Yong Tai Bhd
(Jan 21, 15.5 sen)
Raise to trading buy with an unchanged target price of 23 sen: Yong Tai Bhd announced overnight the planned development of an international cruise terminal at its Impression City development in Melaka Tengah, and also entering into of a memorandum of understanding with Singapore Cruise Centre Pte Ltd (SCC) for the latter to act as a terminal operations and management consultant. We are excited about this development, seeing this playing a significant part in turning around Encore Melaka’s prospects, having been plagued by lower-than-expected ticket sales.

The international cruise terminal will be built very near the Terra Square development, the latter comprising a linear mall, an outlet mall, a hotel and retail lots. With details such as cost and size, among others, of the cruise terminal still scant pending the definite agreements’ signing, clinching this international cruise terminal so near the Encore Melaka theatre is a coup for the group.

While potentially feeding footfall to the proposed mall development, the terminal will just as importantly be a potential channel of visitors to the theatre. With an annual capacity of about 1.4 million — with 2,000 seats x two shows per day x 365 days — Encore Melaka has underperformed in its first year of operations, with an estimated 120,000 people only walking through the turnstiles.

This in turn led to pre-tax losses of RM34.8 million, pummelling its share price from a high of RM1.75 as on Jan 8, 2018 to its recent all-time low of 13.5 sen. While it is still early days, we nonetheless believe the worst is likely behind Yong Tai and see this as marking the group’s long but certain trek back in regaining investors’ confidence.

SCC currently manages three ferry terminals — Tanah Merah, Pasir Panjang and Harbour Front, and an international cruise terminal, Harbour Front, in Singapore. With its vast experience, SCC has built very good rapports with cruise operators worldwide, a significant plus point in promoting the Impression City-Encore Melaka theatre to international and local tourists.

As consultation fee for its services, Yong Tai will pay SCC a one-time fee of S$120,000, with 30% of the sum being non-refundable and the remaining 70% subject to approvals by the transport and home affairs ministries as well as other relevant authorities. — PublicInvest Research, Jan 21