Yoma

Yoma: 3QFY16 headline net profit surged 223% y/y to $25.2m, boosted by a revaluation gain of $27.7m. Otherwise, core earnings would have reflected a $2.5m loss.

*The revaluation gain arose from the reclassification of its investment in edotco from associate to financial assets, based on the base floor pricing of certain option agreements.

Operationally, revenue fell 5% to $23.8m, as improvements in automotive, property rental, real estate services, tourism, and the addition of KFC contributions were offset by a slump in residence and land development rights sales.

In particular, housing and LDR sales tumbled 73.1% to $5.1m due to high base effect of Star City Zone A ($3.1m vs $8.2m in 3QFY15) and the deferral of sales at Pun Hlaing Golf Estate till nearer completion in order to reap better margins.

Revenue from the automotive segment soared to $8.6m (3QFY15: $0.4m) from the contribution of Convenience Prosperity (acquired Feb’15), while sales from the vehicle leasing arm doubled.

Gross margin collapsed 14.4% to 34.3% due to a larger sales mix from lower-margin auto segment.

Admin expenses jumped 65% from new subsidiaries such as New Holland and KFC businesses, as well as increased staff costs.

Share of associate’s profits rose to $1.9m from a negligible base, largely from the performance of Access Myanmar Distribution which is in the beverages business.

Yoma is sanguine that with the new Myanmar government will focus on peace and economic prosperity, which should in turn bode well for the group’s business.

In Jan '16, the Burmese parliament passed the long-awaited condominium law that in principle, allows foreigners to purchase up to 40% of a condomium block, provided the apartments are from the sixth floor and above. The law is now awaiting presidential approval upon such, Yoma expects a boost in property sales.

The group has has also made progress on its Landmark Development, following the signing of the master lease extension with the Ministry of Rail Transport at end Dec’15.

The KFC business is expanding, with the fourth store expected to commence operations by Feb 2016. It targets to have up to 12 stores by Mar ’17.

Management is sanguine that telco infrastructure remains one of the fastest growing segments in Myanmar and edotco is targeting to grow its 1,250 towers to 5,000 over the next three years.

Yoma is currently trading at 20x trailing P/E, and 43x FY3/16 consensus P/E.