• BUY with higher S$1.00 FV
• Agreement to redevelop The Peninsula Yangon
• Expansion into education, agriculture and logistics

Redeveloping The Yangon Peninsula Hotel

Yoma reported that it has signed a definitive shareholders agreement with Hongkong and Shanghai Hotels to redevelop the former Myanmar Railway Company headquarters on the Landmark site into The Peninsula Yangon hotel. We believe this is subject to the successful acquisition of the Landmark site, which currently has a deadline in end Jun 2014. Management indicated, during the media briefing, that it expects the lease of the site to be topped up from the current 28 years to a 50+10+10 structure once discussions with the respective ministries are concluded, and that there could be concrete updates regarding the acquisition in the next month or so.

Enhancing value with schools at key sites

Yoma also reported plans to co-develop educational facilities with Harrows International Management Services in Pun Hlaing Golf Estate and Dulwich College International in Star City. Both schools are anticipated to enroll about a thousand students each, and are slated to open by 2016. While the direct ROI for these investments fall in the single digits, management believes that the strategic location of these schools will yield significant benefits as they enhance the value of residential properties in both development sites. In addition, the group also reported that it will take an 80% stake in developing two sites near FMI City in Hlaing Tharyar Township, Yangon into a project with 90 residential units and 19.9k sq ft of commercial leasing space.

BUY with higher S$1.00 fair value estimate

The group also formed a proposed partnership (YALH) with IFC to invest in agriculture and logistics businesses. YALH has entered into agreements with ED&F Man Holdings Ltd, PMM Partners Ltd, and Kokubu & Co. Ltd., separately, to invest in coffee planting in Ayeyarwaddy, and supplying UHT dairy products, and establishing a cold chain business in Myanmar, respectively. Maintain BUY with a higher fair value estimate of S$1.00, versus S$0.97 previously, as we update our model for the accretion from the FMI City Gate project and marginally firmer real estate prices.

Source: OCBC Research - 12 Mar 2014