Yong Tai - Back From the Brink?

Date: 02/12/2019

Source  :  MAYBANK
Stock  :  YONGTAI       Price Target  :  0.22      |      Price Call  :  HOLD
        Last Price  :  0.045      |      Upside/Downside  :  +0.175 (388.89%)

Lift TP by 22% to MYR0.22; U/G to HOLD from SELL

1QFY20 only outperformed on lower depreciation and interest expense, while underlying fundamentals remain weak. That said, liquidity concerns appear to have been allayed as evidenced by accelerated progress billings at property. We raise FY20E core net profit by MYR7m but trim FY21/FY22E by MYR1m p.a. Ascribing a narrower 40% discount (from 50%) to end-FY20E NTA/shr, we raise TP to MYR0.22 from MYR0.18.

Generated a net profit but underlying still weak

1QFY20 core net profit of MYR0.2m was above our expectations as we were expecting a loss. YTB has not generated a core net profit since 4QFY18, before Encore Melaka opened. The outperformance was due to lower depreciation and interest expense as Courtyard By Marriott (CBM) has not opened (i.e. capex not being depreciated and interest expense still being capitalised). At the operating level, 1QFY20 EBITDA of MYR5.4m fell short at just 15% of our FY estimate.

New shares issuance allayed liquidity concerns

Positively, property progress billings accelerated after YTB raised MYR36.4m via 155m new shares at an average MYR0.23/shr. Recall that 4QFY19 progress billings decelerated due to liquidity concerns. Progress billings ought to continue accelerating as YTB has raised another MYR18.5m by issuing another 94m new shares at an average MYR0.20/shr. YTB can issue another 151m new shares (total: 400m new shares). We have already assumed 400m new shares.

Encore Melaka utilisation still has room to improve

Assuming average ticket price of MYR60, we estimate that Encore Melaka (EM) admitted ~50k in 1QFY20 which translates into ~13% utilisation rate (FY19: 10%). This is below our FY20 EM utilisation rate forecast of 25%. Imputing lower depreciation, interest expense and EM utilisation rate, we now forecast a small MYR1m core net profit in FY20 (vs. MYR6m loss earlier) but larger FY21/FY22E core net loss by MYR1m as depreciation and interest expense will rise when CBM opens in FY21 (Fig. 2). [Prior:SELL]

Source: Maybank Research - 2 Dec 2019

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YONGTAI 0.045 0.00 (0.00%) 155,500 

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