Yoma Strategic - RHB Invest 2017-01-03: Revving Up The Growth Engines

YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic - Revving Up The Growth Engines

Yoma Strategic (Yoma) offers investors the best proxy to invest in Myanmar, in our view, with a strong and diversified business model. It is focused on scaling up its core businesses in real estate, consumer and automotive equipment and has a good track record of capital allocation.
We expect the group to be a key beneficiary of the rapid urbanisation trend in Myanmar, with its strong foothold in the real estate sector.

Catalysts include bolt-on acquisitions within its core businesses, further restructuring of its non- core assets and the turnaround of non-real estate businesses.

Yoma Strategic’s (Yoma) real estate interests are defined by its two township projects and the Landmark mixed development in downtown Yangon.
Yoma’s 135-acre Star City township project, when fully developed, is slated to yield 10,000 apartments and 1.7m sq ft of commercial area. Pun Hlaing Golf Estate targets a more upscale segment, with landscaped houses within a gated community with a landbank of 6m sq ft.
Following a lull due to the general election last year, sales have picked up (+26% YoY in 2Q17 (Mar) to SGD9.9m) due to a more active launch pipeline.
Yoma has also obtained the master leases for Landmark and finalised agreements with its JV partners for the project, with development works expected to commence end-2016.

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 FY17F-19F, forming 40% of group sales by FY19F.
In the telecoms towers JV with Axiata (AXIATA MK, NEUTRAL, TP: MYR4.70) , the group is planning to sell half of its 25% stake to Axiata for USD35m, generating a 250% gain on the investment over a 2-year period.

Yoma has also announced plans to spin off its existing tourism assets, which includes the hot air balloon business Balloons over Bagan and land for a hotel development in Bagan into a separate listed vehicle, SHC Capital, via a RTO exercise. The exercise would give the company’s tourism business a separate platform to raise capital independently for expansion and expand its asset base.

We value the stock using the SOP methodology to reflect the diverse nature of its businesses. We use a revalued NAV approach to value its real estate (SGD0.65/share), DCF to value its consumer business (SGD0.05/share), a target P/E to value its automotive business (SGD0.10/share) and a fair value estimate for its telecom business (SGD0.06/share).
We have also applied a 10% holding company discount to our SOP valuation of SGD0.86 to derive our TP of SGD0.78.
Risks to our call include a sustained depreciation of the MMK due to political or macroeconomic uncertainty, and the stability of the legal framework.

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2017-01-03

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