SINGAPORE (Apr 11): RHB Group Research says Yoma Strategic ready to transition into its next growth phase, despite weakness in its real estate business.

The brokerage is keeping its “buy” call on Yoma with a target price of 57 cents, representing an upside of 78% from its current trading price of 32 cents as at 12pm on Thursday.

“We believe Yoma Strategic is well-poised for its next leg of growth, with the steady expansion of its non-real estate segment offsetting weakness in its real estate unit,” says analyst Vijay Natarajan in a Thursday report.

The bullish outlook comes despite RHB cutting Yoma’s FY19-21 earnings forecasts by 12-14%. Natarajan says this is to factor in a slowdown in the group’s real estate business, dragged by its mid- to high-end residential properties, as well as the group’s auto business, which has been hit by a strong monsoon season and slower agriculture growth.

However, the analyst notes that Yoma’s acquisition of a 65% stake in restaurant chain Yankin Kyay Oh Group (YKKO) in February will immediately contribute to earnings.

“The total price consideration of US$12.6 million ($17.0 million), based on 10 times FY18 EV/EBITDA, is reasonable. There is more upside potential with earnings expected to grow by double digits in the next 2-3 years,” Natarajan says.

See: Yoma Strategic acquires majority stake in one of Myanmar's largest restaurant chains for $17 mil

Meanwhile, Natarajan says Yoma’s financial services segment is also showing healthy improvement.

“Yoma’s fleet size has increased by 40% since FY18 to 1,003 vehicles, resulting in 9M19 segmental revenue growth of 17%,” he says. “Management remains optimistic on leasing activity prospects, with growth from organic and inorganic expansion.”

At the same time, he notes that Wave Money’s cash flow broke even in September 2018 and continues to see a double-digit m-o-m revenue and transaction growth.

According to RHB valuations, shares in Yoma are trading at an estimated price-to-earnings ratio of 18.3 times and a dividend yield of 0.8% for FY19.