SINGAPORE (June 6): RHB Research is keeping its “buy” call on Yoma Strategic Holdings with an unchanged target price of 78 cents amid sluggish real estate sales in Yangon.
This is on the back of the rapid scaling up of the non-real estate businesses, which now account for 47% of the group’s topline, according to RHB analyst Goh Han Peng.
For the full year ended March, Yoma posted a 3.2% decline in earnings to $35.9 million, largely due to higher interest expenses and administrative expenses.
FY17 revenue was grew 11% to $124.2 million.
(See: Yoma FY17 earnings dip 3.5% to $35.9 mil on higher expenses)
“The automotive segment represents one of Yoma’s fastest growing businesses, contributing $38 million or 31% of group revenue in FY17, up from just $8.8 million in FY15,” Goh says in a Tuesday report.
Currently driven by sales of agricultural equipment, Yoma’s automotive business is set to grow further with the exclusive distributorship of JCB-branded construction equipment in Myanmar.
(See: Yoma subsidiary launches JCB heavy equipment products in Yangon)
“We forecast a sales CAGR of 32% over FY17-19 for the auto division, as the group bumps up sales of tractors (New Holland) and construction equipment (JCB) and its leasing fleet,” says Goh.
On the consumer business front, Yoma is also looking to open another 10 KFC stores in the current financial year.
In addition, the group is awaiting regulatory approval for the spin-off of its tourism assets into a separate listed vehicle.
“Over the past two years, Yoma has chalked up substantial revaluation gains from its investment properties and non-core asset sale,” says Goh.
He opines that Yoma could see potential for further capital recycling and opportunities to further optimise the group’s capital structure through additional sale of non-core assets as well as a roll-up of its agriculture products platform.
“Catalysts for the stock price would be a recovering real estate market and further non-core asset divestments,” Goh adds.
As at 4.06pm, shares of Yoma Strategic are trading flat at 59 cents.
