SINGAPORE (Dec 27): RHB Research is maintaining its “buy” call on Yoma Strategic while lowering its target price to 57 cents from 66 cents, after the stock’s recent share price recovery from all-time low levels in Oct.
The lower target price comes after introducing a higher 20% discount to SOP valuations from 15% previously to factor in higher regulatory and political risks. At the same time, RHB has lowered its FY19-20F net profit forecasts to account for lower margins for real estate projects.
In a Wednesday report, analyst Vijay Natarajan says he believes the stock’s recent share price weakness stemmed from a combination of factors such as a slowdown in the real estate market as well as emerging market (EM) fund outflow and political tensions – all of which are now largely priced in.
He now believes Yoma is in a dominant position to reap the benefits from the overhaul in its real estate business and rapid scale up in its F&B, motors and financial services businesses.
“While near-term market uncertainty remains, we see good long-term potential for investors at current levels,” says Natarajan.
In particular, the analyst is positive on Yoma’s recent expansion of its offerings of City Loft, along with the group’s additional tie-up with domestic banks to offer longer mortgage repayment terms for the new product launch.
The move provides much-needed earnings visibility for the group in Natarajan’s view, despite the likelihood of lower margins for City Loft units compared to high-end homes.
Further, Natarajan expects EBITDA for Yoma’s F&B segment – where expansion for KFC stores have been on track, while franchise plans for Little Sheep Hot Pot and Auntie Anne’s outlets are underway – to break even in FY20.
The analyst also remains optimistic on the near-term growth prospects Yoma’s financial services and automotive segments with the positive growth performance of Wave Money and Yoma Fleet, as well as an expected pick-up in 2H sales for New Holland.
“The opening of Volkswagen showrooms in Yangon and Mandalay are expected in 4QFY19 and should start contributing positively to the bottom line,” says Natarajan.
As at 10.48am, shares in Yoma are trading 1.5% higher at 34 cents or 0.9 times FY19F book value.
