Yoma Strategic Holdings - DBS Research 2016-11-09: An eye on the future

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YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings - An eye on the future

• 2Q17 results in line with estimates.
• Expected improvement in real estate buying sentiment to boost sales.
• Locking in gains by selling off non-core investments.

BUY, TP maintained at S$0.80. 

• We continue to like Yoma Strategic Holdings (Yoma) on the back of an improved operating outlook post elections 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.

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 transaction volumes going forward.

Spinning off non-core business to lock in gains. 

• Yoma has also announced the proposed spin-off of its tourism business including their flagship ‘Balloons over Bagan’, Pun Hlaing Lodge and Bagan land. The sale price of S$43.9m is c. S$5.9m over the book value as of September 2016. With proceeds of the sale, Yoma intends to focus its efforts in growing its core businesses of real estate, Automotive & Equipment and Consumer. 
• We have not removed earnings in our forecasts yet pending completion and approval of the deal. If delisted, we estimated close to 5% impact to forecasts. In addition, Yoma has exercised its option to sell its 12.5% stake in MTC for US$35m. 
• Yoma intends to hold on to its remaining 12.5% till the company achieves stability.

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.

Derek Tan DBS Vickers | Rachel Lih Rui Tan DBS Vickers | http://www.dbsvickers.com/ 2016-11-09

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.80 Same 0.80