Logic Invest Research Blog

Author: loginvest   |   Latest post: Wed, 8 Jan 2020, 4:53 PM


Only World Group Holdings Bhd 4Q FY 2019 Update Report (HOLD)

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OWG continues to face many headwinds. Moreover, the outlook is turning from bad to worse as growth in tourist arrivals remains quite sluggish whilst the general level of spending on food and entertainment is visibly decelerating in Malaysia. FY19 vs FY18 group sales decreased, corroborating our view that economic conditions in Malaysia and especially Singapore continue to deteriorate. Indeed, there is already talk of a second rate cut in Malaysia. As mentioned previously, heavy borrowing has also been a drag on profits as interest costs remain large relative to operating profits. It is possible that a weaker MYR and lower borrowing costs will boost profits a bit in the coming quarters.


Risks to our recommendation and target price include: i) weaker consumer sentiment ii) lower growth in tourist arrivals, and iii) an increase in the general level of interest rates.


We maintain our HOLD recommendation on Only World Group Holdings Bhd (“OWG”) whilst reducing our fair value estimate to MYR 0.51. The recreation part of OWG’s business continues to suffer, whilst the food retail business is not growing at a sufficient rate to counter the drop in recreation sales. There may be more pain ahead as operating profits are currently not sufficient to cover even administrative expenses. Investors may wish to wait for signs of a sustained turnaround in profits before buying; this may take a few more quarters.


Only World Group Holdings Berhad (OWG) is engaged in the businesses of investment holding and provision of management services. It operates in three segments. The Food service operations segment operates central kitchen and food service outlets. The Amusement and recreation Operations segment operates water amusement parks and family attractions. The Other services segment is involved in the operation of various products and services and investment holding. Its subsidiaries include Believe It Or Not Sdn. Bhd., which is engaged in operation of family attractions and provision of other services; Dunia Setulin Sdn. Bhd., which is engaged in operation of food service outlets; K.C.K. Capital Sdn. Bhd., which is engaged in the operation of a main central kitchen; Kota Tinggi Resorts Sdn. Bhd., which is engaged in the operation of a resort and a food service outlet, and Magnificent Empire Sdn. Bhd., which is engaged in operation of food service outlets and provision of other services.

Source: Wilson & York Securities Research - 29 Aug 2019

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