• Foray into mobile financial services
• Expected to be cash flow positive
• FV of S$0.51

Expanding Into the Financial Services Sector

Yoma announced yesterday that it plans to acquire a 34% stake in Digital Money Myanmar Co., Ltd. (Wave Money) from First Myanmar Investment Company Limited (FMI) for US$19.4m.

Wave Money is the first licensed provider under the Central Bank of Myanmar’s Mobile Financial Services Regulation to offer mobile financial services to consumers in Myanmar. Its product offering includes money transfer, either through mobile account or at Wave Money agents, in addition to corporate products.

Following the acquisition, apart from Yoma, other stakeholders will include Telenor, FMI and Yoma Bank with 51%, 10% and 5% stakes in Wave Money, respectively.

Tapping Opportunities and Synergies

In our opinion, Yoma’s investment in Wave Money should be beneficial in the mid to long term. Firstly, over 80% of Myanmar’s population remains unbanked, according to Channel NewsAsia, while physical bank branches and ATMs are limited. Mobile financial services could help to address this, given that total mobile penetration in Myanmar stands at 105% with smartphones representing 80% of the mobile phones sold in the country, according to Telenor.

Secondly, Wave Money should prove to be complementary to Yoma’s existing businesses. Over time, the newly-acquired platform should allow Yoma Fleet to expand finance lease and hire purchase services, as well as for the group to put out other lending offerings.

From Jan 17 to Jan 18, Wave Money has seen monthly revenue grow at a CMGR of 22%, while transfers volume has grown at a CMGR of 30% over the same period. We understand that the business should be cash flow positive within the next couple of months.

Broadly Positive, But Staying Conservative

Notwithstanding the positives as outlined above, we have not incorporated the new business into our assumptions at this juncture, given the relatively early stage of Wave Money’s growth.

In light of recent market volatility, as well as the continued oversupply of condominiums in Yangon, we prefer to adopt a conservative stance and employ a higher discount to our SOTP valuation, thereby adjusting our fair value estimate from S$0.55 to S$0.51.

Source: OCBC Research - 7 Mar 2018