Yoma Strategic Holdings - RHB Invest 2018-05-03: “the Golden Land” To Rise Again

Yoma Strategic Holdings - RHB Invest 2018-05-03: “the Golden Land” To Rise Again YOMA STRATEGIC HOLDINGS LTD SGX: Z59

Yoma Strategic Holdings - “the Golden Land” To Rise Again

  • While Yoma’s recent share price performance has been dragged down by political uncertainties in Myanmar, we strongly believe that the stock offers a compelling investment case for investors who are willing to take a mid- to long-term view of Myanmar’s growth potential.
  • Yoma Strategic is the only listed group that offers a holistic exposure to all the fast growing segments (real estate, consumer, automotive, financial services, tourism). With a strong operating track record and healthy balance sheet, we believe Yoma is well positioned for the impending growth in Myanmar’s economy.
  • Maintain BUY with revised Target Price of SGD0.66, offering a 53% upside. This report marks the transfer of coverage to Vijay Natarajan.

In all the right segments.

  • Yoma Strategic Holdings is a pioneer in the Myanmar market, offering investors a unique exposure to all the fast growing segments of the economy. Its four key pillars are real estate and services, automotive and heavy equipment, consumer, and financial services. It also has investments in tourism assets, telecom towers and distributed power network. 

Access to cheap, strategic land bank. 

  • Due to its long presence in Myanmar since early 1990s, Yoma enjoys first-mover advantage, and has access to low- cost and strategic landbank. It is developing two township projects, StarCity and Pun Hlaing Golf Estate (PHGE), which together can last another 8-12 years. 
  • Recently, it started construction at Yoma Central (48% stake), a prime historic site in the heart of Yangon. While real estate remains the long term driver of growth, its near term outlook has been impacted by the lack of clarity in condominium laws and political uncertainties.

Non-real estate business ramping up steadily.

  • Revenue from the non-real estate segment accounted for 47% of total revenue in FY17, compared to just 15% in FY15. This was thanks to the rapid expansion of Yoma’s KFC store network, as well as solid contributions from its automotive leasing and agricultural equipment units. 
  • By FY20, Yoma has set a target of generating 50% of its revenue from the non-real estate segment. The group also has an ambitious plan to triple its asset size in each of these segments by 2023.

Entry into the fast-growing financial services segment.

  • In Mar 2018, Yoma announced the acquisition of a 34% stake in Wave Money – a mobile financial services provider with the largest network of agents in Myanmar. The acquisition presents Yoma with immense potential to tap into the fast-emerging consumer credit industry. 
  • We also see a lot of synergy between the financial services business and its existing core business segments.

Strong balance sheet.

  • Yoma had a low net gearing (net debt to total assets) of 15% as at FY17. 
  • Overall, we expect its net gearing to remain low at below 30% for the next three years.

BUY with Target Price of SGD0.66, based on our SOP valuation, which takes into account the diverse nature of its businesses.

  • We valued its real estate interests using RNAV. We used DCF to value its consumer business, and P/E for its fast- growing automotive business. Our Target Price is derived after imputing a 15% discount, to factor in political and regulatory risks. 
  • Key risks include prolonged political tensions that may derail Myanmar’s economy, and forex risks.

Vijay Natarajan RHB Invest | https://www.rhbinvest.com.sg/ 2018-05-03
SGX Stock Analyst Report BUY Maintain BUY 0.66 Down 0.780