Yoma Strategic - RHB Invest 2016-05-31: Multiple Engines of Growth

Yoma Strategic - RHB Invest 2016-05-31: Multiple Engines of Growth YOMA STRATEGIC HOLDINGS LTD Z59.SI 

Yoma Strategic - Multiple Engines of Growth

  • We initiate coverage on Yoma Strategic (Yoma) with a BUY and TP of SGD0.78 (50% upside)
  • Yoma offers investors the best proxy to invest in Myanmar, in our view, with a strong and diversified business model. 
  • The group is a key beneficiary of the rapid urbanisation trend in the country, with its strong foothold in the real estate sector through its township projects. 
  • Yoma also offers optionality from the upside of its non-real estate businesses, which are fast-growing and not well appreciated by the market due to gestation losses, in our view.

Focused strategy. 

  • With a conglomerate strategy, Yoma aims to build a portfolio of businesses in Myanmar, focusing on those that are scalable and which the group has the potential to turn into market leaders. The group aims to record balanced contributions from its real estate and non-real estate segments by 2020. 
  • Having gone through 1-2 years of gestation, its automotive and consumer segments now form the second and third legs of its core business platforms, with a strong contribution of 40% to its total topline in FY16.

Property sales recovery leads the way. 

  • Yoma’s real estate interests are defined by its two township projects. In Thanlyin, the group owns a 135-acre development called Star City that is slated to yield 10,000 apartments and 1.7m sq ft of commercial area when fully developed. Pun Hlaing Golf Estate (PHGE) targets a more upscale segment, with landscaped houses within a gated community and has a remaining landbank of 6.0m sq ft. Following a lull last year due to the general election, we expect a more active launch pipeline across both projects to drive a 13% sales CAGR that is projected over FY17-19.
  • Yoma has also obtained the lease extensions on its downtown project in Yangon, the Landmark – and this enables it to begin development works.

Non-property businesses ramping up rapidly. 

  • Contributions from the non-property businesses are ramping up fast, thanks to the rapid expansion of its KFC store network as well as solid contributions from its automotive leasing and agricultural equipment units. 
  • We expect a 48% sales CAGR for the automotive division over FY17-19, and accounting 40% of group sales by FY19. In its telecoms tower company JV with Axiata (AXIATA MK, NEUTRAL, TP: MYR5.70), it booked a gain of SGD36m, and we expect this quantum of gains to be sustained over the next few years on the back of steady EBITDA growth from a larger installed base of towers.

Initiate coverage with BUY and a SOP-based TP of SGD0.78. 

  • We value the stock using the SOP approach to better reflect the diverse nature of its businesses. In the near term, the property segment remains the key driver of profits and asset values. 
  • We have not factored in any upside from the redevelopment of the Landmark, pending further details. 
  • Risks to our call include a sustained depreciation of the Myanmar kyat (MMK) due to political or macro-economic uncertainty, and the stability of the legal framework.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-31
RHB Invest SGX Stock Analyst Report BUY Initiate BUY 0.78 Same 0.78