Yoma Strategic Holdings (YOMA SP) - DBS Research 2017-05-25: Tractor And Consumer Business To Boost Profitability Ahead

Yoma Strategic Holdings (YOMA SP) - DBS Vickers 2017-05-25: Tractor And Consumer Business To Boost Profitability Ahead YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings (YOMA SP) - Tractor And Consumer Business To Boost Profitability Ahead

  • 4Q17 results ahead of expectations on the back of fair value gains.
  • Holland Tractor and KFC will continue to drive profitability and growth in FY18F.
  • Active marketing at existing real estate projects to drive sales.
  • Maintain BUY, TP S$0.80.

What’s New 

Yoma's 4Q17 results were ahead of expectations.

  • Revenue and gross profit rose by 18% and 61% to S$53.8m and S$21.6m respectively. PATMI rose by > 100% to S$24.1m. 
  • For the full year, Yoma's FY17 revenue and gross profit came in 11% and 23% higher y-o-y to S$124.2m and S$50.1m respectively. PATMI, however, was 3.5% lower y-o-y at S$35.9m.

Core operating profit in 4Q16 despite a loss in FY2017.

  • We remain positive on the non-real estate businesses, which increased by 31% y-o-y while real estate businesses increased by 10%. Non-real estate businesses contributed c.40% of revenues for the quarter.
  • The main drivers of Yoma’s non-real estate businesses were its Automotive and heavy equipment (New Holland Tractor) and consumer (KFC franchise).
  • We are seeing a strong rebound in operating performance as most of its underlying businesses are doing well. 
  • Most importantly, 4Q17 gross profit of S$21.6m covers the group’s overheads of c.S$14.3m, implying that operating performance has achieved a sustainable level. For the quarter, despite stripping out the fair value gains of S$24.4m, we estimate that Yoma will still make a core operating profit.

Outlook positive momentum to continue: 

Real Estate:

  • Star City and Pun Hlaing Estate continue to attract interest and saw good sales in FY17. The reconfiguration of Star City Galaxy Towers to 1,038 units (vs 954 units) is completed and expected to capitalise on the trend for smaller units aimed at an increasing demand for rent.
  • The group has launched close to 334 units and 38 units at Star City and at Pun Hlaing Estate respectively, which will continue to be actively marketed.
  • Targeted official launch of Peninsula Residences in 2QFY18. Phase 1 of the project is expected to garner strong interest.

Non-real estate:

  • New Holland tractors and implements is up 27.6% y-o-y to FY2017. It has secured 164 units out of the 600 units allocated under the Ministry of Agriculture and Irrigation’s nationwide mechanisation programme. Yoma has 436 more tractors to be delivered in the coming months, which imply that earnings momentum from this business should continue.
  • Yoma will also launch a new heavy equipment arm – JCB equipment and should see positive contribution in the medium term.
  • Yoma Fleet saw an addition of 280 vehicles to its fleet and will continue to add positively come FY18.
  • The group has been increasing its number of KFC stores and now has 12. It is planning to increase its store count to 22 by end of 2018. While this business is still loss-making, we believe that it will turn profitable after achieving an operational scale of >15 stores.

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-05-25
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.800 Same 0.800