Yong Tai reported a marginal net profit of RM437,000 (+151.1% YoY, for the start of its new financial year. Resumption of work post the Movement Control Order helped bring development-related contributions back on-stream however, mitigating the absence of revenue contribution from the Encore Melaka Theatre. 1QFY21 net profit is above our and consensus expectations of RM25.0m in net losses. We err on the side of conservatism and leave estimates unchanged at this juncture though it appears that full-year losses may not be as drastic as expected. 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 theatrerelated losses. We retain our Neutral call, with an unchanged sum-of-parts derived target price of RM0.14.

• The property development segment recorded a pre-tax profit of RM5.5m (-18.6% YoY) as the resumption of works post-MCO contributed to progressive revenue recognition during the quarter. Increase in segmental revenue during the quarter was also contributed by an en-bloc sale of The Dawn condotel. Near-term focus of the Group continues to be on clearing its unsold inventories which incidentally had some measure of success this 1QFY21 as the Group managed to clear RM76m worth. 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. Total unbilled revenue as at September is RM397m. Status of the Group’s projects:

• Encore Melaka remains shuttered owing to its compliance with the government’s Standard Operating Procedures. With zero ticket sales during the quarter, the property investment segment recorded a pre-tax loss of RM5.0m due to depreciation of the building, amortization of intangible assets and interest costs. Near to medium term prospects remain clouded by domestic movement and foreign travel restrictions. To mitigate expectedly low tourist arrivals for the foreseeable future, the Group will reorganize its shows (upon re-opening) to optimize the theatre’s utilization, and also lease out the theatre hall to external production houses.

Source: PublicInvest Research - 24 Nov 2020