Yong Tai’s 9MFY18 net profit of RM10.1m (+218.7% YoY), though registering admirable growth YoY, is below expectations at only 28% of our and 24% of consensus full-year estimates respectively. Major causes of the discrepancies are slower-than-expected progress in the Terra Square and Amber Cove developments, with the Encore Impression Melaka now slated for official launch in early July despite being already completed. FY18 and FY19 estimates are lowered by 42% and 4% respectively to account for changes in billing assumptions. Our Outperform call continues to be affirmed nonetheless, underpinned by its “Impression”-based in projects in Melaka, with an unchanged sum-of-parts based target price of RM2.25.

• 9MFY18 is driven primarily by on-going progress billings of “The Apple” mixed development project, which is currently at 76% (2QFY18: 60%) completion. With the recently completed Apple 99 Development Sdn Bhd acquisition, the Group is now able to fully account for 60% of development earnings going forward from the 42% previously. Contributions from the RM873m Terra Square retail units and RM267m Amber Cove project, both fully-sold, have been slower-than expected however, more evidently in the former. Works are only at 16% completion for Terra Square (2QFY18: 15%) as China’s capital controls have stymied repatriation of funds, thereby slowing progress considerably. Management is making progress in overcoming this however, though near-term contributions are likely to be hampered notably. Cancellation risks are minimal but cannot be ruled out altogether. It will not be short on takers however, more so with the impending opening of the Theatre in the vicinity. Works on the Amber Cove project is 10% completed (2QFY18: 5%), with piling just completed. Management anticipates more significant pick-ups in the subsequent quarter going into FY19.

• Construction of the Encore Impression Melaka theatre is completed (Figure 1) and slated for official opening in July 2018. Initially targeted for May 2018, we are made to understand that observation of the holy months of Ramadan and Syawal is a reason for the push-back in opening. A million tickets (or about 70% of capacity) per year for the next three have already been committed to via off-take agreements with various parties.

• The recently-launched RM220m Impresssion U-Thant development in Kuala Lumpur, the Group’s maiden project out of Melaka, has secured 70% bookings and is currently being converted into sales. We foresee no issues with this project given its attractive location and price point, with unit sizes ranging between 782sf and 1,632sf priced at about RM1,700 psf.

Source: PublicInvest Research - 30 May 2018