Yong Tai Bhd (Oct 16, RM1.62)
Maintain buy with a target price (TP) of RM2.10: We understand that Yong Tai Bhd has recently received approval for a grant from the government which would be used to improve the infrastructure surrounding the Impression Melaka development.
The group has secured a 30-year concession to produce and stage the Impression Melaka concert after acquiring PTS Impression from PTS Properties, Datuk Wira Boo Kuang Loon and the Apple Impression for RM3 million. The group is building a 2,014-seat theatre costing RM300 million. Construction is expected to complete by the fourth quarter of 2017 (4Q17), with the inaugural performance to be held in 1Q18. The group expects to conservatively attract about 1.1 million in audience per annum (capacity is about 1.4 million), including tourists from China and Asean countries. There would be two to four shows daily with a duration of 70 to 90 minutes with ticket prices expected to average RM120 per person.
To reduce its working capital requirements, the group has entered into joint-venture agreements with landowners that own over 100 acres (40.47ha) of leasehold land surrounding the Impression Melaka theatre. The development, named Impression City, will eventually house a shopping mall, serviced residences, an office tower and retail shops. We believe the mall would be able to ride on the eventual success of the Impression Melaka shows, which are expected to attract over one million spectators per annum. The integrated development is expected to generate gross development value north of RM7 billion over a period of seven years. To date, Impression City has contributed about RM1.1 billion in sales, on the back of RM1.3 billion in launches.
We maintain our “buy” call and a TP of RM2.10, based on a 40% discount to its fully diluted sum-of-parts valuation of RM3.49 per share. — UOB Kay Hian, Oct 16
This article first appeared in The Edge Financial Daily, on Oct 17, 2017.