Yoma Strategic Holdings - CIMB Research 2016-05-19: A year boosted by one-off gains

YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings - A year boosted by one-off gains

FY3/16 headline net profit was boosted by a number of one-off gains, without which Yoma would have incurred losses.
Residence sales at Star City trailed our expectations and we expect delays in future project launches, resulting in a 21-47% cut in our FY17-18F EPS.
We expect non-property segment to continue to grow; however, the growth is unlikely to offset the potential miss in the property segment.

Lofty valuation at 1.33x FY16 P/BV vs. FY17-18F ROE of 2.8-4.4%; downgrade to Reduce from Hold, with an unchanged target price of S$0.45.

Yoma’s FY16 headline net profit rose 33% yoy to S$37m (US$27m, FY15: S$28m), only due to the significant one-off gains recognised during the year, including a S$36m revaluation gain on its 25% stake in a telecom tower development business and a S$13m revaluation gain on its investment properties.
Excluding all the one-off gains, Yoma would have incurred a core net loss of S$10.2m (FY15: S$8.6m gain).

Sales of residences and land development rights (LDRs) plunged 41% yoy in FY16 due mainly to the wait-and-see sentiment of buyers before and during Myanmar’s general election.
We note that sales progress at Star City was significantly behind our previous projection. We expect the inventory of over 900 residence units at Galaxy Towers (a.k.a. Star City Zone C) to take at least two years to be digested.

Non-property sales rose 167% yoy in FY16 on growth in Automotive, Tourism and F&B businesses. Despite the strong sales growth, the overall non-property segment has yet to be profitable.
It reported an operating loss of S$4m in FY16 (FY15: S$5.5m loss); this was due mainly to the start-up costs related to Agricultural and F&B businesses.
While we believe the non-property segment is on track for a turnaround as the businesses continue to grow, we expect their near-term profit contribution to be very limited.

In view of the considerable residence inventory outstanding at Galaxy Towers, we push back our assumptions for future project launches at Star City; this has resulted in a downward revision to our FY17-18F EPS by 21-47%.
While we are optimistic of a recovery in residence sales in FY17, the recovery has been reflected in our projected sales growth and the turnaround from the core net loss of FY16.

Due to the positive knee-jerk reaction to Myanmar’s peaceful power transition, Yoma’s share price has risen by 21% in the last three months.
In view its lofty valuation (1.33x FY16 P/BV against FY17-18F of ROE of 2.8-4.4%), we downgrade Yoma to Reduce from Hold with an unchanged target price of S$0.45 (40% discount to FY17 RNAV).
Key upside risk to our call is faster-than-expected residence sales.

Roy CHEN CIMB Securities | William TNG CFA CIMB Securities | http://research.itradecimb.com/ 2016-05-19

CIMB Securities SGX Stock Analyst Report REDUCE Downgrade HOLD 0.45 Same 0.45