Yoma Strategic Holdings

Kim Eng on 10 Apr 2012

Background: Yoma Strategic Holdings has business interests mainly in Myanmar, covering real estate, agriculture and automobiles. Its other businesses are in China real estate, as well as design and project management. Its Myanmar real estate dealings are through projects where it sells housing and Land Development Rights (LDRs).

Recent developments: Developments in Myanmar have been very positive in recent weeks, most notably, the by-elections that saw democracy icon Aung San Suu Kyi leading her party, the National League for Democracy (NLD), to a landslide victory. The US has since announced selected lifting of trade sanctions against the country and the market has responded positively, with Yoma’s share price surging to a new high of $0.60. On its part, the company has undergone restructuring, with its China real estate holdings now focused solely on the retail mall component of its Grand Central Project. It has also announced the purchase of a 70% interest in Star City LDRs, which is located within 6 miles of downtown Yangon.

Country development trend positive. Ms Suu Kyi’s party, NLD, won a landslide victory in Myanmar’s by-elections on 1 April 2012. It took 43 of the 45 seats contested. Although they make up less than 7% of the total seats in Parliament, the manner of defeat for the army-backed incumbent party, USDP, signals the Myanmar people’s desire for change and further economic development.

Macro-economic prospects bright. The US was quick to follow up on the by-election results with an announcement of a targeted easing of the ban on the export of US financial services and investment. It will also allow companies to invest in certain sectors in Myanmar, but the sectors have yet to be decided. Whichever they are, additional investments will drive demand for real estate and boost prices, and Yoma is well-placed to benefit from this development.

Increasing real estate exposure. There are encouraging signs that Yoma is actively building up its exposure to Myanmar’s real estate sector through the Star City project, which will give the company a development pipeline for the next 6-8 years. The decision to keep its retail mall holdings in Dalian, China, prevents Yoma from billing itself as a pure Myanmar play, and this may prove to be an unnecessary distraction. The mall suffered losses of  S$800,000 for the April-September 2011 period and more losses are anticipated in the near future.