Yoma Strategic Holdings (YOMA SP) - DBS Research 2018-03-07: Jumping On The Fintech Bandwagon!

YOMA STRATEGIC HOLDINGS LTD Z59.SI

Yoma Strategic Holdings (YOMA SP) - Jumping On The Fintech Bandwagon!

Proposes to take a 34% stake in Wave Money, a financial services company offering mobile payment solutions and services.
Huge potential to scale up in the medium term supported by Myanmar’s deep mobile penetration.
Limited financial impact for now.

Proposed acquisition of a 34% stake in Digital Wave Money Myanmar Co Ltd (Wave Money) from First Myanmar Investment Company Limited (FMI). The consideration for the proposed acquisition is US$19.4m, valuing Wave Money at US$57m, which is at the mid-point of the US$38m-US$73m independent valuation done by PricewaterhouseCoopers.
Wave Money is a Joint Venture between Telenor (51%), FMI (44%) and Yoma Bank (5%).
Wave Money is in the financial services sector to offer mobile payment solutions and services (remittance and e-wallet) in Myanmar. The company is the first licensed provider under Myanmar’s Mobile Financial Services Regulation and is permitted for foreign investment. Wave Money has over 20,000 agents across the country.

Telenor: A leading global mobile network operator with strong presence in Central and Eastern Europe and Asia. The group was founded in 1855 and has over 160 years of telecom experience.
FMI; Yoma Bank: Related parties of YOMA and held privately.

We believe the acquisition allows YOMA to ride on the accelerating growth demonstrated by Wave Money in the past few months as the business is just coming out of the incubation phase. Wave money is targeting the mass market with the goal of providing financial services throughout Myanmar without heavy infrastructure commitments. The ability for Wave Money to scale up is supported by the lack of formal banking infrastructure (banks are capital constrained and operate under an under-developed retail financial regulatory framework) in Myanmar and aided by high mobile penetration rate in the country.
We note that Myanmar’s mobile penetration rate stands at 105% and smartphones form 80% of all mobile phones sold in the country.
With Myanmar leading ASEAN in 3G/4G rollouts with 90% of the population living within range of mobile broadband, the ability to expand Wave Money’s reach to consumers and ability to drive topline growth is high.

In fact, since Jan’17, the number of transactions through Wave Money (measured by volume of transfers) is growing at a Compounded Monthly Growth Rate (CMGR) of over 30%. Monthly revenue for Wave Money has also been accelerating upward, growing at CMGR of 22% in the same period.

While still loss making at this juncture (proforma 9M17 to Dec’17 reported net loss of S$3.2m), we note that Wave Money is expected to turn cash-flow positive in FY19F ( FYE March) and profitable thereafter.
The investment will be made through internal funding sources and potentially a recent equity placement exercise.

Derek TAN DBS Vickers | Rachel TAN DBS Vickers | http://www.dbsvickers.com/ 2018-03-07

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