Evolving Yoma poised to capture Myanmar’s growth
1. Yoma Strategic has evolved over the last five years and is focused on four key businesses. What can shareholders expect in the next three to five years?
We have accelerated the buildout of non-real estate businesses, particularly our non-bank financial services and consumer sectors. These businesses have scaled up and are out of their incubation phases, and should contribute to earnings going forward. We will continue to focus on improving profitability and cash flow across all our businesses, and are confident of creating additional value for shareholders.
Given Myanmar’s financial inclusion gap and shortage of affordable housing in major cities, we are excited about the role we can play in shaping the affordable housing market segment and the financial services sector through technology. We foresee Yoma Land and Yoma Financial Services representing a large part of our valuation in the next three to five years.
2. Yoma Strategic has many international partners. What is your strategy in working with them?
We are an attractive proposition for international companies entering Myanmar as we combine extensive domestic market knowledge with international standards of corporate governance and transparency. For an emerging market like Myanmar, this is particularly valuable when forging partnerships. Our partnerships and investments underscore our partners’ confidence in the future of Myanmar and in Yoma Strategic.
We seek partners who not only add capital and expertise, but also validate the valuations of our businesses:
• Tokyo Century’s US$ 26.6- million ($37-million) investment for a 20% stake in Yoma Fleet, our fleet leasing business, valued it at US$133 million, placing its implied valuation at around 25% of our market cap.
Ayala Corporation’s US$155 million investment at $0.45/share represented a 37.7% premium over the volume-weighted average price of our shares on the day of transaction.
Ant Group announced in May plans to invest US$73.5 million in Wave Money, our mobile financial services business, to become a substantial minority shareholder.
3. Ayala Corporation is making a significant investment in Yoma Strategic. What can we expect from this partnership?
With its 185 years of history, Ayala is one of Asia’s most respected and successful conglomerates. It played a vital role in private sector development in the Philippines and has leadership positions and well-run operations in many industries similar to Yoma Strategic. We share a long-term vision for building scalable and sustainable businesses in Myanmar, and Ayala’s success in the Philippines will provide a roadmap for how we can develop Yoma Strategic.
Joining as a non-independent non-executive director is Ayala’s president and COO, Fernando Zobel de Ayala, who will further add diversity of experience and knowledge to our board.
4. How do you plan to invest the US$155 million funds from the Ayala deal?
The majority of the proceeds will be invested in our real estate business, including the Yoma Central mixed-use development and the Peninsula Yangon Hotel, as well as the expansion of City Loft. We will also use some of the proceeds to reduce gearing and for general corporate purposes.
5. Yoma Land remains your largest earnings driver. What are key opportunities for this business?
Sales of City Loft, our affordable residential product for the underserved middle-income segment, saw strong interest and take-up since its launch in November 2018. This taps into a significantly larger market than our previous focus on high- to mid-end residential offerings. Further launches for City Loft will help to drive sustainable cash flows for Yoma Land’s development activities. Meanwhile, the completion of Yoma Central by the end of 2021 will transform Yoma Land’s business by significantly growing recurring revenue streams.
We will also leverage Ayala Land’s vast regional experience to further develop our large existing landbank of more than 9 million sq ft, acquire additional landbank in a capital-efficient manner, and create a product pipeline for a more “life-cycle”-centric strategy for greater demographic penetration.
6. Yoma Financial Services was added as a new core business in March 2018. What are the key highlights and opportunities for this business?
Myanmar’s population is still massively underserved by formal banking institutions with only 25% of people having a bank account. With a connected population and high smartphone penetration, Myanmar is ready for mass adoption of digital payment services and mobile e-wallets.
In 2019, Wave Money’s transfer volume more than tripled from 2018 to reach US$4.3 billion, equivalent to 6% of Myanmar GDP. During the same period, revenue and transaction numbers also tripled. Wave Money became Ebitda positive in September 2018, just two years after its launch and continues to maintain its profitability.
Ant Group’s investment will accelerate Wave Money’s growth trajectory. Its experience in building mobile payment platforms and e-wallets will help to enhance Wave Money’s digital capabilities, user experience and service offerings to better address the needs of users in Myanmar.
In 2019, Yoma Fleet’s third-party assets under management grew by 79% y-o-y to US$50 million. It targets to have an asset base of over US$200 million by 2023.
7. Yoma F&B has four brands under its umbrella: KFC, Little Sheep, Auntie Anne and YKKO. How do you intend to grow this business?
During the past 18 months, Yoma F&B’s store count has tripled to 91 outlets, making it the largest restaurant operator in the country. Our goal is to have six or more brands and upwards of 125 locations by FY2023, including expansion outside of Myanmar’s major cities. We will also focus on improving efficiencies, developing supply chains, and stepping up marketing and brand-building efforts.
8. Yoma Strategic recently divested its telco tower investment. Why?
Exiting this business was in line with our longterm strategy of growing core businesses, while actively working to dispose of certain non-core assets to redeploy capital in our balance sheet.
Our initial investment of US$20 million in edotco Myanmar grew 4.6 times to US$93 million over five years. Proceeds from the sale were earmarked for acquiring an additional 10% in Wave Money and to reduce debt.
Net gearing ratio declined to 24% as at March 31 from 31% a year ago with the repayment of certain borrowings from the proceeds of the sale of edotco Myanmar and the first tranche of Ayala’s investment.
9. Is Yoma Strategic exploring any opportunities outside of its four core businesses?
More than 60% of Myanmar’s population is without access to grid electricity, making electricity supply one of the largest opportunities and one of the biggest bottlenecks for Myanmar’s economic development.
We are working to bridge this gap with Yoma Micro Power and our proposed JV with AC Energy. Yoma Micro Power builds micro power plants and mini grids that provide electricity to off-grid rural communities and telecommunications towers. Following a successful pilot, Yoma Micro Power is targeting more than 2,000 sites by 2023. We are also looking to develop around 200MW of additional renewable energy projects in Myanmar with AC Energy, including participating in large utility-scale renewable projects.
10. Lastly, what do you think are the key drivers for Myanmar’s economic growth?
We are confident Myanmar’s long-term economic outlook. Guiding this is the Myanmar government’s Sustainable Development Plan — a comprehensive, forward-looking, social, economic and environmental reform agenda. Also, China’s Belt & Road Initiative (BRI) will provide a huge economic impetus.
During President Xi Jinping’s visit in January, he signed more than 33 bilateral agreements including railway, port and Special Economic Zone projects, which are expected to bring billions of dollars in foreign direct investments and create jobs. More BRI projects will follow soon, including the New Yangon City.
An integral part of our growth is the continued promotion of sustainable investment models, which offers our international partners a fair and level playing field, and one to which Yoma Strategic is fully committed.