SINGAPORE (June 4): DBS Group Research believes Yoma Strategic Holdings is well placed to tap into Myanmar’s potential economic turnaround, with its diversified portfolio in the property, consumer and automotive sectors.
DBS is keeping its “buy” recommendation on Yoma with an unchanged target price of 40 cents, based on a 60% discount to RNAV.
Yoma’s real estate business remains its core EBITDA contributor, accounting for 96% of core EBITDA in FY19, excluding fair value gains.
Yet, the segment accounted for just under half of total FY19 revenue, due to revenue growth from its non-real estate businesses.
The group’s food and beverage segment was the second largest contributor to revenue growth in FY19, on the back of higher sales at KFC and additional revenue from the newly acquired YKKO.
Yoma F&B also opened its first retail units for Little Sheep and Auntie Anne’s in Myanmar in March this year.
With a total of 72 stores under the four brands currently, Yoma targets to grow to 125 stores under six brands by FY23.
“Yoma’s timely investments in growing its non-real estate business segments will start to contribute more significantly going forward,” says lead analyst Rachel Tan in a report on June 3.
Under Yoma Motors, the New Holland agricultural equipment business continues to be a main driver of growth. In May, the segment also saw its first Volkswagen showrooms in Yangon and Mandalay turn fully operational.
Meanwhile, Yoma Fleet, the group’s vehicle leasing and rental segment, saw a strong uptick in the number of vehicles under lease to 1,166 as at end-FY19. “This should contribute stable returns to the group,” Tan says.
At the same time, the company’s mobile wallet service, WaveMoney, continues to record strong growth and has turned profitable in terms of EBITDA since September 2018.
“Yoma could tap into the growth in various sectors in Myanmar,” says Tan. “Given the lack of proxies to gain exposure into Myanmar’s growth, Yoma offers investors a unique proposition.”
“The stock currently trades at an attractive 0.8x P/BV as it rides through the gestation period of its businesses,” she adds.
However, the analyst cautions that Yoma’s share price performance is likely to remain volatile, and be influenced by macro-drivers and newsflow regarding Myanmar’s economy.
“Myanmar is still a developing country and its real estate investments and developments for sale/rent are in the nascent stage of the property cycle. As such, continued supportive government policies for foreign investments are key to improving sentiment within the real estate space,” Tan says.
But despite disappointment so far on Myanmar’s economic growth, Tan remains positive on the group's prospects in the longer term.
“We still believe that Yoma is the beneficiary of a potential economic turnaround in Myanmar with the new government in place,” she says.
Tan also notes that Yoma’s board has decided not to declare any dividends for FY19, in view of the cash requirements for ongoing operations and investment plans for the future.
As at 2.30pm, shares in Yoma are trading flat at 34 cents, imply an estimated price-to-earnings (PE) ratio of 69 times for FY20F.
