Investment Highlights

• Only World Group’s (OWG) FY18 earnings remain underwhelming. We are keeping our HOLD recommendation with a lower fair value of RM1.01/share (from RM1.39/share). We have trimmed our earnings for FY19 and FY20 by 28% and 19%, respectively as we factor in lower margin assumptions. Our FV is based on a PE of 16.5x EPS.

• While we like OWG for its exciting growth prospects and consumer-driven theme, the uncertainty surrounding the actualization of the Twentieth Century Fox World theme park that is expected to improve visitor numbers clouds its earnings visibility. Key risks to OWG include a decline in visitors and a delay in the opening of the Twentieth Century Fox World theme park in Genting.

• OWG posted 4QFY18 earnings of RM0.31mil (QoQ: -77%; YoY: 13%), bringing FY18 earnings to RM6.4mil (YoY: 17%). The results are below our and consensus expectations at 55% and 58% of full-year estimates respectively.

• No dividend was declared as expected.

• Topline for the quarter grew 7.2% QoQ due to the fullquarter impact from the opening of 4 new family attractions at SkyAvenue, Genting Highlands and 2 new family attractions at the TOP, KOMTAR Tower, Penang. OWG also rolled out promotional initiatives in line with school holidays and promotional pricing in tandem with the abolishment of the GST.

• FY18 revenue grew by 13% YoY due to the full-year impact from the new family attractions at the TOP, Komtar as well as the commencement of new retails outlets at SkyAvenue, Genting Highlands. However, this was partially offset by a 30% YoY contraction in the food service outlets (FSOs) revenue which was caused by the closure of FSOs at First World Plaza, Genting Highland in tandem with the ongoing Genting Integrated Tourism Plan (GITP).

• FY18 PBT margin improved marginally by 0.7ppt YoY as PBT surged 25.7% driven mainly by its amusement and recreation operation segment’s earnings which more than doubled. However, this was offset by an earnings contraction of circa 84% for its FSO segment due to high overhead costs on the segment’s lower revenue.

Source: AmInvest Research - 28 Aug 2018