of a coup for the Group. While potentially feeding footfall to the proposed mall development, the terminal will just as importantly be a potential channel of visitors to the theatre. With an annual capacity of ~1.4m (2000 seats x 2 shows per day x 365 days), Encore Melaka has underperformed in its first year of operations, with an estimated 120,000 only walking through the turnstiles. This is turn has led to pretax losses of RM34.8m, pummelling its share price from a high of RM1.75 (on 8 Jan, 2018) to its recent all-time low of 13.5sen. While still very much early days, we nonetheless believe the worst is likely behind the Group and see this as marking the Group’s long but certain trek back in terms of regaining investor confidence.
  • SCC currently manages 3 ferry terminals (Tanah Merah, Pasir Panjang, Harbour Front) and 1 international cruise terminal (Harbour Front) in Singapore. With its vast experience, SCC has built very good rapports with cruise operators worldwide, a significant plus point in promoting the Impression City-Encore Melaka theatre to international and local tourists. As consultation fee for its services, Yong Tai will pay SCC a one-time fee of SGD120,000, 30% non-refundable with the remaining 70% subject to approvals granted by the Ministry of Transport, Ministry of Home Affairs and all other relevant authorities.

Source: PublicInvest Research - 21 Jan 2020

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