Stock Highlights

Hospitality assets at prime location. Plenitude owns a number of prime hospitality assets, including Novotel KL, Ascott Gurney Penang, Holiday Villa Langkawi, and several Travelodge-managed hotels in popular tourist destinations such as Penang, Osaka, Kyoto, and Seoul. With the revival of the tourism industry post-COVID-19 pandemic, revenue from its hotel operation segment has nearly tripled in FY21-23, with even the most recent 9MFY24 financials still showing a strong 51% year-on-year growth. With that, the hotel operation business now contributes a substantial 39% of Plenitude’s revenue, which we believe will continue to grow stronger driven by better occupancy rates and higher room rates. We expect domestic tourism to remain robust amid the ongoing promotion efforts by the Malaysian Tourism Board, including the recent launch of the “Visit Malaysia 2026” initiative.

Owns sizeable landbank in Kedah and Johor. Plenitude’s property development arm, which contributes 60% of revenue, is also growing strongly with 76% year-onyear growth as of 9MFY24. Notably, the company owns a sizeable 1,127 acres of landbank that are mainly concentrated in Kedah (53%) and Johor (36%). With the property market in both states becoming more vibrant, this should augur well for Plenitude. Kedah is witnessing significant investment in the Kulim Hi-Tech Park, while Johor is benefiting from the establishment of a Special Economic Zone with Singapore as well as a recent surge in the development of data centres.

Undemanding valuation. Given the favourable outlook and strong earnings visibility for its hotel operation and property business, we see Plenitude’s current trailing P/E valuation of just 6.7x as undemanding (vis-à-vis FBM Small Cap Index P/E of 13.5x). We believe strong earnings delivery will help to re-rate valuation of the stock.

Re-visiting its 52-week high. The stock had been hovering in the range between RM0.70 to RM1.18, until the growing momentum led its share price to escalate and broke through the primary resistance of the double bottom pattern at RM1.18. Since then, the share price has continued to rise with minor consolidation seen after reaching its 52-week high recently. The share may revisit its 52-week high at RM1.75 if it breaks through the first resistance at RM1.60. Stop loss at RM1.40.

Source: Mercury Research - 15 Aug 2024