Wednesday 01 Jan 2025
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This article first appeared in The Edge Financial Daily on July 10, 2017 - July 16, 2017

Only World Group Holdings Bhd
(July 7, RM1.70)
Initiate hold with a fair value (FV) of RM1.66:
Our FV is based on a price-earnings ratio (PER) of 16.5 times on calendar year 2018 earnings per share, which is close to the average of its peers.

Only World Group Holdings Bhd’s (OWG) PER-to-growth of 0.6 times suggests value relative to its peers (1.5 times). However, we prefer greater clarity over top-line and bottom-line growth as its attractions unfold going into the financial year ending June 30, 2018 (FY18) before we consider a rerating.

OWG’s Komtar project is firmly entrenched in the heart of Penang, conveniently located within the vicinity of large captive tourist hotspots. It offers an integrated entertainment attraction for families, including a complete ecosystem of food and beverage and retail stores. 

Aside from channelling traffic from tour agencies, management looks to optimise its pricing strategy to maximise receipts. We are excited as it addresses what we perceive to be affordability issues. We forecast OWG’s Komtar revenue to grow exponentially over FY17 to FY19 in tandem with the gestation period of The Top@Komtar. 

Genting Malaysia Bhd’s RM10.4 billion investment in its Genting Integrated Tourism Plan (GITP) is expected to drive OWG’s Genting operations to new heights. We expect OWG’s expansion to peak in tandem with GITP’s cornerstone development, 20th Century Fox World theme park. 

Leveraging its experience operating in Genting, we expect increased OWG-operated family attractions and food service outlets, and additional visitor volume to drive its top line going forward. 

We expect OWG’s aggressive expansion phase to tail off by FY19, before a step change in revenue growth emerges. We do not expect any dividend payouts as OWG undergoes an aggressive expansion phase. Meanwhile, gearing remains elevated. We opine OWG may pursue further fundraising to cushion its balance sheet as its assets gestate over the incoming years. 

Key risks to OWG include a decline in international tourists, heightened competition in Genting and execution issues. — AmInvestment Bank, July 7
 

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