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MYANMAR'S ECONOMY TAKES FLIGHT; HERE'S HOW TO PLAY ITBy PC Lee
SINGAPORE (Nov 17): Daiwa Capital Markets is initiating coverage of Yoma Strategic with a “buy” call with 73 cents target price, as the stock offers investors a way to ride Myanmar’s expanding economy, while featuring multiple growth drivers.
In a Wednesday report, lead analyst Shane Goh says a new political party, an influx of foreign investments, and the lifting of sanctions by Europe and the US is propellling Myanmar’s economy on an upward trajectory.
One big attraction is Yoma’s
residential land bank, which was acquired during low-cost periods, and offers healthy margins of 30-50%.
Clarity on the Condominium Law, which enables foreigners to buy homes in the country, would provide a key impetus to drive residential sales, says Goh.
“We forecast sales of 150 units in FY17E, before accelerating to 305-315 units per year in FY18-19E,” adds Goh, who says they will come from three projects:
Star City, Pun Hlaing Estate and Landmark Residences.Consequently, Daiwa forecasts PBT to rise at a 22% CAGR for FY16-19E, with the real-estate segment contributing more than 85% of PBT over this period.
Yoma aims to diversify its earnings base and derive 50% of revenue from non-property sources by FY20. Goh believes its KFC business is set to attain critical mass and break even at the EBIT level from FY17E onwards, with a target of 12 outlets by end-FY17.
As for the automotive busines, increased adoption of mechanisation in the agriculture segment and growth in the construction sector should boost revenue from agriculture and equipment vehicle sales.
Goh says key catalyst for the stock would be further clarity on the Condo Law while the government is also expected to unveil a raft of detailed regulations and procedures by December. Other catalysts include signing up new franchisee or distributorship licences in its F&B and automotive businesses.
“We initiate coverage with a 12-month TP of SGD0.73, based on a 30% discount to
our SOTP valuation of SGD1.04,” says the analyst,
“Our SOTP includes the present value of residential sales, the revaluation of its undeveloped land bank and investment properties, as well as ascribing earnings multiples to its other businesses. Notably, Landmark, which contributes 30% of our SOTP valuation, would only generate revenue from FY21 onwards.”
Shares of Yoma are up 0.5 cent to 52.5 cents.
Source: The Edge
http://smr.theedgemarkets.com/article/m ... e-87358173
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