• Muted contribution by the Real Estate business
• Condominium by-laws a positive
• Correction overdone

Non-real Estate Businesses Contributing Well

Yoma’s 3Q18 revenue witnessed a marginal gain of 0.1% YoY to S$24.1m, with gains in its Automotive & Heavy Equipment and consumer businesses largely offset by weakness in the group’s Real Estate development business. We understand that the drop in revenue from S$6.1m in 3Q17 to S$1.4m in 3Q18 was largely due to the group’s change in sales strategy for StarCity’s Zone C following the recent buy-back of the development to withhold some units for long-term rental, as well as a re-design of other units to meet the demand for smaller spaces.

For the same reasons, we believe that contribution from the group’s Real Estate development business will continue to be muted in the near term. PATMI rose from S$334k in 3Q17 to S$16.8m in 3Q18, due largely to the fair value and disposal gain from the completion of the disposal of the group’s tourism related businesses.

Mixed Outlook for the Property Segment

We note that the long-awaited Condominium bylaws have been issued in December 2017, which allows foreign buyers to own up to 40% of the total floor area of a condominium building. Registered condominiums will also soon be eligible for strata title, which should aid in the development of a domestic mortgage market. While these are broadly positive, we reiterate our concerns on supply as outlined in our report last month, with the future condominium supply in Yangon remaining substantial with more than 10,000 units currently in the pipeline, according to Colliers International.

Value at Current Level

Notwithstanding the above, we believe that earnings visibility for the group’s Automotive & Heavy Equipment Business continues to be evident, given that it is currently fulfilling an additional order of 500 New Holland tractors with revenue expected to be recognized progressively. For its consumer business, the group now has 21 KFC stores (post-3Q18) and aims to operate at least 32 KFC stores nationwide by end-March 2019. As such, we believe that the group’s target of reaching 50+ stores in 2020 is still achievable.

While concerns over the outlook for the property sector have not fully abated, we believe that Yoma’s share price has now undergone an overcorrection, especially in light of the recent broader market pullback. We maintain our fair value estimate of S$0.55 for now.

Source: OCBC Research - 8 Feb 2018