Yoma Strategic Holdings

Price target: PhillipCapital ‘unrated’

Responding to challenging macro environment

Yoma Strategic Holdings is adapting well to the challenging operating environment of its home market Myanmar, says PhillipCapital analyst Paul Chew in an unrated report.

Myanmar’s GDP, in US dollar nominal terms, contracted 17.5% y-o-y in 2021 and 8.9% in 2022. Inflation is running at 20% per annum and the kyat is down 60% since 2021.

In response to these challenges, Yoma has been de-gearing its balance sheet, disposing of its non-core assets, localising costs as well as “rebalancing” its headcount, Chew points out.

“Following the pandemic and coup in 2021, Yoma has undergone a major de-leveraging and rightsizing exercise. Net debt has shrunk from US$326 million ($433.6 million) in September 2021 to US$134 million in September 2023. The company disposed of investment properties,

restructured Yoma Central debt, resized food and beverage (F&B) operations, lowered manpower costs and generated operating cash flow,” says Chew.

Real estate development has been the key performer for Yoma. The division’s revenue has more than tripled in 1HFY2024 ended September 2023 to US$48 million.

As at September 2023, there is US$65.2 million of unrecognised revenue from the property division. Not included in this number are 515 of the 527 units at the Estella project, which have been sold and booked since the launch in October 2023.

Future launches include Phase 4 of Estella (163 units) and City Loft West third tower (247 units). There is another 6.2 million sq ft landbank which Yoma can develop on its own or with partners, says Chew.

Property earnings contributed to two-thirds of Yoma’s almost fourfold spike in ebitda to US$18.8 million in 1HFY2024. The next three major contributors were Wave Money, leasing and F&B.

Myanmar’s digital payment sector is dominated by Wave Money and KBZPay, operated by the country’s largest bank, KBZ Bank. Wave Money became a subsidiary of Yoma in December 2022 after the acquisition of an additional stake from Telenor.

In future, more money transfers will likely move into the digital wallet rather than via agents. Although KBZ Bank has the advantage of securing commercial customer deposits that can be used for digital money transfers, banks suffer from a small footprint of branches compared to the huge network of Wave Money agents, Chew points out.

In its leasing business, demand for Yoma’s fleet is expected to be positive with the resumption of business activities. Additionally, the expansion of Yoma Plus to offer financing plans is an opportunity in the current credit-constrained environment.

Lastly, Yoma’s F&B business has been managing a high-cost environment amid high import costs and additional fuel costs to cope with power cuts. The benefits of the difficult past two to three years are starting to bring results, as revenue achieves record levels of US$16.7 million in 1HFY2024.

“There are fewer competitors in casual dining and fewer options for consumers to spend their disposable income and leisure time,” says Chew. —