Yongnam Holdings

DBS Group Research, May 31

YONGNAM is partnering JGC Corporation and Changi Airport Planners and Engineers to bid for two airport projects in Myanmar. We think that Yongnam's consortium stands a good chance of securing the projects given its Singapore and Japan representation. JGC Corporation is Japan-based while Yongnam and Changi Airport Group are Singapore-based, all of which are viewed favourably by the Myanmar Government.

We believe a win on the Yangon airport project could boost share price by 12 Singapore cents. We estimated that the construction of the Yangon Airport project could add $10.4 million or six Singapore cents per share to FY2014 earnings. Thereafter, the rights to operate the airport for the next 30 years would add another six Singapore cents to the stock based on discounted cashflow projection.

We believe that Yongnam's current valuations are only in line with peers, and not reflecting Yongnam as a strong contender for project wins in Myanmar. We are convinced that Yongnam stands a good winning chance and thus believe +1 standard deviation valuation is achievable.

At +1 standard deviation of 10 times blended PE, we revised Yongnam's target price to $0.41. Upgrade to "buy" for 22 per cent upside.

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