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Thursday, July 30, 2015

OWG rises as much as 6.12% as CIMB Research ups target price

KUALA LUMPUR (July 30): Shares of Only World Group Holdings Bhd (OWG) gained as much as 6.12% or 17 sen in the morning trade to RM2.95 today, after CIMB Research raised its target price for the stock to RM3.66 and remarked that it was positive on OWG’s recent acquisition of 60% in Escaperoom Holdings Sdn Bhd.

As at 2.36pm, OWG has pared some gains and was trading at RM2.91, up 13 sen or 4.68%, with 465,300 shares done. The current price gives it a market capitalisation of RM540.2 million.

The counter is one of the top gainers on Bursa Malaysia today. The stock has risen over three times from 87 sen on Jan 28 to its current price of RM2.91.

To recap, OWG announced it was buying a 60% stake in Escaperoom for RM5.4 million earlier this week. The acquisition comes with a guarantee profit of RM4 million for two financial years ending June 30, 2016 (FY16) and FY17.

In a research note dated July 28, CIMB Research said it has raised FY16-FY17 earnings per share (EPS) forecast by 1% to 2% to include profits from the Escape Room and raised its target price for OWG from RM3.60 to RM3.66.

“We view the acquisition positively as it is cheap and earnings-accretive (acquisition P/E of 4.5 times versus OWG’s FY16 P/E of 22.8 times),” it said.

CIMB Research said the acquisition also opens the doorway to mega expansion opportunities in Genting’s properties, globally.

The research house added that re-rating catalysts are OWG’s successful opening of Komtar by year-end and the announcement of light railway transit (LRT) track from Penang airport to Komtar.

CIMB Research suggests investors to continue to accumulate shares in OWG as the stock remains one of its high-conviction small cap picks, locally.

“We continue to believe that over the next 2 to 3 years, OWG will be a multi-bagger, up to RM8.67 per share (raised by another 67 sen since our last note with the addition of potential earnings from Escape Room’s expansion), with various events and earnings catalysts that will continue to re-rate the stock,” it said.

Meanwhile, in an interview with The Edge TV yesterday, OWG executive director Datin Jean Koh said she believes the share price of the company should be able to be maintained at the current level.

She was of the opinion that the share price rally was mostly based on market sentiment as people are aware of the Komtar project, which is expected to start operating by November, and saw earnings potential from it.

“With the number of attractions and the way we are going to market it, we expect Komtar [project] to contribute in a big way to the group’s earnings,” she added.

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