Yong Tai’s low price “grossly unjustified” - AllianceDBS report

Impression Melaka, set to lure tourists, will be staged in 2017

KUALA LUMPUR: DBS Group Research is making a buy call on Yong Tai Bhd, envisioning long-term earnings visibility as the tourism-related property developer’s Impression City and Impression Melaka projects ride on the booming Chinese tourism.

“As the first Impression Series outside China, the Malacca Straits-fronting Impression Melaka is poised to be a resounding success by tapping into the booming Chinese tourism in Malaysia, which has seen an impressive 11% tourist arrivals CAGR (compound annual growth rate) over 2000-2016 (versus 1% for Malaysia’s overall tourist arrivals),” the report said.

The stock was trading at an undemanding nine times FY18 price-earnings, it said, calling this “grossly unjustified.”

The report, prepared by AllianceDBS Research, gave a 12-month price target of RM2.10. The counter closed unchanged at RM1.48 on Wednesday with 1.4 million shares done.

DBS Group Research said Impression Melaka - featuring a live, large-scale, cinematography show using light and sound technology - offered a compelling value proposition given its estimated 20% internal rate of return over the 30-year concession from Impression Wonders Art Development Co Ltd of China.

This would transform Yong Tai into an emerging cash cow with strong recurring income, it reckoned.

The report said that the Malacca property market was under-appreciated despite its “immense potential” as the target was not just confined to its 900,000 local population but also more than 16 million tourists that visited the World Heritage City annually. 

“Yong Tai’s impressive unbilled sales of RM990mil – anchored by en-bloc sales of 262 retail lot units in Impression City for RM873mil – will underpin strong earnings visibility strong earnings visibility over the next two years,” said DBS Group Research.

The report said Impression City’s attractive investment merit was under-appreciated by investors, and the official opening of Impression Melaka in February 2018 would be a major catalyst.

“Given Yong Tai’s unrivalled competitive advantages arising from its unique tourism appeal and synergistic property product offerings, it iss expected to deliver exponential earnings per share CAGR of 57% over FY16-FY19f,” AllianceDBS Research said.