Yoma Strategic Holdings - OCBC Investment 2017-07-27: Cautious Optimism For The Road Ahead

Yoma Strategic Holdings - OCBC Investment 2017-07-27: Cautious Optimism For The Road Ahead YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings - Cautious Optimism For The Road Ahead

  • Good set of 1QFY18 numbers.
  • Cautious optimism for the road ahead.
  • Maintain HOLD.

Broad-base growth achieved in 1QFY18 

  • Yoma’s 1QFY18 revenue grew 46.8% YoY to S$25.8m, bolstered by growth across various operating segments. 
  • Healthy top-line contribution was made by the sale of residences and LDRs, on the back of the group’s share of profits from the sale of residences in Galaxy Towers (StarCity Zone C) and additional share of profits in StarCity Zone B following its completion. This comes on the heels of management’s decision to reconfigure units in StarCity’s Galaxy Towers to be more aligned with market preferences. 
  • The group’s automotive & heavy equipment business also put in a good performance, with a 61.3% YoY growth to S$11.9m, arising from healthy demand for its New Holland tractors and increased number of leased vehicles. 
  • Encouragingly, management’s efforts at diversification continue to remain on track, with the non-real estate business comprising ~58.2% of revenue. 
  • An interim cash dividend of 0.25 S-cents per share has been declared, while no dividend was declared in 1QFY17.

Signs point towards cautious optimism ahead 

  • Looking ahead, we note that management sees mild signs of recovery in the Yangon property market, which would hopefully gain further traction with economic development and urbanization. 
  • We also believe that the group’s automotive & heavy equipment business could receive a boost from favourable government priorities. As per our report on 5th July 2017, we understand that the Myanmar Investment Commission has reiterated that agriculture and construction remain as top priority sectors. This, in our view, should be generally positive for Yoma’s automotive & heavy equipment sector.
  • Also, Mr. U Tun Tun Naing, permanent secretary of the Ministry of Planning and Finance, was reported to have mentioned that arrangements are currently being made to offer agricultural loans to farmers. This development should also augur well for the group’s New Holland tractor business. While positive signs emerge, we are still generally cautious, and prefer to wait for further signs of strength especially in the Yangon property market. 
  • We adjust our assumptions to incorporate these encouraging developments, increasing our fair value estimate from S$0.54 to S$0.58. Maintain HOLD.

Joseph Ng OCBC Investment | http://www.ocbcresearch.com/ 2017-07-27
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.580 Up 0.540