• Yoma Strategic (SGX:Z59), with a new consortium of investors, is raising its effective stake in Wave Money to 64% while Telenor exits for US$76.5m.
• Implied price values Wave Money at 12x PE on 12-month March 2020 net profit; similar to Ant Financial’s investment previously.
• Yoma Strategic will hold up to 41% effective stake in Wave Money post the transaction with a further US$25m investment.
• We believe that Yoma Strategic and Ant Group have strong platforms for synergistic opportunities/cross business collaborations to drive Wave Money into the next phase of growth.

What’s New

• Following the entry of Ant Financial into Wave Money just a while back, Yoma Strategic is raising its effective stake by acquiring Telenor’s current 51% stake in Wave Money for US$76.5m, as the founder of Wave Money is making its exit. The implied valuation for Wave Money is similar to the previous investment by Ant Financial which was an estimated 9x PE on annualised 6-month March 2020 net profit or 12x PE on 12-month March 2020 net profit.

Key details of the transaction

• In conjunction with the transaction, Yoma Strategic intends to restructure the holding of its interest in Wave Money through Yoma MFS Holdings (Yoma MFS), a newly established company.
• Yoma MFS Holdings will acquire Telenor Group’s 51% stake in Wave Money for US$76.5m.
• Yoma Strategic will invest up to a further US$25m in Yoma MFS for another 11.2% effective stake in Wave Money while a consortium of investors will contribute as new shareholders of Yoma MFS.
• Post the transactions and restructuring, Yoma MFS Holdings will hold a 63.76% effective interest in Wave Money while Ant Financial and Yoma Bank will hold the remaining 33% and 3% respectively. Yoma Strategic will hold up to a 40.72% effective interest in Wave Money.
• Yoma Strategic will fund the additional investments via new capital from Ayala Group and bridging loans.
• Post these transactions, Yoma Strategic will consolidate the financials from Wave Money.
• Long-stop date for completion is 15 November 2020.

Our Views

• While we do not need more introduction to Wave Money or its future prospects in building a super app as Myanmar accelerates the adoption of digital money, the key concern is whether Yoma Strategic and Ant Financial will be able to drive Wave Money to its next level of growth with the departure of Telenor.
• While the next part of the journey may be rocky with increased competition, we believe Wave Money’s dominant position in Myanmar and the synergistic opportunities that both Yoma Strategic and Ant Financial can provide will give Wave Money a firm platform as it expands into a super app.

Source: DBS Research - 24 Jun 2020