Yong Tai seen as ‘best proxy’ to Chinese tourism

PETALING JAYA: Yong Tai Bhd remains the “best proxy” to booming Chinese tourism as Chinese tourist arrivals continue to chalk in new highs in recent years, according to Alliance DBS Research.

The group’s Malacca Straits-fronting Encore Melaka is poised to be a “resounding success”, tapping into the booming Chinese tourism in Malaysia which has seen an impressive tourist arrivals with compound annual growth rate (CAGR) of 10.2% over 2008 to 2017, compared to 1.8% for Malaysia’s overall tourist arrivals, making it the third largest tourist source market, the research house said.

In July, Yong Tai sold 32,400 tickets, which was short of its monthly target of 85,000, based on one million annual ticket sales.

However, the ticketing sales in July mainly comprised walk-in customers and online purchases, which accounted for 57% of the total sales.

The off-take agreement for one million tickets by six travel agencies have yet to come in, and they are expected to contribute strongly to the ticketing sales from late September onwards, in tandem with the holiday season in some of the key Asian markets.

“Encore Melaka offers a compelling value proposition with an estimated 20% internal rate of return (IRR) over the 30-year concession.

“This will transform Yong Tai into an emerging cash cow with strong recurring income,” said Alliance DBS Research.

The research house added that there is “immense potential” in the Melaka property market, which is targeting not just its 900,000 local population but also 16 million tourists that visit the World Heritage City annually.

Yong Tai’s strong unbilled sales of RM1.08bil will underpin strong earnings visibility over the next two years, it said.

Yong Tai’s share price plunged recently by as much as 23% since the announcement of its proposed acceleration of the conversion of the irredeemable convertible preference shares (ICPS) on Aug 1, 2018.