Yoma announced that, instead of acquiring 80% of the Landmark site after the SPA group has extended the master lease to 50+10+10 years (as originally planned), it will initially acquire the site (comprising 2 subplots with remaining leases of 24 and 26 years respectively) with its existing leases with a first payment of US$43.2m. The remaining payment of up to US$38.08m will be paid to the SPA Group if and when the master lease extension to 50+10+10 years is secured in future.

SPA is also expected to procure approval, by end Dec-15, from the Myanmar Investment Commission (“MIC”) for the transfer of the site to Yoma, and Yoma’s pro rata development cost for Landmark will be capped at US$40m over this period, in addition to the S$7m already incurred. Should the SPA Group fail the obtain MIC’s approval for the transfer by end Dec-15, it will refund Yoma US$43.2m and all monies disbursed for the Landmark project.

To fund this acquisition, Yoma has proposed a 1-for-8 rights issue at 38 S-cents and Serge Pun, the controlling shareholder, has indicated his intention to support the entire rights issue. We will speak with management about the transaction later today and, in the meantime, maintain BUY with our fair value estimate of S$0.87 under review.

Source: OCBC Research - 16 Jun 2014