UPDATE REPORT

OWG continues to face headwinds. Based on data through Jul 2019, tourist arrivals appear set to grow 3-4% for calendar year 2019, whilst the general level of spending on food and entertainment continues to decelerate in Malaysia. In spite of these headwinds, OWG sales rose 2.2% 1Q FY20 vs 1Q FY19. Margins remain subdued however, and we expect little improvement for the next quarter or two. Around the region, which is the source of most of Malaysia’s tourist arrivals, the economic outlook is turning progressively worse. It is possible that a weaker MYR and lower borrowing costs will boost profits a bit in the coming quarters

INVESTMENT RISKS

Risks to our recommendation and target price include: i) weaker consumer sentiment ii) lower growth in tourist arrivals, and iii) an increase in the general level of interest rates.

RECOMMENDATION

We maintain our HOLD recommendation on Only World Group Holdings Bhd (“OWG”) whilst maintaining our fair value estimate at MYR 0.51. The recreation part of OWG’s business continues to plod along, whilst the food retail business is not growing at a sufficient rate to counter the drop in recreation sales. There may be more pain ahead as operating profits are barely sufficient to cover finance costs. Investors may wish to wait for signs of a sustained turnaround in profits before buying; this may take a few more quarters.

COMPANY PROFILE

Only World Group Holdings Berhad (OWG) is engaged in the businesses of investment holding and provision of management services. It operates in three segments. The Food service operations segment operates central kitchen and food service outlets. The Amusement and recreation Operations segment operates water amusement parks and family attractions. The Other services segment is involved in the operation of various products and services and investment holding. Its subsidiaries include Believe It Or Not Sdn. Bhd., which is engaged in operation of family attractions and provision of other services; Dunia Setulin Sdn. Bhd., which is engaged in operation of food service outlets; K.C.K. Capital Sdn. Bhd., which is engaged in the operation of a main central kitchen; Kota Tinggi Resorts Sdn. Bhd., which is engaged in the operation of a resort and a food service outlet, and Magnificent Empire Sdn. Bhd., which is engaged in operation of food service outlets and provision of other services.

Source: Wilson & York Securities Research - 15 Nov 2019