Investment Highlights

• Only World Group's (OWG) FSO segment disappointed as its Genting replacement assets gestate slower-thanexpected. Maintain HOLD recommendation with a fair value of RM1.53/share based on a PE of 16.5x FY19F EPS, which is close to the average of its peers.

• OWG’s 2QFY18 earnings were RM2.6mil (QoQ: 17.5%, YoY: -5.7%). This brought its full-year core earnings to RM4.7mil (YoY: 17%), in line with our estimates.

• No dividend was declared as expected.

• The Top@Komtar 1QFY18 performance has been sustained heading into 2QFY18. Amusement and recreation segmental revenue grew 75% YoY for the quarter, contributing to 86% cumulative growth YoY. We are encouraged by the performance given it coincided with the Penang flash floods as well. Launched in Dec 2016, with better monetisation efforts of foot traffic has bumped EBIT margins to 72% (vs. 2QFY17: 47%).

• The Top@Komtar should see another bump in performance heading into 2HFY18 with its elite social club, The Tower Club. We gather from management that OWG is in the midst of membership sourcing and making it more affordable through longer term financing of its RM18k membership fee.

• Meanwhile, the food services outlet (FSO) segment came in softer than expected. Quarterly revenue shrunk 34% due to the temporary closure of 14 outlets at First World Hotel, Genting Highlands since Jan 2017. However, the key driver for the segment, food court at Genting Premium Outlet and FSOs in Sky Avenue were not quite as profitable as we expected. Going forward, the Top@Komtar FSOs could prove supportive as OWG optimizes its monetization efforts.

• OWG’s other services segment which includes close to 10 varied entertainment outlets such as Escape room and Starship Galactica at 1Utama Shopping Mall saw losses enlarge to -RM7.2mil from -RM4.7mil in the previous quarter.

• We maintain our forecasts as earnings are in line. Key risks to OWG include a decline in visitor footfall at both its key related attractions, Komtar and Genting Highlands and a delay in the opening of Twentieth Century Fox World theme park in Genting.

Source: AmInvest Research - 14 Feb 2018