Yong Tai reported a net loss of RM5.6m for 1QFY22, extending its poor performance from the previous quarter, though the current one in review saw the full effects of the Full Movement Control Order (FMCO) and subsequently the early phases of the National Recovery Plan in which strict nationwide movement restrictions were imposed. As a result, development-related contributions were also hampered, weighing further on negative effects from the on-going closure of the Encore Melaka theatre which has now entered its 21st month. We keep estimates unchanged at this juncture, on expectation that stronger recovery in the tourism market in 2022 and significant headway made in its vaccine-related and gold-mining ventures will see the earnings shortfall narrowed significantly. We adjust our sum-of-parts derived target price to 16sen (from 24sen) on account of its recently announced fund raising exercise which is dilutive in nature. While there appears to be notable share price upside, we retain our Neutral call for now given the lack of near-term re rating catalysts.

• Property development revenue for 1QFY22 slumped 88.9% YoY to a meagre RM4.8m from RM43.3m a year ago due in large part to disruptions at work sites for all its on-going development projects. Profit recognition was consequently affected, resulting in a pretax loss of RM614,000. With most parts of the economy now fully re-opened and business activity resuming, the Group will place emphasis on completing all its on-going projects, as listed below:

• Encore Melaka remains closed. Pretax loss of RM4.9m was reported due to depreciation and amortization charges, as well as finance costs.

• The Group’s vaccine-related venture appears to be close to commercialization (by early-2022) as management has indicated progress in its Phase 3 trials, and the likely application to the National Pharmaceutical Regulatory Agency for approval. On its gold mining venture, the Group has resumed exploration works with production expected to commence in phases this FY22.

• Fund raising exercise. The Group recently announced the proposed issuance of new Redeemable Convertible Preference Shares (RCPS) amounting to RM180m (on a maximum scenario). Management expects the first sub-tranche to be issued in 1Q2022, barring circumstances.

Source: PublicInvest Research - 24 Nov 2021