Only World Group Holdings Bhd
(July 29, 69 sen)
Maintain hold with a higher fair value (FV) of 71 sen: In view of the news of Genting Malaysia Bhd’s settlement with Twenty-First Century Fox Inc (Fox), we have increased our financial year 2021 (FY21) earnings forecasts for Only World Group Holdings Bhd (OWG) by 21% as we anticipate higher foot traffic for its Genting operations, spurred by the anticipated opening of Genting’s outdoor theme park. However, we have cut our earnings forecasts for FY19 from a core net profit of RM2.9 million (after excluding a one-off tax allowance gain of RM12.6 million) to a loss of RM5.4 million as we account for a loss of RM5.7 million for the third quarter of FY19 mainly on the back of a lower business volume for The Top, Komtar Tower operations.

 
We maintain our “hold” call with a higher FV of 71 sen (56 sen previously) after rolling forward our valuation period to FY21 from FY20. Our FV is based on a price-earnings ratio of 16.5 times earnings per share.

Genting Malaysia announced recently that the group had entered into a settlement agreement with 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 utilise both Fox and non-Fox intellectual properties. We believe the settlement has reduced the uncertainty over the direction of the outdoor theme park. This bodes well for OWG.

In light of the news, we have revised our estimated spend per outlet and operating margins for OWG’s Genting operations. OWG is currently operating over 20 food service outlets and more than 15 family attractions in Genting, making up about 40% of its bottom line.

However, we have reduced our estimates of contributions from OWG’s The Top, Komtar Tower operations as we anticipate lower tourist arrivals and higher fixed costs due to the asset-heavy nature of the business.

Key upside risks to OWG include an increase in visitors for The Top, Komtar Tower operations, rise in foreign tourists and faster-than-expected opening of the outdoor theme park. — AmInvestment Bank, July 29