Yoma Strategic - RHB Invest 2017-06-06: Roadshow Takeaways

YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic - Roadshow Takeaways

We organised a recent investor roadshow with Yoma Strategic following the release of its full year results. The key takeaway was the rapid scaling up of the non-real estate businesses, which now comprise 47% of the group’s topline.
Yoma has added a new product line in construction equipment to its auto platform, and plans to open another 10 KFC stores in the current FY.
Maintain BUY rating with unchanged SOP-based TP of SGD0.78 (32% upside).

Catalysts for the stock price would be a recovering real estate market and further non-core asset divestments.

The automotive segment represents one of Yoma’s fastest growing businesses, contributing SGD38m or 31% of group revenue in FY17, up from just SGD8.8m in FY15. Currently driven by sales of agricultural equipment, Yoma has bolted on another pillar of growth with the exclusive distributorship of JCB-branded construction equipment in Myanmar. UK-based JCB offers high-quality and cost-efficient construction equipment that are highly in demand as Myanmar develops its infrastructure from power stations to railways and airports.
Yoma intends to leverage on its existing sales network to fast-track the introduction of JCB equipment into Myanmar, ramping up from two branches initially to 11 branches over the next two years. We forecast a sales CAGR of 32% over FY17-19 for the auto division, as the group bumps up sales of tractors (New Holland) and construction equipment (JCB) and its leasing fleet.

Real estate sales in Yangon were sluggish over the past year due to uncertainty over details of the newly passed Condominium Law and its implementation. There are now signs of a nascent recovery, with sale of smaller-quantum units – typically in the MMK20-30m (USD15-23,000) range and targeted at local end-demand – flying off the shelves.
To cater to the market demand, Yoma has re-configured the current phase of Star City’s development towards smaller units to enhance affordability.
The group is also targeting to launch residential sales at its luxury downtown development, Yoma Central, in the third quarter of this year.

Over the past two years, Yoma has chalked up substantial revaluation gains from its investment properties and non- core asset sale, such as the partial divestment of its stake in the telecom towers joint venture with Axiata Group. Proceeds generated were redeployed to grow its core businesses of real estate, automotive and consumer. Yoma is currently awaiting regulatory approval for the spin-off of its tourism assets into a separate listed vehicle.
We see opportunities to further optimise the group’s capital structure, through additional non-core asset sales, such as its investment property in Dalian (carrying value: SGD90m) and a roll-up of its agriculture products platform.
Key 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/ 2017-06-06

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.780 Same 0.780