Yoma Strategic Holdings’ 32.1% profit growth disappoints analyst

Even as home sales surged.

Yoma Strategic Holdings (Yoma) reported 3QFY13 PATMI of S$3.7m, increasing by S$2.3m YoY mostly due to higher sales of residences and land development rights. 

Here’s more:

This brings 9MFY13 PATMI to S$1.9m,  which is mostly in line with our expectations but below consensus  estimates. Topline for the quarter came in at S$13.0m, up 32.1% YoY, again driven by stronger property sales.

Yoma reports that residential sales during the quarter increased by more than three times YoY, and is mainly attributable to multiple projects in Pun Hlaing Golf Estate (Ivory Court Residences II, Bamboo Grove Garden Villa, Lakeview Apartments) and also apartments in Star City. Myanmar outlook stays firm.

The macro outlook in Myanmar continues to be positive. Last Sunday, the World Bank announced a deal that would allow Myanmar to clear its outstanding debt to the World Bank and the Asian Development Bank, totaling about US$900m, which would allow new lending for the infrastructure growth, including electricity and ports.

We also look forward to Yoma’s anticipated general meeting to approve the acquisition of the central Yangon site; the proposed 1-for-4 rights issue at S$0.38 per share is conditional on this approval.

Over the period in 2012 when we initiated coverage and maintained a buy rating on the company, the share price had appreciated a whopping 47% in five weeks. However, at current price levels, while we acknowledge that the company holds meaningful franchise value
as a leading developer in Myanmar, we see most positives to be already priced in, even under our most optimistic assumptions.

We downgrade our rating on the company to a SELL based on a 12-month fair value estimate of S$0.71 (20% premium to RNAV), but caution that the anticipated 1-for-4 rights issue ahead would likely be supportive of the share price over the nearer term.

Note that our fair value estimate is a considerable 35% above the S$0.525 per share paid by major investors who bought into the 192.9m-share private placement just two months ago.