OWG (5260) - Only World Group Holdings - I love Penang
Target RM3.02 (Stock Rating: ADD)
In a recent group meeting that we organised between fund managers and OWG’s management, we learnt that Komtar would be a themed attractions-based destination. Its NLA has doubled and the space will be fully taken up by end-15. We raise our FY06/16-17 EPS forecasts by 12-18% to reflect higher rental revenue from the Komtar space and higher projected revenue from the observation deck on level 64. Our target price is raised to RM3.02, still based on 19x CY16 P/E (20% discount to the F&B sector target P/E). We maintain our Add rating. Further upside could come from 1) F&B revenue at Komtar, 2) ticket sales for the new attractions at Komtar, and 3) additional space in Genting.
What Happened
The focus of the meeting centred on updates at Komtar. We gathered that the original 60k sq ft of NLA at Komtar has doubled and the space will be fully taken up by end-15. The extra space will come from an additional floor (level 66) and new spaces on levels 3, 4, 5 and 6. Komtar will be modelled along a themed attractions-based concept; a popular Japanese manga park and prehistoric attractions will be built. Management is also bullish on the potential for the tourist observation deck on level 64, targeting 1m visitors within the first year.
What We Think
We are confident that the Komtar revitalisation project will be a success. As a tourist destination offering themed attractions, a high-rise observation deck and a sky bar/dining under a single roof, Komtar will be another captive market business in addition to Genting Highlands, we believe. Penang averages 5m-6m in tourist arrivals annually (local and foreign). With the help of the Penang state tourism board in promoting Komtar, we believe that management’s target of 1m visitors is conservative and achievable. We raise our observation deck visitor estimate from 600k to 1m at unchanged blended revenue of RM15/visitor, which is conservative as management expects to price the tickets at a higher rate. In the longer term, Penang’s LRT and cable car projects will further drive tourist traffic to Penang and, by extension, Komtar.
What You Should Do
Remain invested in the stock. Our forecasts remain conservative as we have not factored in profit contribution from 1) its own F&B outlets in Komtar (levels 5, 59 and 60), 2) higher blended ticket rates for level 64, 3) revenue from the themed attractions at Komtar, and 4) additional F&B revenue in Genting.
Source: CIMB Daybreak - 22 April 2015
Target RM3.02 (Stock Rating: ADD)
In a recent group meeting that we organised between fund managers and OWG’s management, we learnt that Komtar would be a themed attractions-based destination. Its NLA has doubled and the space will be fully taken up by end-15. We raise our FY06/16-17 EPS forecasts by 12-18% to reflect higher rental revenue from the Komtar space and higher projected revenue from the observation deck on level 64. Our target price is raised to RM3.02, still based on 19x CY16 P/E (20% discount to the F&B sector target P/E). We maintain our Add rating. Further upside could come from 1) F&B revenue at Komtar, 2) ticket sales for the new attractions at Komtar, and 3) additional space in Genting.
What Happened
The focus of the meeting centred on updates at Komtar. We gathered that the original 60k sq ft of NLA at Komtar has doubled and the space will be fully taken up by end-15. The extra space will come from an additional floor (level 66) and new spaces on levels 3, 4, 5 and 6. Komtar will be modelled along a themed attractions-based concept; a popular Japanese manga park and prehistoric attractions will be built. Management is also bullish on the potential for the tourist observation deck on level 64, targeting 1m visitors within the first year.
What We Think
We are confident that the Komtar revitalisation project will be a success. As a tourist destination offering themed attractions, a high-rise observation deck and a sky bar/dining under a single roof, Komtar will be another captive market business in addition to Genting Highlands, we believe. Penang averages 5m-6m in tourist arrivals annually (local and foreign). With the help of the Penang state tourism board in promoting Komtar, we believe that management’s target of 1m visitors is conservative and achievable. We raise our observation deck visitor estimate from 600k to 1m at unchanged blended revenue of RM15/visitor, which is conservative as management expects to price the tickets at a higher rate. In the longer term, Penang’s LRT and cable car projects will further drive tourist traffic to Penang and, by extension, Komtar.
What You Should Do
Remain invested in the stock. Our forecasts remain conservative as we have not factored in profit contribution from 1) its own F&B outlets in Komtar (levels 5, 59 and 60), 2) higher blended ticket rates for level 64, 3) revenue from the themed attractions at Komtar, and 4) additional F&B revenue in Genting.
Source: CIMB Daybreak - 22 April 2015
