Yoma Strategic - Revving Up The Growth Engines
- Yoma Strategic (Yoma) offers investors the best proxy to invest in Myanmar, in our view, with a strong and diversified business model. It is focused on scaling up its core businesses in real estate, consumer and automotive equipment and has a good track record of capital allocation.
- We expect the group to be a key beneficiary of the rapid urbanisation trend in Myanmar, with its strong foothold in the real estate sector.
- Catalysts include bolt-on acquisitions within its core businesses, further restructuring of its non- core assets and the turnaround of non-real estate businesses.
Property sales recovery leads the way.
- Yoma Strategic’s (Yoma) real estate interests are defined by its two township projects and the Landmark mixed development in downtown Yangon.
- Yoma’s 135-acre Star City township project, when fully developed, is slated to yield 10,000 apartments and 1.7m sq ft of commercial area. Pun Hlaing Golf Estate targets a more upscale segment, with landscaped houses within a gated community with a landbank of 6m sq ft.
- Following a lull due to the general election last year, sales have picked up (+26% YoY in 2Q17 (Mar) to SGD9.9m) due to a more active launch pipeline.
- Yoma has also obtained the master leases for Landmark and finalised agreements with its JV partners for the project, with development works expected to commence end-2016.
Non-property businesses ramping up rapidly.
- Contributions from the non- property businesses are ramping up fast, thanks to the rapid expansion of its KFC store network as well as solid contributions from its automotive leasing and agricultural equipment units.
- We expect a 48% sales CAGR for the automotive division over FY17F-19F, forming 40% of group sales by FY19F.
- In the telecoms towers JV with Axiata (AXIATA MK, NEUTRAL, TP: MYR4.70) , the group is planning to sell half of its 25% stake to Axiata for USD35m, generating a 250% gain on the investment over a 2-year period.
Spin-off of tourism assets.
- Yoma has also announced plans to spin off its existing tourism assets, which includes the hot air balloon business Balloons over Bagan and land for a hotel development in Bagan into a separate listed vehicle, SHC Capital, via a RTO exercise. The exercise would give the company’s tourism business a separate platform to raise capital independently for expansion and expand its asset base.
Maintain BUY and a SGD0.78 TP.
- We value the stock using the SOP methodology to reflect the diverse nature of its businesses. We use a revalued NAV approach to value its real estate (SGD0.65/share), DCF to value its consumer business (SGD0.05/share), a target P/E to value its automotive business (SGD0.10/share) and a fair value estimate for its telecom business (SGD0.06/share).
- We have also applied a 10% holding company discount to our SOP valuation of SGD0.86 to derive our TP of SGD0.78.
- Risks to our call include a sustained depreciation of the MMK due to political or macroeconomic uncertainty, and the stability of the legal framework.