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Author: kltrader   |   Latest post: Tue, 19 Nov 2019, 9:43 AM

 

Yong Tai - No Sign of Recovery Yet

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Maintain HOLD, TP cut to MYR0.37

2QFY6/19 results missed our expectations. Encore Melaka (EM) utilisation rate stayed low while average ticket prices fell. We switch our valuation methodology to P/NTA from P/BV as YTB’s intangible assets relate to EM, which we do not expect to be profitable soon. Ascribing a wider 30% discount (20% previously), we cut our YTB TP to MYR0.37 from MYR0.62. EM utilisation rate ought to be ramped up and/or the stalled Terra Square mall sold before we will consider re-rating YTB.

Results below our expectations

2QFY19 net loss of MYR5.9m (2QFY18: MYR4.5m net profit, 1QFY19: MYR5.2m net loss) brought 6MFY19 net loss to MYR11.1m or 271% of our full year estimate. The shortfall was due to 6MFY19 EM utilisation rate of ~10% (MKE forecast: 15%) and 6MFY19 EM average ticket price (ATP) of ~MYR95 (MKE forecast: MYR120). While 2QFY19 EM utilisation rate was flattish QoQ at ~10%, 2QFY19 EM ATP fell to ~MYR75 or down ~35% QoQ.

Encore Melaka still under-utilised

EM ATP fell as YTB offered many discounts and promotions to attract more non-Chinese audiences in 2QFY19. China Outbound Tourism Research Institute estimated that Chinese visitor arrivals to Malaysia fell 29% QoQ to 600k in YTB’s 2QFY19 (4QCY18). Post-2QFY19, YTB did not experience a material increase in EM utilisation rate during Chinese New Year (5-19 Feb 2019). YTB hopes that the Malaysian delegation to the Belt & Road Forum in Apr 2019 will cajole Chinese to visit Malaysia.

Cutting earnings estimates by MYR5m-MYR16m

For now, we cut our FY19/FY20/FY21 EM utilisation rates by 5ppts p.a. to 10%/15%/20% and EM ATP to MYR100 from MYR120. Coupled with minor housekeeping, we cut our FY19/FY20/FY21E earnings by MYR16m/ MYR10m/MYR5m. We do not expect EM to generate profits in the near term. Our slight FY20 net profit forecast is generated by property development but with unbilled sales easing to MYR391m as at end- 2QFY19, we expect YTB to return to generating losses in FY21.

Source: Maybank Research - 26 Feb 2019

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Labels: YONGTAI

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