• S$0.53 per placement share
• Capex requirements of ~US$150- 200m
• Maintain HOLD

~S$82.2m Raised Through Share Placement

Yoma announced that it has raised gross proceeds of ~S$82.2m following the closure of a placement exercise involving the issuance of 155m new ordinary shares at S$0.53 per placement share. This comes at a ~9.4% discount to the volume weighted average price of S$0.5852 per share for trades done on 2 Nov-3 Nov 2017 up to the time of the trading halt.

We understand that the pricing range to investors was between S$0.53 – S$0.54 per placement share. This placement will represent ~8.2% of the enlarged issued and paid-up share capital of the company, subject to approval-in-principle being granted by the SGX-ST.

Various Fund Raising Avenues Expected

Yoma will be setting aside ~50%-60% of the net placement proceeds for the group’s Real Estate businesses, ~15-20% for the group’s Automotive & Heavy Equipment businesses, and another ~15-20% for its KFC store expansion and potential new F&B investments. We understand that the group foresees capex requirements of ~US$150-200m and this is to be funded through a mixture of equity fund raising (which this latest placement exercise falls under), additional debt, as well as the sale of non-core assets, possibly including its interest in a retail mall in Dalian, PRC. We expect the group to gear up once it has built up a steady stream of recurring income.

Streamlined Business Units

While this latest round of equity fund raising would likely be dilutive in the near term, we are of the opinion that this is congruent with management’s intention of growing its core businesses and streamlining its non-core operations. Specifically, management has decided to focus and organize the group into three verticals: Yoma Food, Motor and Land. In light of more focused growth, we incorporate slightly firmer assumptions, but adjust for the enlarged share base following the placement exercise. All considered, our fair value estimate dips from S$0.58 to S$0.55. Maintain HOLD.

Source: OCBC Research - 6 Nov 2017