Only World Group sees a return to glory days

This article first appeared in The Edge Financial Daily, on December 29, 2017.
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GEORGE TOWN: Only World Group Holdings Bhd (OWG) is set to reverse four years of profit declines in the current financial year ending June 30, 2018 (FY18) as it races to open new food and beverage (F&B) outlets in Genting Highlands and Penang by Chinese New Year.

According to its chief operating officer and executive director Puan Sri Chew Lean Hong, the leisure and hospitality services provider expects to see significant revenue contribution from the new outlets in the fourth quarter of FY18.

“[With] the new outlets, coupled with the reopening of [14] outlets [at Genting Highlands] and the stabilisation of the indoor theme park operations at The Top at Komtar Tower in Penang, we should return to our glory days,” she told The Edge Financial Daily in an interview.

OWG’s net profit has declined since listing on Bursa Malaysia on Dec 18, 2014, from RM14.49 million in the financial year ended June 30, 2014 (FY14) to RM5.42 million in FY17. It attributed the decline to administrative costs and pre-opening costs for The Top.

The group’s net profit for FY17 also took a huge hit from the temporary closure of 14 outlets at First World Hotel in Genting Highlands in February this year due to the ongoing redevelopment and transformation of Resorts World Genting. Its earnings for FY17 more than halved from RM12.57 million the previous year.

On the other hand, the group’s revenue has registered a compound annual growth rate of 8.8% over the FY14-to-FY17 period, mainly contributed by its core businesses comprising food service operations, and amusement and recreation operations.

Nevertheless, early indicators look promising. The group saw net profit jump 64% to RM2.17 million in the first quarter of FY18 (1QFY18) from RM1.32 million a year ago, while revenue was up 6% to RM30.14 million as against RM28.47 million in 1QFY17.

Chew is confident that the group will deliver improved earnings going forward, noting that expansion works in Genting Highlands and Penang are nearly complete while cost-effective measures have been implemented.

OWG is building an integrated attraction zone on 70,000 sq ft of land called Ripley’s Believe It or Not Adventure Land within Resorts World Genting, following the closure of its previous site as part of the relocation and renovation works under the Genting Integrated Tourism Plan (GITP).

The group is also reopening its F&B outlets at the Sky Avenue mall, as well as a new food court at Genting Premium Outlets.

In total, OWG has estimated that total capital expenditure for its expansion plans in Genting Highlands should be in the range of RM45 million to RM50 million.

The Top, meanwhile, features attractions such as the Jurassic Research Centre, 7D Discovery Motion Theatre, D’Top observatory deck, Rainbow Skywalk, Tech Dome, Penang State Gallery, Durian The King of Fruit Museum, Escape Room, and retaurants and convention and function rooms, drawing in seasonal visitors and local groups.

“We only have the aquarium left to fit which should be done within one month. Once that is completed, The Top, including our restaurants and kiosks, will be fully operational by Chinese New Year,” said Chew.

She said The Top is popular among student groups and tourists and for corporate and association events.

“People are amazed by Komtar’s transformation, but we will do more hostings and invitations to show the place. We are reaching out to groups, associations, and hoteliers such as concierges.

“Our mission is to make The Top an international and domestic destination when you are in Penang. A visit to The Top is a must,” she said, adding that OWG is growing its business through organic growth.

Chew noted that The Top celebrated its one-year anniversary on Dec 18 and it is on track to hit its one million visitors per year target.

Despite the overall weak consumer sentiment, Chew said Malaysians are still taking their families out for holidays, particularly domestic travels to save cost.

“People may be thrifty in their spending and might not travel abroad, but they do not mind saving for this type of activity. That is why we offer options within the country for people to go somewhere nearby.

“There are not many [outlets] in Sky Avenue at the moment, but the place is packed and people are curious to see the progress. Once it is [fully] opened, I imagine the place would be packed like sardines,” she said.

The group plans to increase its marketing spend to 3% to 5% of its revenue from the current 2% to 3%.

“We haven’t been doing much marketing in the past as it was mostly done through online and face-to-face promotion where we invited groups to our attractions, particularly in Penang. However, we want to ramp up our marketing spend by allocating 3% to 5% for both locations,” said Chew.

Both Chew and her husband Tan Sri Koh Cheng Keong — the chief executive officer and managing director of OWG — have an indirect 52.35% stake in OWG through their private investment company Rich Dad Café Sdn Bhd.

Moving forward, the group looks to reduce up to 5% of its cost at Resorts World Genting by centralising its F&B kitchen operation as rentals have increased following the revamp of the resort under GITP.

“Our restaurant footprint is smaller now [and so we have] to keep the rentals at a manageable level. We don’t have the luxury of operating big kitchens.

“So, there would be a lot of pre-preparatory work at a central kitchen where there would be finished and semi-finished products delivered to the outlets whose kitchen size has shrunk to optimise the sitting area,” she said.

She expects revenue contribution to be equal from its food service and amusement and recreation operations, from the current 40:60 ratio, thanks to The Top’s contribution.

“If we can reach our target of [holding] 52 weekend events or 108 events a year at The Top, it would see our food service operation equalising if not more than the other segment. This can possibly happen in less than five years because our order book for the banquet hall is filling up,” she said.

With most of the expansion completed at the two locations, Chew said the group is looking at the possibility of expanding operations to other Asean countries.

“We are in various stages of preparation and studies in the country using the same business model but with different themes and contents. We hope to secure a new location in the next two years but I won’t say where yet,” she added.

OWG shares closed 2 sen or 1.74% lower at RM1.13 yesterday, bringing a market capitalisation of RM290.98 million.