D/G to SELL From HOLD; Cut TP to MYR0.18 (-45%)

4QFY19 net loss disappointed due to large impairments. Even excluding the impairments, we note that property progress billings have slowed due to liquidity concerns. While YTB assured us that its financial liquidity has improved, we still cut our FY20/FY21 net profit estimates by MYR4m MYR10m. Imputing also for the lower offer price for the new ordinary shares it intends to issue and ascribing a wider 50% discount (30% previously) to end-FY20E NTA/shr, we cut TP to MYR0.18 from MYR0.33.

Hit by Large Impairments

4QFY19 net loss of MYR62.9m took FY19 net loss to MYR79.3m, worse than we had expected of MYR20m due to MYR43m impairment of inventories and receivables in relation to Terra Square and MYR17m impairment of receivables arising from the textile business it disposed of in FY17. FY19 revenue of MYR100.4m (-23% YoY) was also significantly below our expectation at just 55% of our FY19 estimate, due to a marked deceleration in property progress billings in 4QFY19.

Major Equity Exercise Taking Longer Than Expected

We understand that the deceleration in property progress billings was due to liquidity concerns. In our opinion, it may take time to improve as its planned major equity exercise (link) was not taken up by parties who were originally scheduled to take up 300m of the 400m new shares. This was despite the offer price being cut to MYR0.23/shr from MYR0.36/shr. To date, YTB has issued 8.5m new shares. That said, YTB said it will be issuing more new shares to raise equity.

Cutting Earnings Estimates by MYR4m-10m

Although YTB stated that its financial liquidity improved after end-FY19, we cut our FY20/FY21 net profit estimates by MYR10m/MYR4m as it has not launched The Dawn Tower 2 (GDV: ~MYR115m). We now expect FY20 to fall into a loss at MYR6m (vs. MYR4m profit previously), and FY21 in a deeper loss of MYR15m (vs. MYR11m loss previously). We introduce FY22 net loss of MYR25m due to completion of AmberCove and The Dawn Tower 1. Imputing the lower offer price for the new shares, our end FY20E NTA/shr is cut to MYR0.35 from MYR0.47.

Source: Maybank Research - 28 Aug 2019