PhillipCapital analyst Tan Jie Hui has downgraded her recommendation on Yoma Strategic to “neutral” from “buy”, with a lower target price of 15.6 cents from 34 cents.

The brokerage’s downgrade also comes slightly over a month after it continued to rate Yoma at “buy” on Feb 5, since Myanmar’s military seized power and declared a state of emergency on Feb 1.

“Since the coup on Feb 1, peaceful protests have swiftly escalated into violent protests. The military has opened fire on demonstrators and conducted overnight raids to arrest residents. As of date, more than 50 people have been killed, which is more deadly than the Saffron Revolution in 2007,” writes Tan.

“The 2007 protests were triggered by a decision of the military government to remove price subsidies for fuel. The number of casualties in that crisis was estimated at 13- 31,” she adds.

Since February, state telecommunication services have been disabled intermittently, while major construction work has ceased.

Myanmar’s biggest trade unions began widespread strikes on March 8, in a bid to restore Aung San Suu Kyi’s elected government to power.

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Business impact

“The impact has been felt at every level of the national infrastructure, with hospitals, ministry offices and banks all unable to operate. Major shopping centres have also been closed and factories are not operating,” says Tan.

The political instability, she says, is likely to damage investment sentiment and hurt economic growth in the country, and that the major business disruptions are likely to affect the group’s 2QFY2021 performance.

The impact of the unrest is also likely to spill over into the 3QFY2021, she adds.

“There could be fewer Wave Money transactions as consumers conserve cash. F&B and Motors sales are also likely to be lacklustre,” she notes.

“Given the pause in construction work, Yoma may not be able to recognise revenue from the completion of its property-development projects in the next 3-6 months. Yoma Land has US$45 million worth of revenue yet to be recognised from City Loft @ Star City, The Peninsula Residences and Star Villas.”

“We change our valuation from sum of the parts (SOTP) to price-to-book ratio (P/B), using its average historical price tanks during major conflicts, political upheavals and natural disasters,” explains Tan.

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“Before the 2010 general election, Myanmar was under military rule. Given that the current state of emergency in Myanmar is expected to last a year and violent protests are not likely to cease in the near term, we believe a P/B discount of the similar magnitude as in 2007-2010 is warranted. Excluding 2007 when Yoma traded at its low of 1.45 times P/B, its historical 2007-2010 had averaged lows of 0.41 times P/B,” she says.

Tan adds that the P/B target price of 0.45 times is above the low of 0.41 times in 2007 to 2010 due to Yoma’s size with more “resilient businesses” such as financial services.

“Our FY2021e book value is US$0.257. We believe Ayala will proceed with its second tranche US$46mn investment in Yoma. At US$/S$ rates of 1.35, our valuation translates to a target price of 15.6 cents.”

As at 10.35am, shares in Yoma are trading 0.2 cent higher or 1.3% up at 15.9 cents