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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 20 Nov 2019, 9:59 AM

 

Yong Tai Berhad - No Relief In Sight

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Yong Tai reported a whopping RM79.3m loss for the FY19 financial year, missing our (RM23.1m) and consensus (RM20.7m) loss estimates by a mile. The letdown is attributed to a revision in costing of its existing on-going projects to reflect increasing development costs and a one-off impairment loss on receivables and inventories which amounted to RM59.9m. The Group also continues to be weighed by significantly lower-than-expected ticket sales in its Encore Melaka theatre, with property-related contributions unable to mitigate. We cut our FY20 and FY21 earnings estimates further by an average 90% as delays in new launches are anticipated. Our target price is consequently lowered to RM0.29 (RM0.38 previously) as we raise our discount to 70% of its RM0.96 sum-of-parts valuation due to on-going operational weaknesses. Our Neutral call is retained. While we continue to see value in its long-term proposition, near term confidence in the Group will depend largely on the speed in which it manages to turn around its Encore Melaka theatre.

  • Property development contributions will be a key driver in the interim, though cumulative FY19 revenue of RM89.4m is 31.3% lower YoY in the absence of new launches while the Terra Square development continued to remain at a standstill. Pretax loss of RM57.6m was recorded for the segment as impairment losses on inventories and receivables were undertaken, in what appears to be a kitchen-sinking exercise in light of current market conditions. Activity is still underpinned by:
  • Encore Melaka failed to perform as expected, with ticket revenue of only RM10.9m garnered the entire financial year, significantly below its potential. Assuming an average ticket price of RM90 (post-concessions, versus listed price of RM120), only about 122,000 tickets (people) could have gone through the turnstiles in the first year of operations, significantly below its annual capacity (1.4m) and/or breakeven (~300,000) point. Pretax losses ballooned to RM34.8m owing to depreciation and interest charges.

 

Source: PublicInvest Research - 28 Aug 2019

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