Yong Tai reported another loss for the quarter, with 3QFY19’s RM5.3m adding on to a cumulative RM16.4m loss for 9MFY19. This is now some way off our full-year estimates of an RM7.3m loss as we had anticipated an earlier turnaround, though in line with consensus’ RM20m loss expectation. The Group continues to be weighed by significantly lower-than-expected ticket sales in its Encore Melaka theatre, with property-related contributions unable to mitigate. We cut our earnings estimates for FY20 and FY21 by an average 8% while also widen FY19 net loss expectations to RM23.1m. Our target price is consequently lowered to RM0.38, on a 60% discount to its RM0.96 sum-of parts valuation. Post-completion of its share placement exercise anticipated by the second half of the year, target price will adjusted to RM0.25. Our Neutral call is retained, with clarity on near-term earnings prospects remaining cloudy. While we continue to see value in its long-term proposition, near term confidence in the Group will depend largely on the speed in which it manages to turn around its Encore Melaka theatre. To this end, the Group has entered into an MOU which may bode well, longer term.

• Property development contributions continue afoot, though cumulative 9MFY19 revenue of RM81.3m is 20.2% lower YoY compared to the preceding year’s RM101.8m owing to zero contributions from the Terra Square development. Correspondingly, pretax profit contributions are also lower 29.0% lower YoY to RM11.8m (9MFY18: RM16.6m). Activity this current period is still underpinned by The Apple, Amber Cove, The Dawn and Impression U-Thant projects, with no new launches in recent months, nor any planned in the near future given soft market conditions. Unbilled sales are a healthy RM399.7m, providing visibility for the next 2- 3 years at least.

Source: PublicInvest Research - 29 May 2019