SINGAPORE (Oct 30): DBS Vickers says Yoma Strategic’s non-real estate businesses are picking up momentum and while the real estate market shows signs of stabilising, it remains broadly slower than before, especially in the mid-market segment.
PATMI fell 56.8% y-o-y to $3.7 million due largely to the absence of a $14.7 million fair value gain on the telecommunications towers investment which was recognised in 2Q17.
In 2Q18, Yoma’s revenue increased 32.9% y-o-y to $33.1 million, driven largely by growth in its Automotive & Heavy Equipment and Consumer businesses.
The group’s Automotive & Heavy Equipment business grew 109.9% y-o-y to $14.6 million on the back of healthy sales of its New Holland tractors.
The group has also entered into an agreement to buy back the development of Galaxy Towers (Zone C) at cost, entitling it to the share of profits in relation to the sales of units made.
In a Monday report, analyst Joseph Ng says, “We believe that this contributed, in part, to the 3.3ppt y-o-y increase in gross margins to 44.7%, as the group’s real estate business generally commands higher margins relative to the other business segments.”
In the F&B arena, Yoma has successfully grown its KFC store footprint from 12 in March to 16 in Sept. It is also exploring the possibility of acquiring and developing new brands.
“We think it is also possible for Yoma to consider a domestic brand, given that this could unlock greater efficiencies as the business scales up,” says Ng.
In the Automotive & Heavy Equipment space, Yoma is expected to deliver another 651 tractors from sales that were organised by the government’s Agriculture Mechanisation Department.
Looking ahead, OCBC believes that while Myanmar’s real-estate market is starting to stabilise, it still remains broadly slower than before, especially in relation to the mid-market segment.
“To that end, we note that management is looking at re-designing its units at StarCity to cater to the mass-market segment, which we understand to still see relatively robust demand,” adds Ng.
Separately, the uncertainties over the Condominium Law passed in 2016 have yet to be clarified, and this could continue to rein in further optimism in the local property market, in our opinion.
OCBC is maintaining its “hold” rating with fair value estimate of 58 cents.
As at 12.37pm, shares in Yoma are trading at 59 cents or 28 times FY17 earnings.
