Real es­tate slump pulls down Yoma prof­its

The Myanmar Times - - Business - STEVE GIL­MORE s.gil­more@mm­times.com

YOMA Strate­gic recorded its first taste of rev­enues from its lo­cal branches of US fast-food chain KFC in the first quar­ter of this fi­nan­cial year and en­joyed growth in its au­to­mo­tive and prop­erty rental busi­nesses. But a slug­gish real es­tate mar­ket left the group’s net prof­its down on the pre­vi­ous year.

The firm is the lo­cal fran­chise holder for KFC and opened its sixth branch in June. Rev­enue from the KFC busi­ness for the first quar­ter of this fi­nan­cial year was S$2.15 mil­lion (K1.84 bil­lion; US$1.57 mil­lion) – 12.2 per­cent of the group’s to­tal, Yoma an­nounced yes­ter­day.

The Sin­ga­pore-listed com­pany opened its first KFC store in June 2015, mak­ing the most re­cent quar­ter the first to record rev­enue from the new busi­ness. The group aims to have 12 KFC stores op­er­at­ing by March 2017, it said.

But de­spite the ad­di­tion of KFC on the group’s in­come state­ment, net prof­its were down 12pc year-on-year, fall­ing from S$2.57 mil­lion to S$2.26 mil­lion ac­cord­ing to re­sults re­leased yes­ter­day. Group rev­enue for the first quar­ter was down over 22pc year-onyear, fall­ing from S$22.64 mil­lion to S$17.56 mil­lion.

The main cul­prit was a sharp fall in rev­enue from the sale of res­i­dences and land de­vel­op­ment rights. That busi­ness brought in S$12.3 mil­lion in the first quar­ter of the pre­vi­ous fi­nan­cial year – more than half of the group’s to­tal rev­enue for that pe­riod. This year the first quar­ter fig­ure was just S$3 mil­lion.

Yoma Strate­gic said the drop was due to “soft real es­tate mar­ket con­di­tions”. The group also pointed to the fact that it had fin­ished two build­ings in Zone A of its Star City pro­ject, and de­cided to post­pone sell­ing prop­er­ties in Pun Hlaing Es­tate un­til they are al­most com­plete “in or­der to achieve higher mar­gins”.

The real es­tate mar­ket re­mains slug­gish, but is show­ing signs of re­cov­ery, Melvyn Pun, Yoma Strate­gic’s chief ex­ec­u­tive of­fi­cer, said. How­ever, a de­ci­sion by Yangon Re­gion govern­ment to halt con­struc­tion on over 100 high-rise projects had also hurt “buy­ers’ sen­ti­ments”, the group said.

Yangon au­thor­i­ties is­sued a blan­ket sus­pen­sion on high-rise con­struc­tion projects in or­der to make sure they cor­re­spond with city de­vel­op­ment and zon­ing plans. Some de­vel­op­ers are be­ing told to dras­ti­cally amend plans, al­though “none of the group’s on-go­ing projects have been halted”, Yoma Strate­gic said.

Yoma’s real es­tate rental rev­enue, mean­while, rose slightly from S$2.54 mil­lion to S$2.85 mil­lion year-on-year, mainly from higher oc­cu­pancy and rental charges at the Star City and Pun Hlaing Es­tate apart­ments. The group also an­nounced it ex­pects to fin­ish its Land­mark De­vel­op­ment pro­ject in down­town Yangon by 2020, hav­ing re­cently se­cured vi­tal lease ex­ten­sions (see re­lated story above).

In the au­to­mo­tive sec­tor firstquar­ter rev­enue was S$7.41 mil­lion, up from S$6.97 mil­lion in the same quar­ter of last fi­nan­cial year, driven by the group’s New Hol­land trac­tors trad­ing busi­ness and leas­ing firm Yoma Fleet. The leas­ing arm’s rev­enue more than dou­bled year-on-year to hit S$1.1 mil­lion in the first quar­ter.

To­tal bor­row­ing for the group rose to S$108 mil­lion as of June 30, up from S$89.7 mil­lion at the end of March. Most of the in­crease went on grow­ing the Yoma Fleet busi­ness, cap­i­tal ex­pen­di­ture on the KFC stores and con­struc­tion costs, Yoma said.

The group’s au­to­mo­tive busi­ness ac­counted for 42pc of to­tal rev­enue, while the sale of res­i­dences and land de­vel­op­ment rights con­trib­uted just over 17pc. As the au­to­mo­tive op­er­a­tions have lower profit mar­gins than real es­tate, this bal­ance low­ered the group’s gross profit mar­gin from 44pc to 38.8pc, the firm said.

The com­pany’s shares were down 0.83pc yes­ter­day af­ter­noon at S$0.6, hav­ing started this year at S$0.49.

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