“This would be underpinned by the Impression City project, which would see a potential total gross development value (GDV) rise to RM6.1bil from RM164mil currently,” it said.
The research house said this ought to keep the group busy for the next eight to 10 years. Impression Melaka, it added, offers a further upside to both earnings and valuations.
“We estimate a valuation range of RM1.03 to RM1.18,” it said as it initiated coverage.
RHB Research said in line with the group’s overall expansion plan into the property sector, Yong Tai has announced several proposals.
They are the RM37mil acquisition of a 17 acre plot in Melaka (Impression Land) for the development of a theatre to produce the Impression Melaka as well as the acquisition of PTS Impression (to hold a 30-year license to stage the show) for RM3mil. It also has a joint venture to develop 100 acres of land adjacent to the Impression Land.
The company is also undertaking a fund-raising exercise to raise more than RM300mil.
“The proposals are expected to be completed/take effect by 1HFY17 (June),” it said.
RHB Research said Impression Melaka, which is the first of its kind outside China, is a live cinematography show that utilises the latest light and sound technologies, modern art concepts and cultural performers.
This is to be the first live largescale Impression Series outside of China and is one of the “entry point project” within the National Key Economic Area (NKEA) initiative for the tourism sector. The performing arts centre is estimated to cost RM300mil, with completion targeted for end-2017.
“Management expects Impression Melaka to contribute RM50mil to RM60milper annum in bottomline thereafter,” it said.
The research house said Impression City is expected to contribute RM5.4bil to total GDV. Concurrent with the construction of the theatre for Impression Melaka, Yong Tai is to develop the land adjacent to it (the development collectively known as Impression City).
The mixed development project includes residential, commercial and retail units. The total GDV over an eight to 10 years period is estimated to be RM5.4bil.
“Management believes the Impression Melaka project would spur the growth of tourism and related industries such as real estate, hotels and eateries, that is catalysts for Impression City.
“We project for Yong Tai to turn around and post a net profit of RM14mil in FY17, accelerating to RM64mil in FY18. This is underpinned by the progress of its property projects. Our forecasts do not factor in the contribution from Impression Melaka, which we have pushed to FY19.
“We derive an indicative valuation estimate range of RM1.03 to RM1.18 (fully diluted) based on SOP. The low end of our valuation range excludes Impression Melaka while, for its property development business, we have ascribed a 40% discount to its RNAV.
“The top end of our valuation range incorporates the show, where we estimate the business to be worth RM107mil based on DCF. We see upside to our valuation for Impression Melaka as execution risks ease. Our indicative valuation estimate range implies an FY18F P/E of seven to eight times (10.6 to 12 times, fully diluted),” it said.