SINGAPORE (May 3): RHB says Yoma Strategic offers a compelling investment case for investors with a mid- to long-term view of Myanmar’s growth potential despite political uncertainties.
“Yoma is the only listed group that offers a holistic exposure to all the fast growing segments. With a strong operating track record and healthy balance sheet, we believe Yoma is well positioned for the impending growth in Myanmar’s economy,” says analyst Vijay Natarajan.
This includes property and services, automotive and heavy equipment, consumer, and financial services. It also has investments in tourism assets, telecom towers and distributed power network.
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 which is has a 48% stake. While property 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.
Meanwhile, revenue from the non-real estate segment accounted for 47% of total revenue in FY17, compared to just 15% in FY15. This was due to the rapid expansion of Yoma’s KFC store network, as well as solid contributions from its automotive leasing and agricultural equipment units.
Yoma has set a target of generating 50% of its revenue from the non-real estate segment by FY20. The group also has an ambitious plan to triple its asset size in each of these segments by 2023.
In March, 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,” says analyst Vijay Natarajan.
Yoma also has a low net gearing of 15% as at FY17. Overall, Natarajan expects its net gearing to remain low at below 30% for the next three years.
“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,” says Natarajan.
RHB is maintaining a “buy” with revised target price of 66 cents based on its SOP valuation, which takes into account the diverse nature of its businesses.
As at 11.08am, shares in Yoma are trading at 44 cents or 22 times FY18 earnings.
