Investment Highlights

• Only World Group Holdings (OWG) entered into a Heads of Agreements (HOA) with Animation Theme Park S/B (ATP). It is to facilitate the potential management of Movie Animation Park Studios (MAPS) theme park in Ipoh, Perak by OWG.

• MAPS is touted to be the first animation theme park in Asia, with content from the likes of DreamWorks Animation. The theme park saw a soft launch in June 2017.

• ATP is the developer and owner of MAPS. In turn, ATP is a 51% subsidiary of Perak Corporation Bhd. The remainder is owned by RSG MAPS S/B.

• Both parties look to finalise the agreement within the next 3 months.

• The agreement would see OWG utilise its deep industry knowledge, experience and expertise to manage MAPS. There is no capex outlay or financial requirement by OWG in managing the completed MAPS theme park.

• In return, OWG shall receive a management fee, which we gather is a function of revenue. It is to our understanding that typical industry management fee averages between 2% and 5%.

• Based on media reports and management, we gather that the EBITDA and PAT breakeven are RM75mil and RM130mil respectively. However, taking into account of the visitor traffic to the comparable neighbouring theme park attraction, Lost World of Tambun (1.1mil visitors annually) and MAPS’ average spend per visitor (RM85), MAPS could command RM90–100mil in revenue a year (refer Exhibits 1 and 2). It may take a few years for MAPS to gestate and mature to achieve Lost World of Tambun’s foot traffic, which has been operational since 2004.

• Assuming the lower end range of the industry average (2%) against a top line of RM95mil, we estimate this translates up to a +2–3% impact to FY19F earnings. While positive, we deem it immaterial for the near term and leave our earnings forecasts unchanged accordingly.

• While we like OWG’s potential explosive growth tied to Genting Integrated Tourism Plan, we prefer for greater clarity over its attractions unfolding going into FY19 before we consider a rerating. We maintain our HOLD recommendation on OWG with a higher fair value of RM1.53/share (from RM1.24/share) as we roll over our valuations to FY19 from CY18. Valuations are pegged to a target PE of 16.5x, the average of its peers.

Source: AmInvest Research - 25 Jan 2018