Yong Tai saw another weak financial quarter, with its 4QFY20 reflecting the full brunt of the Movement Control Order (MCO) which halted operations at its property site and curtailed visitor arrival to its Encore Melaka Theatre. Revenue of only RM577,000 (-94.2% YoY, -92.4% QoQ) speaks volumes. As a result, RM27.5m (-56.3% YoY. +141.9% QoQ) in net losses were booked in for the quarter. Cumulative FY20 net loss of RM44.8m (-44.3% YoY) is above our expectations at 130% of full-year net loss estimates and consensus at 210%. We leave FY21 estimates unchanged though we now expect FY22 to also be in a loss position owing to slower recoveries. The Group continues to hold longer-term promise (FY23 onwards) particularly with the planned development of an international cruise terminal in Impression City playing a significant part in the turnaround of the Encore Melaka theatre. Near to medium-term prospects are muted however with property-related contributions overwhelmed by theatre-related losses. We retain our Neutral call, though we raise our target price to RM0.14 as we lower the discount to our sum-of-parts valuation given the improvement in market multiples.

• Property development recorded pre-tax losses of RM10.6m for FY20 year largely due to revisions in project costing for all its developments as a result of delays in work progress brought about by the various Movement Control Order (MCO) periods. Near-term focus of the Group continues to be on the clearing of its unsold inventories as prudence on launches is still maintained in light of the currently-challenging market conditions. Earnings will be underpinned by its four on-going projects, with medium to longer-term prospects lifted by the planned development of the Terra Square mall. The international cruise terminal initially slated for FY21 is now under careful consideration in light of the Group’s financial challenges.
• Encore Melaka, despite its vast potential, is the Group’s Achilles Heel at the moment. Already plagued by low ticket sales and recently made worse by the MCO, the property investment segment recorded pre-tax losses of RM28.7m for FY20, though an improvement from the previous year’s RM34.8m loss due to cost rationalization efforts. Domestic movement and foreign travel restrictions will be a major impediment to the Group’s near-term prospects though its medium-term prospects will also be dependent on the improvement in its promotional efforts.

Source: PublicInvest Research - 28 Aug 2020