SINGAPORE (Nov 15): DBS Group Research is keeping a keen eye on Yoma Strategic Holdings, following news that Philippine conglomerate Ayala Corporation in injecting some US$155 million ($211 million) to acquire a 20% stake in the Myanmar-focused company.
Ayala, one of the oldest and largest conglomerates in the Philippines, will acquire 478.6 million new shares in Yoma at 45 cents each – representing a 37.7% premium to the last traded volume weighted price.
Following the deal, Fernando Zobel de Ayala, the president and chief operating officer of Ayala, will sit on the board of Yoma.
The 20% stake will also make Ayala the second-largest shareholder in Yoma after the founding Pun family, which will continue to hold a 27% stake in the company.
Ayala is also acquiring a 20% stake in First Myanmar Investment (FMI), another company owned by Yoma’s executive chairman Serge Pun (pictured above).
The deal, which marks Ayala’s largest investments outside of the Philippines, will value Pun’s Yoma and FMI at a combined US$1 billion.
See: Ayala Corp said to eye $324 mil investment for 20% stake in Pun's Yoma Strategic and First Myanmar Investment, FT reports
The pre-market announcement on Thursday saw shares in Yoma open 20% higher, despite the company also reporting a net loss of US$44.2 million for 2Q20 ended September, compared to earnings of US$18.8 million a year ago.
The counter closed at 37.5 cents on Thursday, up 5 cents, or 15.4%.
See: Yoma Strategic sinks to 2Q loss of $60 mil; announces deal to sell 20% stake to Ayala Corp
“The new strategic partnership is a significant milestone for Yoma,” says DBS analyst Derek Tan in a Nov 15 report. “The equity injection will empower Yoma with the renewed financial capacity to fuel its growth aspirations in the longer term.”
Tan is keeping his “buy” call on Yoma, and raising his target price by 25% to 50 cents.
“A majority of the new capital injection will go into Yoma’s real estate business and also potential new landbanks that the group intends to pursue,” Tan says.
Through the strategic partnership with Ayala, another interesting development for Yoma could be its 44%-owned mobile wallet business, Wave Money.
“We see many opportunities that Wave Money can learn from GCash, a joint venture by Ayala Corporation, Ant Financial and Globe Telecom, which has over time cemented itself as the leading mobile wallet in Philippines,” says Tan.
“We remain excited on the longer term prospects for Wave Money which is currently dominant in the over-the counter (OTC) transfer market,” he adds. “However, we see the opportunity in the longer term to expand its digital footprint into the mobile wallet ecosystem and potentially also secure new strategic investors to grow this platform into a leading mobile wallet for Myanmar.”
There could also be more room for collaboration between Ayala and Yoma on the renewable energy front.
In October, Yoma and Ayala’s energy platform AC Energy had formed a joint venture to invest at least $30 million to drive the growth of Yoma Micro Power (YMP), and explore developing around 200 megawatts of additional renewable energy projects within Myanmar.
“We see Yoma Strategic Holdings gaining new wings to soar higher as the new partner open up a myriad of opportunities for growth,” says Tan.
“Despite some disappointment on Myanmar’s economic growth, we believe Yoma remains the best proxy to ride on the country’s potential economic growth in the longer term,” he adds.
Shares in Yoma closed 1 cent higher, or up 2.7%, at 38.5 cents on Friday.
According to DBS valuations, this implies an estimated price-to-earnings (PE) ratio of 79.1 times, and a price-to-book value (P/BV) of 0.9 times for FY20F.
