INTRODUCTION
Only World Group Holdings Berhad (OWG) was listed in Bursa Malaysia on 18 December 2014 with an Initial Public Offer (IPO) price of RM0.88. There was no fanfare back then as the share price opened below IPO price at RM0.71. However, it managed to close the day at RM0.915. The IPO had raised RM49.64 million in proceeds for the Group. Majority of the proceeds raised from the IPO will be utilised for the KOMTAR Revitalisation Project in Penang. The company intends to utilise RM30.00 million for the refurbishment of five (5) levels within the KOMTAR Tower in Penang and RM13.00 million for the setting-up of ten (10) new food service outlets and for the expansion of the Wet World Water Park Shah Alam in Selangor. The remaining balance of the IPO proceeds will be utilised for working capital purposes and listing expenses.
OWG's motto is "Fun, Food & Good Living" and honestly, i had no interest in the stock. Firstly, i did not like the business and secondly i did not like the name. The name OWG sounded a bit weird and it always cross my mind as "Oh My God" (OMG). My apologies, no bad intentions on my part.
OWG share price began to spike on February 2015, one month after the IPO listing. CIMB has on 15 February 2015 intiated coverage on OWG as a undervalued gem entitled "High-Growth Proxy To Genting" with a Target Price of RM2.62 from the share price of RM1.44 with an upside potential of 81.8%. OWG share price has been climbing ever since and at the time of writing it closed at RM2.83. CIMB has also revised the Target Price upwards many times being the latest revision on 17 December 2015. I am now very curious with OWG and I have signed up as a subscriber of OWG's newsletters.
CIMB RESEARCH – 17 December 2015
Only World Group Holdings
An RM8 stock when Komtar opens?
■ We visited Komtar for a progress update.
■ New target opening date: 1 Apr 16.
■ Our observation deck ticket pricing estimate is very conservative, with substantial
room for upside. Themed-attraction profits have also not been priced in.
■ We cut FY16 EPS by 10% for the delay in Komtar’s launch
■ Blue-skies target of RM8. We maintain our target price and Add rating, still based on
a CY17F P/E of 22.5x, the sector average.
Komtar update
We visited Komtar recently for a progress update on the state of launch-readiness. Our earlier expectation was for a launch in two phases – Dec 15 and Feb 16. It appears that this has now been changed to a single grand launch on 1 Apr 16 so that the project becomes a single coherent destination where all attractions and destinations are ready. As a result, we lower our FY16 EPS by 10% to account for the delay.
Construction milestones
OWG’s project director Kenny Yap took us on a tour of the site. Although Komtar will be launched on a single date, the various components are still targeted to be completed in two phases. In phase one (end-Jan 16), the themed attractions 1) I Love Penang gallery, 2) Doraemon, 3) Haunted House, 4) 5D Sea Explorer and 6) Playoke will be completed. In phase 2 (mid-Feb 16), 1) Jurassic Park, 2) Zodiac Park, 3) Mirror Maze, 4) Milliondollar Carousel and 7D Planetarium Dome will be ready.
Where is the upside?
Our current assumption of a blended ticket rate of RM15 (@1m visitors per annum) for the observation deck is conservative. Based on comparative pricing for tickets in KL Tower and Petronas Twin Towers, Komtar could potentially earn a blended ticket rate of RM40. This would lift our FY16-18 EPS forecasts by 11-46% and could raise our share price valuation to RM6.95.
Themed attractions not yet priced in
We have not imputed any revenue and profit contributions from the themed attractions at Komtar in our forecasts as ticket prices have not yet been finalised. Based on OWG’s historical ticket prices in Genting Highlands, an average RM30/ticket is not unreasonable. At pretax margin of 30%, the themed attractions division could lift FY16-18F EPS by 10-25% and could raise our share price valuation to RM6.03.
Komtar opening could lift OWG to RM8
If we include the upside potential both from higher ticket prices and the themed attractions, our FY16-18F EPS could rise by 16-71%, which could lift our share price valuation to RM8.00.
Risks
As with all construction projects, the biggest risk to our earnings projections is further delays in the launch of Komtar.
FINANCIAL SUMMARY
THE TOP @ KOMTAR PENANG
AMAZING SKY DINING
59 Sixty Dining Room & Lounge
Enjoy dining with a 360 degree view at the top of Penang. Experience the uniquely designed dining experience serving best-in-class menus.
Level 59 & 60
Dining Price
| Weekday Buffet Lunch: 12pm to 2:30pm |
RM88 nett |
| Daily Buffet Dinner: 6:30pm to 10pm |
RM168 nett |
| Daily Afternoon Tea: 3pm to 5pm |
RM68 nett for 2 pax [RM38 nett per pax] |
| Weekend Brunch / Public Holiday Brunch: 11:30am to 3:30pm |
RM98 nett |
TOP EVENT LOCATIONS
COMING SOON (TARGET OPENING DATE - APRIL 2016)
WORLD CLASS ATTRACTIONS
EXCLUSIVE SHOPPING DESTINATIONS
OBSERVATION DECK ( LEVEL 64 )
CONCLUSION
The opening of The Top @ Komtar Penang tantatively in April 2016 will be the 'cash cow' for OWG. Komtar will be the centre of attractions in The Pearl Of The Orient, offering World Class Theme Park, Observation Deck, Amazing Sky Dining, Top Event Locations and Exclusive Shopping Destinations. OWG says by May 2016, around 80% of various components should start to draw visitors and it expects to hit the 50% revenue growth for FY17. The first impact of earnings will be felt in 9Q 2016 when full 3 months contributions from Komtar (July 2016 to September 2016) is taken into account.
OWG currently operates 26 F&B outlets under the OWG stable of which 11 are in Genting Highlands. The company envisages that when The Top @ Komtar project is completed by May, the number of food outlets will rise to 37. In FY2015, OWG opened a fine dining restaurant on level 59 and an exclusive beverage outlet on level 60 of Komtar tower.
OWG's next catalyst of growth will be the opening of 20th Century Fox World (TCFW) theme park in Genting Highlands in 2017. The park would become the first TCFW theme park in the world and the first in Asia. TCFW is one of the key elements in the RM5 billion Genting Integrated Tourism Plan that spans 10 years and expects some 30 million visitors by 2020. The TCFW theme park will feature 25 rides and attractions based on hit movies like Alien Vs Predator, Ice Age Series, Planet Of The Apes, Rio, Night At The Meseum and Life Of Pi, along with themed restaurant and merchandise outlets.
CIMB Reseach expects the Top @ Komtar to provide further upside for OWG shares price with a Target Price of RM8.00
The ex date for OWG bonus shares on the basis of one (1) bonus share for every (5) is on 13 January 2016.
We can either buy the stocks now at RM2.83 per share & wait for another 3 months for the opening of The Top @ Komtar in April 2016 or we can wait for another 3 months, thereafter buy the stocks at double the current price. The choice is yours.
Happy investing.
TCFW - The Look Of The “Ice Age” Coaster @ Genting Highlands
Note : The comments above do not represent a recommendation to buy of sell.
OWG (5260) - ONLY WORLD GROUP (5260) - BUILDING TOWER OF GOLD
http://klse.i3investor.com/blogs/bursakakis/89487.jsp
