KUALA LUMPUR: The over 50% rise in Only World Group Holdings Bhd’s (OWG) share price since the end of January has raised eyebrows. 

Some dealers said the rally was triggered by the strong recommendation of a local investment bank, coupled with rumours that Genting group’s chief Tan Sri Lim Kok Thay has invested in the company.

OWG, a food service and amusement park operator, has its mainstay in managing the food and beverage (F&B) outlets in the Genting Highlands resorts. Its share price had risen from 87 sen on Jan 29 to RM1.31 yesterday, with a market capitalisation of RM242.4 million. Its net profit was only RM3.04 million in the first quarter ended Sept 30, 2014.

The company was listed on Bursa Malaysia late last year, at an initial public offer price of 88 sen per share.

When contacted, OWG executive director and general manager Kenny Ng Kuan Hua told The Edge Financial Daily that the management is not aware of rumours that Genting’s Lim has invested in the company.

“We are not aware of such news. But we have requested Tricor (share registrar and issuing house) to send us the shareholding list to find out who are buying our shares,” he said.

According to Ng, the 20th Century Fox Theme Park in Genting Highlands and Komtar, Penang, are largely on track, although there might be a slight delay of two months for the completion date for Komtar Tower.

OWG is expecting the expansion of the F&B outlets it manages in Genting Highlands to benefit from the increased number of visitors to the theme park, while the company will also gain new businesses by managing certain components in the refurbished Komtar.

Meanwhile, a dealer said a local investment bank has set a target price of RM2.30 or a market capitalisation of RM425.5 million for OWG, based on a 10 times earnings multiple on a net profit assumption of RM42 million two years down the road.

The much higher profit is premised on increased future revenues riding on the Fox theme park and the refurbishment of Komtar Tower, said the dealer, citing the note from the investment bank.

OWG’s share price had started surging after the note was sent out by the investment bank last Thursday, to its institutional clients.

Due to the closure of the Genting outdoor theme park in September 2013, OWG saw a decline in its financial year ended June 30, 2014 (FY14), earnings in line with the reduction in visitors to the Genting Highlands resort.

Net profit came in sharply lower at RM14.55 million on revenue of RM83.08 million, compared with RM20.11 million and RM88.87 million respectively in FY13.

Nevertheless, with the opening of the Fox theme park in 2017, analysts said OWG is poised to increase its F&B floor space by at least 10% while the traffic to Genting Highlands is expected to increase sharply, hence potentially bringing more revenue to the firm’s F&B operations there.

Besides, OWG is poised to see more earnings streams in 2016 from the revitalising of Komtar. The works to revitalise the tower is to be completed by the third quarter of this year, according to the management.

OWG will transform the highest five levels in the tower and rename them The Top, which will consist of high-end eateries, a souvenir centre and an observation deck.

Research houses have positive ratings on OWG. However, their target prices have already been surpassed.

According to a note dated Dec 4, 2014, Alliance Research valued OWG at RM1.10 per share, based on a 10% discount to the FTSE Bursa Malaysia Small Cap Index’s forward price-earnings multiple of 11 times.

Alliance said Komtar is expected to drive OWG’s earnings going forward, which could lift its earnings in FY16 significantly due to the roughly 130,000 sq ft of floor space it will be operating. 

OWG’s present food service operations only cover 50,000 sq ft, it said.

“Overall, we forecast Komtar to contribute about 33% to OWG’s FY16 top line, driving its year-on-year growth by about 60% and making up 27% of gross profit in the period.”

Meanwhile, MIDF Research valued OWG at RM1.20 in a note dated Dec 4, 2014, without giving it a rating. Based on its forecasts, the stock implies an FY15 price earnings of 9.4 times and 1.5 times price-to-book, according to MIDF Research.

MIDF Research said it expects OWG’s earnings to grow 62% in FY15F and 57% in FY16F driven by the food service outlet sector following its expansion plans.

This article first appeared in The Edge Financial Daily, on February 10, 2015.