Yoma Strategic - RHB Invest 2016-11-11: Best Proxy To Myanmar

YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic - Best Proxy To Myanmar

Yoma’s latest sale of a 12.5% stake in its telecoms tower JV with Axiata reflects a 250% gain on its original investment cost of USD20m which has grown to USD70m.
We continue to like the stock as a proxy to the burgeoning opportunities in Myanmar. The group has a strong and diversified business model and enjoys significant first mover advantage in its chosen fields.

Yoma Strategic (Yoma) reported 2QFY17 net profit of SGD8.5m, bringing its interim earnings to SGD10.1m. Broad-base growth was seen across its core businesses.
Real estate revenue grew 28% YoY to SGD15.3m on the back of higher unit sales at Pun Hlaing Golf Estate and higher rental income. However, the property market in Yangon remains slow as existing supply are being gradually taken up by buyers who prefer to sit on the side-lines awaiting greater clarity on the Condominium Law.

Yoma’s non-real estate businesses are ramping up steadily, with the KFC network growing to seven stores and a quarterly revenue run rate of SGD2.7m.
The automotive business saw continued YoY growth from both a higher fleet at its vehicle rental business and higher sales of agricultural tractors, notwithstanding supply issues at the manufacturer level.
We expect these new businesses to incur gestation losses as management puts in the infrastructure and associated overheads to sustain long-term growth.

Yoma plans to exercise its put option to sell 12.5%, or half of its stake, in its telecoms tower JV with Axiata (AXIATA MK, Neutral, TP: MYR5.20). The investment, which has grown 250% in value to USD70m over the past 2 years, should generate proceeds of USD35m from the partial sale.
Management is expected to re-deploy the finds into its core businesses.
Separately, the Group is spinning off its tourism assets, which includes the hot air balloon business Balloons over Bagan into a separate listed vehicle – SHC Capital, via a RTO exercise. The newco will have its own management team and a platform to raise capital independently for expansion.

We value the stock using the SOP approach to reflect the diverse nature of its businesses, using a revalued NAV approach to value its real estate and DCF to value its consumer business.
We have also applied a 10% conglomerate discount to our valuation.
Our TP of SGD0.78/share reflects an upside of 30%.

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-11

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