SINGAPORE (May 31): Yoma Strategic on Wednesday announced that its 4Q18 earnings have fallen by 86% to $3.5 million from $24.1 million in 4Q17. This brings FY18 earnings to $26.6 million, 25.7% lower than the previous year.
Revenue for the quarter saw a 48.2% y-o-y drop to $25.1 million, impacted by reduced income generated from the sale of residences and land development rights (LDRs), which fell the most in the company's breakdown of revenue.
The fall in real estate sales was mainly due to the group changing its sales strategy for StarCity, following its recent buyback of the development, and by continuing its sales strategy of only launching and selling near-completed units in Pun Hlaing Estate, also in Myanmar.
The group also recommended a final cash dividend of 0.25 cents per share.
See: Yoma's 4Q earnings fall 86% to $3.5 mil; in JV with Little Sheep to open hot pot restaurants in Myanmar
Despite the drop in earnings analysts are remaining positive on the group.
RHB is keeping its “buy” recommendation on Yoma Strategic with a target price of 66 cents.
Currently, the group operates 23 KFC stores compared to 12 stores as at end-FY17. And with the increasing scale of its KFC business, the group’s management plans to reap cost benefits and efficiency by consolidating its supply chain.
On the other hand, the group also announced in a separate filing on Wednesday that it has entered into a joint venture (JV) with international hot pot brand, Little Sheep, to open its first store in Yangon, Myanmar.
The store is expected to open in 4Q18, with plans to open five more in the future.
In a Thursday report, analyst Vijay Natarajan believes that the group’s outlook for its automotive business remains promising from the continued mechanisation of the agricultural sector and upturn in construction and infrastructure sectors.
And on the passenger and commercial segment, the addition of more showrooms and dealerships for its Volkswagen and Mitsubishi brands is expected to drive growth.
DBS is also maintaining its “buy” call on Yoma, but with a lowered target price of 58 cents, from 75 cents previously, to factor in slower recovery from the real estate market, and higher expenses / start-up expenses for new businesses.
Apart from Little Sheep, the group has also entered into a JV with Pernod Ricard to produce and distribute alcoholic beverages in Myanmar.
See: Yoma partners Pernod Ricard to produce & distribute whisky in Myanmar
Pernod Ricard will take the lead in management of the production facilities, extensive distribution network and brand portfolio of Access Myanmar Distribution Company.
Consequently, Pernod Ricard is also expected to inject new capital for future expansions and to be the largest shareholder, while Yoma is expected to own some 20%.
Meanwhile, the group also announced new ongoing ventures with Gran and WaveMoney.
In a Thursday report, analyst Rachel Tan says, “The 50:50 JV with Grab is currently waiting to obtain the required licenses and approvals while WaveMoney continues to show rapid growth.”
See: Yoma Strategic partners Grab to upgrade taxis in Myanmar
See also: Yoma acquiring 34% stake in Myanmar's Wave Money for $25.6 mil
“Despite the lower TP and earnings estimates, we continue to believe Yoma is the beneficiary of potential economic turnaround in Myanmar with the new government in place,” says Tan.
As at 10.58am, shares in Yoma are trading at 40 cents or 1.0 times FY19 book with a dividend yield of 0.6%.
