In view of the news in respect to Genting Malaysia’s settlement with Twenty First Century Fox Inc (21st Century Fox), we increase FY21F earnings forecast for Only World Group (OWG) by 21% as we anticipate higher foot traffic in its Genting operations spurred by the anticipated opening of Genting’s outdoor theme park. However, we cut our earnings forecasts for FY19F from a core net profit of RM2.9mil (after excluding one-off tax allowance gain of RM12.6mil) to a loss of RM5.4mil as we account for the loss of RM5.7mil in 3QFY19 mainly on the back of lower business volume in its The Top, Komtar Tower operations.
We maintain our HOLD call with a higher fair value of RM0.71 (RM0.56 previously) after rolling forward our valuation period to FY21F from FY20F. Our FV is based on a PE of 16.5x EPS.
Genting Malaysia announced that the group has entered into a settlement agreement with 21st Century Fox and The Walt Disney Company. As part of the settlement terms, Genting Malaysia was granted a licence to use certain Fox intellectual properties.
Genting Malaysia’s outdoor theme park will utilize both Fox and non-Fox intellectual properties. We believe that the settlement has reduced the uncertainty over the direction of the outdoor theme park. This bodes well for Only World Group (OWG).
In light of the news, we have revised our estimated spend per outlet and operating margins for OWG’s Genting operations as we anticipate higher foot traffic upon the completion of the outdoor theme park. OWG is currently operating over 20 food service outlets (FSO) and more than 15 family attractions in Genting, making up circa 40% of its bottom line.
However, we reduce the estimated contribution from OWG’s The Top, Komtar Tower operations as we anticipate continued lower business volume on the back of lower tourist arrivals in Malaysia, and higher fixed costs due to the asset-heavy nature of the business. Recall in 3QFY19, OWG incurred a RM5.7mil core net loss mainly dragged by The Top, Komtar Tower operations.
Key upside risks to OWG include increase in visitors in The Top, Komtar, rise in foreign tourists and faster-thanexpected opening of the outdoor theme park in Genting.
Source: AmInvest Research - 29 Jul 2019