AmInvestment Bank starts coverage of Only World Group with ‘hold’

PETALING JAYA: AmInvestment Bank has initiated coverage on lifestyle and food & beverage operator Only World Group Holdings Bhd (OWG), with a “hold” recommendation and a fair value of RM1.66 a share.

OWG operators include Starship Galatica in 1Utama, Petaling Jaya; The TOP@Komtar, Penang; Kota Tinggi Waterfalls in Kota Tinggi, Johor; as well food and beverage outlets such as OnlyMee and Babajia at Genting Highlands.

OWG shares were unchanged at RM1.70 last Friday on 500,300 units traded. Its market capitalisation stood at RM412.9 million.

In a note last Friday, AmInvestment analyst Philip Wong said the research house’s fair value is based on a price-to-earnings (PE) ratio of 16.5 times on CY18F earnings per share, which is close to the average of its peers. “OWG’s PE-to-growth of 0.6 times suggests value relative to its peers (1.5 times).”

However, the research house is looking for greater clarity over top line and bottom line growth, as its attractions unfold going into FY18, before it considers a re-rating.

AmInvestment forecasts the group’s Komtar revenue to grow exponentially over FY17-FY19 in tandem with the gestation period of The Top@Komtar.

Its Komtar project is firmly entrenched in the heart of Penang, conveniently located within the vicinity of large captive tourist hotspots, offering an integrated entertainment attraction for families, including a complete ecosystem of food & 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,” Wong noted.

In addition, he highlighted that Genting Malaysia’s RM10.4 billion investment in its Genting Integrated Tourism Plan (GITP) is expected to drive OWG’s Genting operations to new heights.

OWG’s expansion is expected to peak in tandem with GITP’s cornerstone development, Twentieth Century Fox World Theme Park.

Leveraging on its experience operating in Genting, Wong expects 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 FY19F, before a step change in revenue growth emerges.”

Nevertheless, Wong does not expects any dividend payouts as the group undergoes an aggressive expansion phase, while its gearing remains elevated.

“We opine OWG may pursue further fund raising to cushion its balance sheet as its assets gestate over the incoming years,” he said.

The key risks to OWG include decline in international tourists, heightened competition in Genting and execution issues.