Yoma Strategic Holdings

DBS Group Research, Nov 7

Q2 FY2014 (year-end: March) net profit of $3.3 million was slightly ahead, compared to net loss of $4.1 million in Q2 FY2013 and net profit of $0.4 million in Q1 FY2014. Excluding $0.8 million of forex losses, core profit would have been $4 million versus our $3.2 million estimate. Revenue surged 132 per cent y-o-y and 77 per cent q-o-q to $27 million.

Property sales remains brisk, while construction picks up pace. Yoma reported $15.1 million of Land Development Rights for block B2 and B5 in Star City and $2.25 million incentive fees for meeting the sales target of block B1. In Q2 FY2014, Yoma sold 10 units in blocks A3 and A4. Together with Zone B sales for the LDR investor, we estimated Yoma sold about 265 units this quarter, up from 174 units in Q1 2014. Average selling price was stable at US$150 per square foot.

Meanwhile, construction pace has improved markedly as Yoma recognised $4 million from sale of development properties in just this quarter, compared to a total of $7.2 million recognised in previous periods.

Staff costs continued to expand to $2.4 million from $0.8 million due to increase in staff strength to meet business expansion.

Star City continues to shine. Given the strong take up rate of Zone B so far, we expect Yoma to sell LDRs of the two remaining blocks soon. The company would also receive more incentive fees accordingly.

Furthermore, Yoma has about $49 million of unrecognized revenue in Star City to be recognised over the next 15-21 months as construction progresses.

Despite the delay in securing a new 70 years Master Lease for Landmark, development on the ground appears active. Yoma recently inked an MOU with Mitsubishi Group to invest and jointly develop Landmark. This is Yoma's second tie-up with an established corporation, after an earlier agreement with The Hongkong and Shanghai Hotels Limited to develop a Peninsula hotel in Yangon.

We believe the completion of this purchase would accelerate development and unveil more opportunities for Landmark.

Maintain "buy", target price is unchanged at $1.02. This is overall a good quarter with improvement in property sales and construction. We expect Star City to continue to provide earnings visibility and growth while the Landmark project remains a wildcard.

BUY