Yoma Strategic Holdings - OCBC Investment 2016-09-09: Appointed exclusive distributor for JCB

Yoma Strategic Holdings - OCBC Investment 2016-09-09: Appointed exclusive distributor for JCB YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings - Appointed exclusive distributor for JCB

  • Construction CAGR at 10.4% to 2020.
  • Acquired remaining interests in BOB.
  • Will restructure tourism platform.

Exclusive distribution rights for JCB construction and heavy equipment 

  • Yoma reported yesterday evening that its subsidiary, Convenience Prosperity Company Ltd (CPCL) has been appointed by J C Bamford Excavators Ltd (JCB) as the exclusive distributor for the Myanmar market. JCB is the third largest manufacturer of construction equipment in the world. 
  • Yoma indicates that infrastructure and construction activities are accelerating across the country and this distribution agreement with JCB will complement their offerings in the group’s automotive and equipment division. The construction industry represents one of the most attractive sectors for investment in Myanmar ahead, with a recent report by Timetric Construction Intelligence Center showing that the country’s construction sector is expected to grow from US$8.2b in 2015 to US$13.5bn in 2020 - an annual growth rate of 10.4%. 
  • CPCL is also the distributor for Case New Holland, an agriculture equipment brand, and already has 11 branches in Myanmar. This is expected to grow to 14 by Dec 2016.

Acquiring remaining interest in Balloons over Bagan business 

  • The group also reported that it has acquired the remaining 25% interests in its Balloons over Bagan (BOB) business through its 70% owned subsidiary, Chindwin Holdings Pte Ltd (CHPL). 
  • After the acquisition, Yoma’s effective interest in BOB will increase from 52.5% to 70.0%. The acquisition cost will comprise US$1.5m (funded by CHPL’s internal resources), termination of a call option to acquire a 21.2 acre hotel land site in Bagan, the transfer of a 75% interest in Eastern Safaris Pte Ltd, and we understand CHPL will also write off all expenses incurred for the proposed Bagan hotel. 
  • Yoma intends to restructure its tourism business and will spin off its tourism assets into a new company with dedicated management and partner with other tourism players in Myanmar. This move is expected to drive commercial and costs synergies. 
  • We update our model with our latest assumptions, including firmer valuations for the Landmark development, and our fair value estimate increases marginally from S$0.49 to S$0.54
  • Maintain HOLD.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2016-09-09
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.54 Up 0.490