Yoma Strategic Holdings - DBS Research 2017-02-13: Look beyond the surface

Yoma Strategic Holdings - DBS Vickers 2017-02-13: Look beyond the surface YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings - Look beyond the surface

  • 3Q17 results hit by currency translation losses, mitigated by investment gains.
  • KFC opened four new stores in 3Q17.
  • Landmark approved by Myanmar Investment Commission (MIC).
  • Government to purchase 600 New Holland tractors.



BUY, TP maintained at S$0.80. 

  • We continue to like Yoma Strategic Holdings (Yoma) on the back of an improved operating outlook post the new government in Myanmar. 
  • We believe the consistent delivery of the group’s real estate sales, coupled with the continued scaling up of its operations for its non-real estate segments, will represent upside to earnings and TP.


9M17 net profit hit by currency translation losses, mitigated by investment gains. 

  • 9M17 net profit fell 60% y-o-y to S$11m on net currency translation losses of S$4m, mitigated by higher investments gains (17% y-o-y). 
  • Excluding currency losses, the estimated net profit fell 39% y-o-y to S$14m, 48% of our FY17 estimates. 
  • Key updates: 
    1. Yoma opened four new KFC stores in 3Q17, on track to meet FY17F target, 
    2. Landmark development has been approved by Myanmar Investment Commission (MIC), and 
    3. the government has chosen Yoma to facilitate the purchase of 600 New Holland tractors.


Revival of property sales post condominium law a catalyst for real estate. 

  • Management remains optimistic on the longer-term outlook for the real estate market in Yangon. 
  • Looking ahead, the establishment of the framework of the condominium law which promotes and facilitates foreign investment in Myanmar’s real estate market is expected to boost volumes going forward.


Valuation

  • Maintain BUY, TP maintained at S$0.80. 
  • We remain positive on the group's prospects and see it as a beneficiary of an improved economic outlook with the new Myanmar government.


Key Risks to Our View

  • Political and economic risk. Myanmar is still a developing country and its real estate and infrastructure sectors are in the nascent stage of the cycle. As such, continued supportive government policies on foreign investments are key to improving sentiment within the real estate space.




Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-02-13
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.800 Same 0.800



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