KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Thu, 12 Dec 2019, 11:38 AM


Yong Tai - a Subpar Quarter But Remedial Measures in the Works

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Maintain HOLD call and MYR0.33 TP

Lower-than-expected Encore Melaka utilisation rate continues to weigh on YTB’s earnings. That said, YTB is open to third parties utilising it in order to boost its utilisation rate and minimise losses. YTB is even open to reducing its stake in Encore Melaka, which we view is positive. We leave our earnings estimates unchanged pending a meeting with management. Our MYR0.33 TP, on an unchanged 30% discount to end- FY6/20E NTA/shr, is also unchanged.

Encore Melaka continues to weigh

3QFY19 net loss of MYR5.3m brought 9MFY19 net loss to MYR16.4m which was below our expectations at 80% of our full year net loss estimate. The shortfall was due to 3QFY19 Encore Melaka utilisation rate of 7% and average ticket price of MYR65-MYR70. We are forecasting Encore Melaka utilisation rate of 10% and average ticket price of MYR100. 9MFY19 revenue of MYR90.4m (-11% YoY) also fell short at 49% of our FY19E.

YTB may open Encore Melaka to other shows

Traditionally, 2QCY (4QFY) is the seasonal trough in Chinese visitor arrivals to Malaysia. That said, we are hopeful that improved relation in China-Malaysia ties will cause 2QCY18 (4QFY19) to translate into higher Encore Melaka utilisation rate. YTB stated that 4QFY19 to date, Encore Melaka utilisation rate has been improving QoQ. It also stated that it is exploring allowing third parties (e.g. Star Planet – a concert organiser) to utilise Encore Melaka for their own purposes to boost its utilisation rate.

May reduce stake in Encore Melaka - +ve in our view

YTB also entered into a MOU with HRC Music for the two parties to enter into a definitive agreement within 60 days, in order for the latter to potentially subscribe for up to 70% of PTS Impression’s (which owns Encore Melaka) enlarged share capital at a yet to be determined price.

HRC Music is owned by HRC World (HRC DC, Not Rated), which is

majority Malaysian owned and a franchisee of Hard Rock Cafes in China. We are positive on this development as HRC World can promote Encore Melaka in China and YTB can monetise its investment in Encore Melaka.

Source: Maybank Research - 29 May 2019

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