Yoma 120905 Oir Final

Asia Pacific Equity Research | Singapore
YOMA STRATEGIC HOLDINGS | BUY
5 Sep 2012
Photo Source: Company
ENTERING THE GOLDEN LAND

Yoma Strategic Holdings Ltd (Yoma) was listed on the SGX in Aug 2006 and is primarily involved in the real estate sector in Myanmar. It is the only publicly listed company globally today providing almost pure exposure to Myanmar with an average daily liquidity over USD5m. Given the political will shown by President Thein Sein so far, we believe the process of economic liberalization in Myanmar will likely be meaningful and sustainable, which bodes well for Yomas long term outlook. Yoma is also an affiliate of the SPA Group (SPA), an established conglomerate in Myanmar with a track record in acquiring, developing and marketing large residential projects. This gives Yoma a strong competitive edge and a first mover advantage in the Myanmar real estate sector. We initiate coverage with a BUY rating and a fair value estimate of S$0.45, based on a scenario-weighted RNAV methodology. (Eli Lee)
Please refer to important disclosures at the back of this document.
MICA (P) 035/06/2012
Singapore | Construction & Engineering
Asia Pacific Equity Research
YOMA STRATEGIC HOLDINGS | BUY

MARKET CAP: USD 290M AVG DAILY TURNOVER: USD 5M 5 Sep 2012 Company Initiation
ENTERING THE GOLDEN LAND

Exposure to Myanmar real estate First mover advantage Initiate with BUY with S$0.45 FV
BUY (initiate)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast S$0.45 S$0.00 S$0.38 20%
Only listed company offering pure Myanmar exposure Yoma Strategic Holdings Ltd (Yoma) was listed on the SGX in Aug 2006 and is primarily involved in the real estate business in Myanmar selling, developing and managing land and real estate projects. It is the only publicly listed company globally today providing almost pure exposure to Myanmar with an average daily liquidity over USD5m. Positive long-term outlook and a clear competitive edge The Myanmar economy is a key driver of Yomas business outlook and, given the political will shown by President Thein Sein so far, we believe the process of economic liberalization will likely be meaningful and sustainable. Yoma is also an affiliate of the SPA Group (SPA), an established conglomerate in Myanmar with a track record in acquiring and developing large residential projects. This gives Yoma a strong competitive edge and a first mover advantage in the Myanmar real estate sector. Access to capital markets - a key source of strength Yomas ability to access capital markets and acquire attractive assets from SPA also enables SPA to focus on what we view to be a core competency: seeking, gestating and recycling capital to a pipeline of accretive Myanmar opportunities. This niche Yomas key role in the larger virtuous dynamic of capital flow within the group is crucial in addressing two common investor concerns. First, that Yoma does not have direct ownership of its land in Myanmar; secondly, that transactions between Yoma and SPA may potentially involve conflicts of interest. Because Yomas access to capital is clearly underpinned by its long-term financial transparency and health, we see it in SPAs paramount interest to be a careful fiduciary of Yomas land assets and ensure transactions at arms-length prices. Initiate with BUY and fair value estimate of S$0.45 We initiate coverage with a BUY rating and a fair value estimate of S$0.45, based on a scenario-weighted RNAV methodology.
Analysts Eli Lee (Lead) +65 6531 9112 elilee@ocbc-research.com Sarah Ong +65 6531 9678 sarahong@ocbc-research.com
Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$361.6 / USD289.8 S$6 / USD5 17.2 0.053 - 0.518 45.8 964.3 SGX YOMA SP YOMA.SI Z59 Industrials Constr. & Enginr Serge Pun 50.1% 1m 0 0 3m -1 -14 12m 562 553
Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr i ce (S$ ) 0.62 0.51 0.39 0.28 0.17 0.06 Sep-11 Dec-11 Mar -12 `
Index Level 28600 23380 18160 12940 7720 2500 Jun-12 Sep-12
Fair Value
Sources: Bloomberg, OIR estimates
YOMA SP
FSSTI
Key financial highlights Year Ended Mar 31 (S$m) Revenue Cost of sales Gross profit PATMI EPS (S-cents) Cons. EPS (S cts) PER (x) P/NAV (x) ROE (%) Net profit margin (%) FY11 11.2 -8.6 2.6 2.6 0.5 na 75.2 1.5 2.0 23.5 FY12 39.2 -27.6 11.6 6.1 1.2 na 32.6 1.5 4.5 15.5 FY13F 56.9 -40.1 16.8 6.3 0.5 na 71.6 1.3 1.8 11.1 FY14F 70.5 -51.5 19.0 6.4 0.5 na 70.3 1.3 1.8 9.1
Industry-relative metrics
Per centil e
0t h 25t h 50t h 75t h 100t h
M k t Cap B et a ROE PE PB
Company
Industr y Aver age
Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates
Please refer to important disclosures at the back of this document.
MICA (P) 035/06/2012
OCBC Investment Research Singapore Equities
Table of contents
Section A Section B Section C Section Section Section Section Section D Section Section Section Section Section E Section Section Section Section Section Section Section F Section G Section G.i Section G.ii Section H Section I Section I.i Section I.ii Section I.iii Section J Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6
Summary Brief business overview Macro driver The Myanmar economy Key economic statistics and facts Overview of key events Major reforms and policies to date Our view: liberalization is real and sustainable Company-specific driver Myanmar real estate sector Looking back at China, India and Vietnam The real estate story revolves around Yangon Foreign participation to be key catalyst An opportunity: the burgeoning condominium market Company business segment Real estate Overview of real estate business Yangon, Myanmar FMI City Yangon, Myanmar Pun Hliang Golf Estate Thanlyin, Myanmar Star City Dalian, China Grand Central retail mall Potential real estate pipeline ahead Company business segment Others Financial highlights and forecasts Income statement Balance sheet and Cash flow statement SWOT Analysis Valuation Scenario-weighted surplus RNAV method Base-case scenario Bear-case scenario Investment thesis and recommendation Key statistics and facts of Myanmar Myanmar - key events since 1948 List of key projects in Myanmar 1998 Foreign Investment Laws Biographies of key management personnel Major shareholders
3 4 6 6 6 7 8 10 10 11 12 12 13 13 15 18 21 24 25 26 28 28 29 32 35 35 36 36 38 40 44 45 46 47 50
C.i C.ii C.iii C.iv
D.i D.ii D.iii D.iv
E.i E.ii E.iii E.iv E.v E.vi
Section A: Summary
Only listed company offering pure Myanmar exposure Yoma Strategic Holdings Ltd (Yoma) was listed on the SGX in Aug 2006 and is primarily involved in the real estate business in Myanmar selling, developing and managing land and real estate projects. It is the only publicly listed company globally today providing almost pure exposure to Myanmar with an average daily liquidity over USD5m. Myanmar economic liberalization likely to be sustained The Myanmar economy is a key driver of Yomas business outlook and, given the political will for reform shown by President Thein Sein so far, we believe the process of economic liberalization is likely to be a meaningful and sustainable one. Myanmar has also opened up at a time when the world would embrace it readily, given its immense potential for economic growth while the US, Eurozone and even perennial growth giant China struggle with economic uncertainties. Affiliation with SPA Group gives competitive edge As Myanmar opens up its economy, we believe there are limited domestic companies with sufficient management depth and business experience to fully leverage on the economic opportunities. Yoma is an affiliate of the SPA Group (SPA), one of the largest Myanmar conglomerates with track records in acquiring, developing and marketing large residential projects. This gives Yoma a strong competitive edge and a first mover advantage in the sector. Access to capital markets a source of strength Yomas ability to access capital markets and acquire attractive assets from SPA also enables SPA to focus on what we view to be a core competency: seeking, gestating and recycling capital to a pipeline of accretive Myanmar opportunities. This niche - Yomas key role in the larger virtuous dynamic of capital flow within the group is crucial in addressing two common investor concerns. First, that Yoma does not have direct ownership of its land in Myanmar; second, that transactions between Yoma and SPA may potentially involve conflicts of interest. Because Yomas access to capital a precious characteristic is clearly underpinned by its long-term financial transparency and health, we see it in SPAs paramount interest to be a careful fiduciary of Yomas land assets and ensure transactions at arms-length prices. Initiate with BUY and fair value estimate of S$0.45 Finally, we think that Yomas valuations are currently attractive. Our fair value estimate of S$0.45 implies a 20% price upside, and we expect the potential acquisition of a prime 10-acre site in Yangon to likely be a price catalyst ahead. We initiate coverage on Yoma with a BUY rating and a fair value estimate of S$0.45, based on a scenario-weighted RNAV methodology.
Section B: Brief business overview
Only listed company globally with pure Myanmar exposure Yoma Strategic Holdings Ltd (Yoma) is a Singapore registered company and was listed on the Mainboard of the Singapore Exchange in Aug 2006. At present, the S$362m (USD 291m) market-cap company is primarily involved in the real estate business in Myanmar selling, developing and managing land and real estate projects. Yoma is the only publicly listed company globally today providing almost pure exposure to Myanmar with an average daily liquidity over USD5m.1 Focused on real estate development Yoma currently has three core business segments: 1) Real Estate, 2) Agriculture and 3) Automobiles. At present, the key segment is Real Estate which made up over 94% of FY12 (ending Mar 2012) revenues, as shown in Exhibit 2. Management expects to focus on real estate activities as a main platform for financial earnings over the near term while building a diversified conglomerate of businesses in Myanmar. Other business units include agriculture, automobiles, retail mall operations and potentially others that the SPA Group is already involved in.
Exhibit 1: Representation of Yoma's business model Core Business Units Real Estate Agriculture Automobile Dealership
Growth Strategy Organic Business Expansion Expand into other SPA Group Businesses Partnerships with International Groups
Source: Company, OIR
An affiliate of The SPA Group in Myanmar Through a common majority shareholder, Dr. Serge Pun2, Yoma is an affiliate of SPA (Myanmar) Ltd an investment holding and operating company in Myanmar pursuing a conglomerate business strategy. We collectively refer to SPA (Myanmar) Ltd, and its subsidiaries, associates and affiliates (including Yoma) as The SPA3 Group. The SPA Group, founded in 1991 by Serge Pun, currently employs more than 4,500 employees in over 20 companies in six major sectors: financial services, real estate, manufacturing and industries, trading and services, automobile, and agriculture.
1 2 3
Yomas 3M average traded value is S$7.1m and has >94% of FY12 revenues from Myanmar Refer to Appendix 5 for detailed biographies of key management personnel, Appendix 6 for major shareholders SPA is an acronym for Serge Pun and Associates
Exhibit 2: Yoma's revenue breakdown (FY12)

Automobile, S$1.0m, 2% Real estate, S$36.9m, 95%
Exhibit 3: Yoma's asset breakdown (end FY12)

Agriculture, S$21.2m, 13% Automobile, S$18.0m, 11%
Others, S$1.3m, 3%
Others, S$52.1m, 32%
Real estate, S$73.1m, 44%
Source: Company annual report 2012
Source: Company annual report 2012
Exhibit 4: Yoma's corporate structure
Yoma Strategic Holdings Ltd (1) 100% Yoma Strategic Investments Ltd
(1)
100%
100%
100%
100%
100%
100%
Lion Century Properties Ltd (2)
Yoma Construction Industries Pte Ltd

(1)
Plantation Resources Pte Ltd (1)
Yoma Development Group Pte Ltd (1)
Wayville Investments Limited (2) 100%
Elite Matrix International Ltd

(2)
Land Development Rights
100% SPA Project Management Ltd (3) 100% SPA Project Management Pte Ltd (1) SPE
(4)
SPE
(4)
Wyndale International Limited (2)
Successful Goal Trading Co Ltd (3)
Pun Hlaing Golf Estate
Orchid Garden
Thanlyin Estate Development Ltd

(5)
Evergreen Condominiums
100% SPA Design (1) Pte Ltd
51% Tol & SPA Design Pte Ltd

(1)
Source: Company annual report 2012 Notes: 1) Incoporated in Singapore 2) Incorporated in British Virgin Islands 3) Incorporated in Myanmar 4) Regarded as a Special Purpose Entity ("SPE") of the Yoma group within the definition of INT FRS 12 5) With effect from 1 Jun 2012
Section C: Macro driver The Myanmar economy
i. Key economic statistics and facts For key statistics and facts of the Myanmar economy, please refer to Appendix 1.
ii. Overview of key events Before 2011: Military rule and isolationism Myanmar gained independence in 1948 and experienced democratic rule until a military coup in 1962. Anti-government riots between 1987 and 1988 saw killings and arrests of human rights activists including Aung San Suu Kyi. In 2010, the junta held elections to transit from a military to civilian government but this was widely discredited as the militarybacked Union Solidarity and Development Party (USDP) won resoundingly. After 2011: Signals of liberalization Major political and economic transformations began to set in, however, when Thein Sein became president in Mar 2011. In Dec 2011, US Secretary of State Hillary Clinton visited, as a sign of warmer relationships with the West. In the Apr 2012 by-elections, the opposition National League for Democracy (NLD), led by Aung San Suu Kyi, won 43 of the 44 seats it contested. Notably, the government, still dominated by the military, upheld the results, unlike the 1990 elections when the NLD wins were voided. Over Apr-Jul 2012, the EU suspended non-military sanctions for a year while the US eased financial and investment restrictions.
Exhibit 5: Major events and Yoma's share price movement

0.60 Apr 12: NLD wins upheld, Aung San Suu Kyi elected 0.50
Jul 12: US restrictions eased
0.40 Aug 11: Thein Sein meets Aung San Suu Kyi in Nay Pyi Taw 0.30 Mar 11: Thein Sein becomes president 0.20 Sep 11: Controversial dam project halted Dec 11: Hillary Clinton visits Myanmar
May 12: Star City acquisition approved
0.10 Jan 12: Yoma proposes Star City acquisition 0.00 Feb11 Mar11 Apr11 May11 Jun11 Jul11 Aug11 Sep11 Oct11 Nov11 Dec11 Jan12 Feb12 Mar12 Apr12 May12 Jun12 Jul12 Aug12 Sep12
Source: OIR, Bloomberg
ii. Major reforms and policies to date
Increasing foreign participation in the economy Under Thein Seins leadership, Myanmar has began to adopt outwardlooking policies and foreign participation in the economy has increased, mostly through private investments or supranational agencies assistance (see Appendix 3 for list of key projects). Going ahead, we could also see the Myanmar government reduce its centralized role in the following sectors: education, energy, forestry, health care, finance and telecommunications. 5-Year National Development Plan Thein Sein has proposed a 5-year national development plan (2011/12 to 2015/16) with the following key macroeconomic goals: 7.7% annual GDP growth (2010/11 market prices) 1.7x GDP per capita increase by 2015 decrease agricultural sectors GDP share from 36.4% to 29.2% increase industrial sectors GDP share from 26% to 32.1%
A foreign investment law and special economic zone bill, aimed at attracting foreign investments through economic incentive, is likely to be passed. In addition, a land utilization policy currently a common issue of contention among foreign companies is being formulated. Infrastructure Development through Joint Ventures Sector-specific development policies to encourage foreign participation have been put forth. In the telecommunications sector, up to three public-private joint ventures would be allowed. Similar proposals are being considered for the banking sector, currently in its infancy stage (only 2% of the population has bank accounts). Foreign companies have been roped in to construct power plants, addressing the situation of chronic electricity shortages. Establishing Special Economic Zones Going down a similar development roadmap as its Asian neighbors China, Thailand and Vietnam, Myanmar passed Special Economic Zone (SEZ) laws in 2011. The first three SEZs are Dawei, Thilawa and Kyaukphyu, and companies operating within the SEZs will be fully exempted from paying income tax for the first five years and will also receive a 50% tax reduction for the subsequent five years.
iii. Our view: liberalization is real and sustainable
We see three key reasons why Myanmars political and economic liberalization would likely be meaningful and sustainable: A) Thein Sein shows clear political will Since taking office on March 2011, President Thein Sein has led Myanmar through unprecedented policy changes and a well-regarded by-election. This demonstrates considerable political will and a commitment to liberalization. In stark contrast, the junta had previously taken minimal steps towards reform, mostly to appease the population and consolidate their power base after the 1988 anti-junta uprisings. B) Global receptiveness towards Myanmar Myanmar has opened up at a time when the world would embrace it readily. After two decades of breathtaking growth from its regional neighbors, global investment attention would inevitably be on Myanmar one of the last bastions of isolationism as it opens up. This is compounded by limited growth opportunities globally, with the US recovering from crisis, the Eurozone mired in debt issues and China showing signs of slowing economic growth. In addition, Myanmar is located in the fast growing ASEAN bloc and between giants India and China. For major global powers, engaging Myanmar would hold key strategic value as they look to grow soft power in the region. We note the speed which the EU, US and India moved quickly in succession to engage Myanmar after the recent by-elections.
Exhibit 6: Map of Myanmar and its regional neighbors
Source: Google Maps
C) Impact from neighbors economic growth Spillover effects from its neighbors vast growth would give Myanmars economic reforms an extra shot in the arm. The combined GDP of Myanmars top three trading partners (China, India and Thailand) grew a whooping 383% to US$9.3 trillion between 2001-11, and is forecasted to hit US$13.4 trillion (IMF) by 2015 making it an economic power bloc
on par with the US and EU. Increasing demand from its neighbors for Myanmars commodities and relatively affordable labor force underpins deep potential for the manufacturing and natural resource sectors.
Exhibit 7: Myanmar's top trading partners saw vast economic growth
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1991 China 2001 India 2011 2015 (IMF forecast) Thailand US$ tr
Source: IMF statistics and forecasts
Verdict of success to come in 2015 The verdict for liberalization, however, would likely have to wait. The next elections are expected in 2015 and a victory for National League for Democracy (NLD), led by Aung San Suu Ky, is almost assured. President Thein Sein, now 67, has indicated that he would likely step down then and it remains to be seen if the military would peacefully hand over power.
Section D: Company-specific driver Myanmar real estate sector
i. Looking back at China, India and Vietnam Neighbors showed high growth in real estate sectors Using GDP per capita as a general proxy for a countrys stage of economic development, we examined the real estate sectors of Myanmars neighbors (India, Vietnam and China) starting from the time they were at similar levels as Myanmar today (2011: USD 832 per capita).4 Over the subsequent five years, we found that the real estate GDP contribution of these countries grew in size by 57%-93% (see Exhibit 8). All three neighbors were also, like Myanmar, largely agricultural economies in the process of political and economic transformation using largely similar development roadmaps.
Exhibit 8: Growth in size of real estate contribution to GDP
200,000 GDP (INR Crore (10m)) 160,000 120,000 80,000 40,000 0 2006 (GDP per capita: USD 807 In 2006) 2007 2008 2009 2010 India
Vietnam 80,000
60,000 (VND Bn)
40,000
20,000
0 2006 (GDP per capita: USD 724 In 2006) 800 2007 2008 2009 2010
China
600 (CNY Bn)
400
200
0 1998 (GDP per capita: USD 817 In 1998) 1999 2000 2001 2002
Source: Bloomberg
In 2011, Myanmars GDP per capita (current prices) was USD 832 per capital. We examined India, Vietnam and China from the years their GDP per capita last came under S$832. For China, India and Vietnam, their GDP per capita (current prices) were USD817, USD807 and USD724 in 1998, 2006 and 2006, respectively.
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ii. The real estate story revolves around Yangon
Still mainly a Yangon-centric story Yangon is the countrys main commercial hub, largest city and the center around which the real estate sector revolves. For office space, while we would likely see increased demand to accommodate growing economic activity, overall supply remains scarce. As of end 2011, total office space was estimated at ~60k sqm this is around half of the floor area of Empire Tower, the largest office tower in Bangkok. For the residential sector, the government is keen to develop the outer areas around to expand Yangons urban borders, and typically offers land for housing projects to trusted developers. This has been favorable for well-financed developers with positive track records in Myanmar. Yangons main regions As shown in Exhibit 9, Yangon City forms the main part of Yangon Region. The downtown area is the old city of Yangon, including China Town, Indian District, the Port, hotels and office buildings. There are still old British colonial apartments and empty government offices due to the relocation of Myanmars capital to Nay Pyi Taw. The inner city area is an expansion from the downtown area, consisting of mainly residential properties, embassies and tourist attractions, like the famous golden Shwedagon Pagoda. The outer city area has significant empty land with factories in some parts. In addition, there is an industrial estate at Hlaingthanyar in the outer city area which has resulted in demand for residential projects sold in nearby locations. The nearby township of Thanlyin is not in Yangon City but has significant real estate developments.
Exhibit 9: Zoning in Yangon City
Source: Colliers International
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iii. Foreign participation to be key catalyst Foreigner influx into Yangon could raise rent levels Currently foreigners are allowed to rent but not own land under the 1988 Foreign Investment Law. Therefore, Yangon can expect to see higher rental levels as the investments by business people and investors surge. In addition, higher tourist arrivals with the resumption of diplomatic ties will also further liven up the local hospitality scene. New foreign investor law anticipated The anticipated new Foreign Investment Law (FIL) will entitle foreigners to lease land for an initial period of up to 50 years, which can be renewed for 2 rounds of 10 years each. This is up from the 30 years under the 1988 FIL, and is important in providing additional certainty for foreign investors leasing land for participation in the Myanmar economy (see Appendix 4). Foreign ownership of condominiums being considered A condominium act that allows foreign ownership is being considered as well. This is widely expected to result in dramatic increases in condominium demand as foreign investment capital flows into the economy, particularly as the price quantums for condominium units are relatively affordable (~USD70k per unit at the Star City project in the outer city area) versus landed homes.
iv. An opportunity: the burgeoning condominium market Landed homes popular but demand could turn to condos The overall condominium take-up rate in Yangon in 2H11 was a healthy 73%. It was highest in the downtown area, followed by the inner city and then outer city areas. If economic development is sustained, we believe the growing middle class could make up a strong demand base for condominiums, particularly as landed property, though popular, becomes unviable as land prices increase. One persistent challenge for the sector, however, is that the nascent financial system makes housing credit, which is necessary for large middle-class demand, inaccessible and costly for most. Future supply from outside downtown With limited land plots in the downtown area, the bulk of future condominium supply will come from the inner and outer city areas. It is estimated that ~1000 and more than 950 units are scheduled to be completed in the inner and outer city areas respectively by 2013. In contrast, less than 500 units will be completed in the downtown area by 2013. 5 Deterrent against a bubble To deter a speculative real estate bubble, authorities imposed cooling measures in Aug 2012 to dampen demand. Since Aug 2012, buyers who cannot show proof of income are required to pay a tax of 30% on the propertys value, an increase of 22%. This is on top of 7% stamp duties. We see this as a prudent step moving property price appreciation towards sustainable levels and would spur greater foreign investment in Yangon over the longer term.
Collier International estimates
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Section E: Company business segment Real estate
i. Overview of real estate business Yomas main business is real estate Real estate is the focal business of Yoma at present, accounting for over 94% of revenues in FY12 (see Exhibit 2). Note that Yoma, as a foreign company, is not permitted to own Myanmar land and real estate. Hence Yoma typically sets up a legal structure whereby it is entitled to economic benefits from the land directly held by a Myanmar entity, usually a subsidiary of the SPA Group. Another key feature of Yomas relationship with the SPA Group is that it has the right of first refusal to the Groups real estate assets and developments. Hence, Yomas acquisition pipeline would likely be formed by future projects that the SPA Group is involved in. Paricipating in three projects currently Currently, Yoma is working with the SPA Group on three projects FMI City, Pun Hlaing Golf Estate (PHG) and Thanlyin Star City (Star City) in which it holds the rights to economic benefits of 52.5%, 70% and 70%, respectively, as shown in Exhibit 11. All three projects are large gated community developments on sites that have multiple hundreds of acres. Yoma would launch for sale, typically in phases over several years, either land parcels, landed homes, or condominium units.
Exhibit 10: Location of Yoma's three real estate developments around Yangon
Source: Company, Colliers International, OIR
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Exhibit 11: Breakdown of launched developments, unsold land and future construction
Stake Units Break-even Selling EBT margin (%) 45% 36% 32% 27% 16% EBT margin (%) 72% 66% 25% EBT margin (%) 30% 30% 30% 20% 20% Sold (Jun 12) (%) 100% 45% 50% 73% 92% Sold (Jun 12) (%) 0% 0% 0% Sold (Jun 12) (%) 0% 0% 0% 0% 0% Completed (Jun 12) (%) 63% 53% 30% 48% 5% Completed (Jun 12) (%) na na na Completed (Jun 12) (%) 0% 0% 0% 0% 0%
(Ks. m /unit) Launched developments FMI houses (Orchid/Fontana) PHG - Ivory Court PHG - Bamboo Grove PHG - Lakeview (Block E-G) Star City - Building 3 53% 100% 100% 100% 70% Stake 102 20 4 48 264 NSA 94 310 461 186 60 Break-even
(Ks. m /unit) 170 485 680 255 75 Selling
('000 sq ft) Unsold land FMI city - land PHG - land Star City - land 53% 70% 70% Stake 585 4512 5277 Units
('000 Ks. psf) 3.2 8.8 16.8 Break-even
('000 Ks. psf) 11.2 25.7 22.3 Selling
(Ks. m /unit) Expected future home construction FMI houses PHG houses PHG apartments Star City - Apartments Star City - Houses Source: Company, OIR estimates Note: 1 USD = approximately 850 Ks; S$1 = approximately 680 Ks. 53% 70% 70% 70% 70% 91 294 160 8448 45 74 246 179 60 246
(Ks. m /unit) 106 352 255 75 308
Yoma's stake in launched developments in PHG are 100% because they have acquired the remaining 30% from the minority partner. NSA = net saleable area, we assume that only 80% of total remaining land at PHG and Star City is saleable
Moving away from selling plain land plots While Yoma had sold plain land plots in the past due to the speed and ease this provided capital for the company, it now prefers to sell landed homes or condominium units to capture additional construction profits. In addition, Yoma finds that plain land is more likely to be left empty by investors, which is detrimental to building up vibrant livable communities and consequently affects future sales. Limited competitors in Yomas niche During our trip to Myanmar in Aug 2012, we learnt from local sources that that there is a dearth of real estate developers with similar track records and the ability to develop large-scale projects like the SPA Group. As the government awards land sites in the outer areas to promote the real estate sector, expand urban borders and create construction jobs, the SPA Group is in a favorable position for acquisitions. In line with this dynamic, note that Yomas three sites are fairly large and lie in the outer Yangon areas.
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ii. Yangon, Myanmar FMI City FMI City sits on a 465-acre site, with a 60-year lease, that was awarded to the SPA Group in 1991. The development, which lies nine miles to the west of central Yangon and two miles from Yangon International Airport, was Myanmars first gated community. It was also the first residential project of this scale developed by the SPA Group.
Exhibit 12: Location of FMI City
SPA Group first launched sales in 1995 and Yoma acquired 52.5% of the land development rights (LDRs) at Ks. 3,167 psf 6 in 2006. This stake is currently held at cost on Yomas book. As of end Jun 2012, FMI City was mostly sold except for the last subdivision, Orchid City and Fontana, which comprises 585,000 sq ft of land on which 91 landed homes would be built. Yoma is also constructing 102 already sold landed homes from which revenue is being progressively recognized. Management guides that each landed home was sold at around USD 200k (Ks. 170m) each. Previously, plain land parcels, without houses, were being sold at USD 12 psf (Ks. 10.2k psf).
This valuation is on 100% stake basis.
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Exhibit 13: FMI City - breakdown of launched developments, unsold land and future construction
Stake Units Break-even (Ks. m /unit) Launched developments FMI houses (Orchid/Fontana) 53% Stake 102 NSA ('000 sq ft) Unsold land FMI city - land 53% Stake 585 Units 3.2 Break-even (Ks. m /unit) Expected future home construction FMI houses Source: Company, OIR estimates Note: 1 USD = approximately 850 Ks; S$1 = approximately 680 Ks. NSA = net saleable area 53% 91 74 106 30% 0% 0% 11.6 Selling (Ks. m /unit) 73% EBT margin (%) 0% Sold (Jun 12) (%) na Completed (Jun 12) (%) 94 Break-even ('000 Ks. psf) 176 Selling ('000 Ks. psf) 46% EBT margin (%) 100% Sold (Jun 12) (%) 63% Completed (Jun 12) (%) Selling (Ks. m /unit) EBT margin (%) Sold (Jun 12) (%) Completed (Jun 12) (%)
Exhibit 14: Layout of FMI City development
Source: OIR
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We visited FMI City and it appeared to be well occupied. It has amenities such as a sport and recreation center, supermarket and wet market, bank and food stalls. Transportation between FMI City and central Yangon can take between thirty minutes to two hours, depending on weather and traffic conditions.
Exhibit 15: A landed home in FMI City
Exhibit 16: Well maintained roads and landscape in FMI City
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iii. Yangon, Myanmar - Pun Hlaing Golf Estate
The Pun Hlaing Golf Estate (PHG) is a 637-acre residential development located eight miles west of Yangon in the Hlaing Tharyar township, surrounding an 18-hole golf course with a country club, international school and hospital on site. PHG is the second gated community development undertaken by the SPA Group and, compared to FMI city, provides for a higher-end client base. In 2006, Yoma acquired 70% of the LDRs for Ks. 7,005 psf 7. This is held on book at cost as well.
Exhibit 17: Location of Pun Hliang Golf Estate (PHG)
5.4m sq ft of land in PHG was unsold as of end Jun 2012. As discussed earlier, while Yoma has previously sold land plots at around Ks. 21k psf (USD 25 psf), going forward it will sell mostly landed homes and condominium units. The group is now focusing sales efforts at Ivory Court Residences which comprises 20 units of three-bedroom townhouses in the heart of the estate. Each house sits on 5.5k sq ft of land and sells for ~USD 570k (Ks. 485m). 10 houses have been sold as of end Jun 2012. As a follow-up to Ivory Court Residences, Yoma is developing Bamboo Grove - four landed homes on land plots between 7,800 to 9,500 sq ft selling for USD 800k (Ks.680m) each. Two houses have been sold. Yoma is also developing a condominium project in PHG called Lakeview Apartments with seven blocks and 144 units in total. As of end Jun 2012, 128 units are fully sold, and four blocks have completed construction. Each apartment costs an average of USD 300k (Ks. 255m).
This valuation is on 100% stake basis.
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Exhibit 18: Pun Hlaing Golf Estate - breakdown of launched developments, unsold land and future construction
Stake Units Break-even Selling EBT margin (%) 36% 32% 27% EBT margin (%) 66% EBT margin (%) 30% 30% Sold (Jun 12) (%) 45% 50% 73% Sold (Jun 12) (%) 0% Sold (Jun 12) (%) 0% 0% Completed (Jun 12) (%) 53% 30% 48% Completed (Jun 12) (%) na Completed (Jun 12) (%) 0% 0%
(Ks. m /unit) Launched developments PHG - Ivory Court PHG - Bamboo Grove PHG - Lakeview (Block E-G) 100% 100% 100% Stake 20 4 48 NSA 310 461 186 Break-even
(Ks. m /unit) 485 680 255 Selling
('000 sq ft) Unsold land PHG - land 70% Stake 4512 Units
('000 Ks. psf) 8.8 Break-even
('000 Ks. psf) 25.7 Selling
(Ks. m /unit) Expected future home construction PHG houses PHG apartments Source: Company, OIR estimates Note: 1 USD = approximately 850 Ks; S$1 = approximately 680 Ks. 70% 70% 294 160 246 179
(Ks. m /unit) 352 255
Yoma's stake in launched developments in PHG are 100% because they have acquired the remaining 30% from the minority partner. NSA = net saleable area, we assume that only 80% of total remaining land at PHG and Star City is saleable
We visited the site in Aug 2012 and found the development to be wellmaintained with clean roads and quality landscaping. The clubhouse and spa facilities in the development were also in good condition. However, we saw that several pieces of land, which were sold some time back, were still left empty by their owners.
Exhibit 19: Landed homes in PHG - Ivory Court units
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Exhibit 20: PHG apartments Lakeview Apartments
Exhibit 21: Attractive views from a high level unit Lakeview Apartments
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iv. Thanlyin, Myanmar Star City
Star City is located in Thanlyin Township, approximately six miles to the southeast of downtown Yangon. It is envisioned that the 135-acre site would ultimately house more than 9,000 apartments (~9m sq ft of gross floor area) targeted at a middle class population, 45 houses and shopping and commercial areas (~1.7m sq ft of gross floor area). Star City is surrounded by a golf course, and is in close proximity to the designated Thilawa Special Economic Zone which is expected to accelerate social and economic development in the Thanlyin Township area.
Exhibit 22: Location of Star City
On 1 Jun 2012, Yoma acquired 70% of the LDRs of the Star City project for S$91m. The acquisition was funded by a non-underwritten 4 for 5 rights issue of up to 422,117,874 rights shares at S$0.24 representing a 39.12% discount to the closing price on 10 Feb 2012, which raised approximately S$100m. Because Yoma is deemed to have a controlling stake in the project, the Star City land site is fully consolidated onto Yomas book at a cost of Ks. 15.1k psf. The first phase of sales at Star City comprises three condominium buildings. Building 1 and 2 (already fully sold) are not part of the acquisition by Yoma. Building 3, with 264 apartment units, launched for sale in Apr 2012 and was fully sold as of end Jun 2012. Prices range from Ks. 80-100k psf, and Building 3 is expected to bring in USD22.4m (Ks. 19.0b) of total sales revenue. Note that Yoma is yet to recognize any revenue from Building 3 and we expect progressive recognition to roll in over the remainder of FY13.
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Exhibit 23: Star City breakdown of launched developments, unsold land and future construction
Stake Units Break-even Selling EBT margin (%) 16% EBT margin (%) 25% EBT margin (%) 20% 20% Sold (Jun 12) (%) 92% Sold (Jun 12) (%) 0% Sold (Jun 12) (%) 0% 0% Completed (Jun 12) (%) 5% Completed (Jun 12) (%) na Completed (Jun 12) (%) 0% 0%
(Ks. m /unit) Launched developments Star City - Building 3 70% Stake 264 NSA ('000 sq ft) Unsold land Star City - land 70% Stake 5277 Units 16.8 Break-even (Ks. m /unit) Expected future home construction Star City - Apartments Star City - Houses Source: Company, OIR estimates Note: 1 USD = approximately 850 Ks; S$1 = approximately 680 Ks. 70% 70% 8448 45 60 246 60 Break-even ('000 Ks. psf)
(Ks. m /unit) 75 Selling ('000 Ks. psf) 22.3 Selling (Ks. m /unit) 75 308
NSA = net saleable area, we assume that only 80% of total remaining land at PHG and Star City is saleable
During our visit to the site, we found that the sales office and show-flats were finished and of good quality. The marketing staff was highly professional and knew the details of the projects well. Buildings 1 and 2, which were not part of the acquisition, were both close to completion.
Exhibit 24: Project model in Star City sales office
Source: OIR
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Exhibit 25: Interior of the showflat unit
Source: OIR
Exhibit 26: Star City apartments under construction
Source: OIR
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iv. Dalian, China Grand Central retail mall
In Nov 2011, Yoma restructured its 27% stake in a mixed development in Dalian, China to full ownership of the retail mall component. This project, named the Grand Central, comprises an office building, serviced residence building and a shopping mall. Located in the heart of the Dalian Development Area, the gross floor area of the shopping mall, already completed, is approximately 33k sqm and focuses on servicing a mid-to high-end clientele. Yoma paid S$32m for the mall in Feb 2012 and expects to start receiving income from the investment asset in Dec 2012, including accrued income starting from Feb 2012. We believe that management would divest the mall when the right opportunity arises, given that it is a non-core asset currently.
Exhibit 27: Grand Central project in Dalian
Source: Company
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v. Potential real estate pipeline ahead
Prime 10-acre site in central Yangon SPA (Myanmar) Ltd recently announced that it is finalizing the acquisition of a 10-acre site in central Yangon, on which the FMI Centre building (SPA Groups headquarters) is currently located. It is approximately 0.5km from the Sule Pagoda and opposite the Traders Hotel Yangon. During our visit, we noted the sites prime location and see the group possibly redeveloping the site into a luxury-tier residential and commercial mixed project. Yoma offered right to buy and redevelop Pursuant to the right of first refusal agreement, Yoma has been offered, on 3 Sep 2012, the right to acquire the land development rights and participate in the redevelopment. Affirmative interest has to be indicated within 30 days, after that it has another 30 days to confirm acceptance. Additional capital likely needed for acquisition If Yoma decides to participate in this project, it would likely be valueaccretive if the acquisition price is sufficiently attractive. However, we think Yoma would likely need to raise capital, potentially through a rights issue or share placement. From market sources, we understand that land transactions of this size in central Yangon are extremely scarce and valuations could be difficult. Using a ballpark range of USD 2k-6k psm (S$2.5kS$7.5k psm), we estimate a value between USD 80m-USD 240m (S$100m S$300m) for this site. In the scenario where Yoma acquires 70% of the LDR, this acquisition could potentially cost from USD 56m to USD 168m (S$70m S$210m).
Exhibit 28: Former train station with a high redevelopment potential on 10-acre site
Source: OIR
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Section F: Company business segment Others
Project Management and Design Yoma maintains a project management and design unit comprising SPA Design, Project Management (PM) and PM Development. This unit provides design and construction management, engineering and architectural solutions for clients in synergy with the real estate developments that the SPA Group is involved in. Agriculture Yoma currently holds 70% of the economic rights to over 100,000 acres of contiguous agricultural land on the Maw Tin estate in the Ayeyarwaddy Division of Myanmar, 260km west of Yangon. The 70% stake was injected in 2007 at S$7m in 2007 and was revalued upwards to S$12m in 2009. The agriculture unit, headed by the Former Director General of the Ministry of Agricultural Planning, recently began to plant black pepper and is exploring potential partnerships for other suitable crops. Given the long gestation period, however, we expected limited impact on financials over FY13-14.
Exhibit 29: >1000k acres in Ayeyarwady, south-west of Yangon
Automobile Yomas automobile division has an exclusive dealership to import Dongfeng Light Trucks from China and is setting up facilities to support the sales of spare parts and after-sales service. We understand that recent legislation allowing locals to import their own trucks have affected sales. Over 1QFY13, the unit has sold around 30 trucks (S$1.48m in revenues) a minimal amount and most of them (S$1.43m) to the SPA Group due to a 120-day sale guarantee arrangement. Despite this, we see the potential for a sales pickup as the country moves to develop its light industrial and agricultural sectors. Yoma also reports an increased level of interest in the local automobile market from a number of foreign companies and is considering widening its activities in this division to possibly include assembly and manufacturing.
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Retail Mall Operations On 14 Aug 2012, Yoma signed a memorandum of agreement with Parkson Retail Asia Limited (PRA), Parkson Myanmar Co. Pte. Ltd (Parkson Myanmar) which is a wholly subsidiary of PRA, and FMI8 to establish a joint venture company to operate department stores in Myanmar. The ownership between Yoma, FMI and PRA is 20:10:70 and Yoma would contribute USD 600k of the initial paid up capital of US$3m. Parkson Retail Asia Limited is a Southeast Asia based departmental store operator with an extensive network of 54 stores (~554k sqm retail space) across Malaysia, Vietnam and Indonesia. The JVs first Parkson department store is expected to take up four storeys of FMI Centre, located on the 10-acre site in central Yangon recently acquired by the SPA Group, and would have a floor area of 43k sq ft. Operations are slated to begin by Mar 2013.
First Myanmar Investment Co., Ltd. (FMI) is a subsidiary of SPA (Myanmar) Ltd and should not to be confused with FMI City - a residential project.
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Section G: Financial highlights and forecasts
i. Income Statement
Exhibit 30: Income statement (historical and forecasted) in (S$m) Revenue Cost of sales Gross profit Other op. gains, net Expenses Finance Sales and distr. Admin Operating profit Profit from JV/assoc. PBT Income tax Profit from continuing ops. Discontinued ops. Profit from discontinued ops. Total profit MI PATMI
Source: Company, OIR estimates
FY2011A 11.22 (8.61) 2.61 0.59 (0.71) (0.01) (3.85) (1.37) 3.53 2.16 0.18 2.34
FY2012A 39.21 (27.58) 11.63 1.12 (0.79) (0.04) (5.57) 6.35 (0.18) 6.17 (0.09) 6.08
1QFY13A 13.62 (8.57) 5.06 0.12 0.00 (0.05) (2.17) 2.95 0.00 2.95 (0.76) 2.19
FY2013F 56.86 (40.08) 16.77 0.14 (0.70) (1.14) (6.54) 8.54 0.00 8.54 (1.45) 7.09
FY2014F 70.50 (51.47) 19.04 0.00 (0.70) (1.41) (7.05) 9.88 0.00 9.88 (1.68) 8.20
0.29 2.63 0.00 2.63
0.00 6.08 0.00 6.08
0.00 2.19 (0.03) 2.16
0.00 7.09 (0.80) 6.29
0.00 8.20 (1.80) 6.40
FY12 revenues up 250% from real estate sales In FY12, revenue increased 250% YoY mostly due to a jump in houses and land development rights (LDR) sales which rose from S$10.2m in FY11 to S$36.9m. 222 plots of LDRs were sold in FY12 versus 35 plots the year before. Slower recognition from percentage-of-completion method In 1QFY13, Yoma recognized S$11.7m from home and LDR sales (24 plots). Going forward, we expect the group to slow down LDR sales to focus on the sales of landed homes and condominiums so as to capture the margins from constructing homes as well. However, because revenue recognition of homes is based on the percentage-of-completion method, in contrast to LDR sales which are recognized fully upon sale, we expect to see the pace of revenue from the real estate sales take on a more spread-out profile ahead. Forecasting 45% YoY increase for FY13 revenues In FY13, we forecast that revenues will increase 45% YoY, comprising mostly progressive recognition from houses and condominiums under construction in FMI City (Orchid and Fontana), PHG and Star City Building 3. In addition, this forecast assumes that ~420 more condominium units in Star City will be sold and a 30% completion status will be achieved by end FY13. Contributions from the agriculture and automobile units are expected to be again minimal in FY13, and we also did not include potential gains/losses from the possible divestment of the shopping mall in Dalian ahead (now on the books at S$32.2m).
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ii. Balance sheet and Cash flow statement
Exhibit 31: Balance sheet (historical and forecasted) in (S$m) Current assets Cash and cash equivalents Trade and other receivables Properties under dev. Land dev. rights Inventories Others Total current assets Non-current assets Investment rights Op. rights Land dev. rights JV/Assoc Prepayments PPE Others Total non-current assets Total Assets Liabilities Trade and other payables Financial liabilities Tax payable Others Total Liabilities Minority interests Total Net Assets Equity Share capital Reserves Total Equity Book value per share (S$)
FY2011A 2.51 3.99 2.57 0.00 1.53 0.42 11.02
FY2012A 20.08 6.50 7.49 7.77 1.63 0.86 44.32
1QFY13A 80.15 9.03 8.09 5.73 0.68 2.35 105.36
FY2013F 46.27 12.46 7.49 7.77 1.63 0.00 75.61
FY2014F 55.82 15.45 8.23 17.77 1.63 0.00 98.91
0.00 12.45 73.40 33.30 8.30 0.37 0.00 127.81 138.83
32.15 11.93 50.05 0.00 9.23 0.54 0.00 103.89 148.21
32.67 11.80 180.05 0.00 9.84 0.67 0.00 235.03 340.39
32.15 11.93 280.05 0.00 10.15 0.42 0.00 334.69 410.30
32.15 11.93 270.05 0.00 11.17 0.30 0.00 325.59 424.50
3.49 4.25 1.00 0.00 8.74 0.00 130.08
11.49 0.00 1.14 0.00 12.63 0.00 135.58
60.68 0.00 1.81 0.00 62.48 38.86 239.04
27.45 0.00 1.14 0.00 28.60 38.86 342.85
35.25 0.00 1.14 0.00 36.39 38.86 349.24
120.81 9.27 130.08 0.25
120.81 14.77 135.58 0.26
221.79 17.26 239.04 0.25
321.79 21.06 342.85 0.29
321.79 27.45 349.24 0.29
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Exhibit 32: Cash flow statement (historical and forecasted) in (S$m) Operating activities Net profit Depreciation Net interest (receipt)/payment Contributions from associates & JVs (Gain)/loss on disposal/reval. of PPE/assets Working capital change ...(Increase)/decrease in land dev. rights ...(Increase)/decrease in inv. & dev. prop ...(Increase)/decrease in trade receivables ...Increase/(decrease) in trade payables Total change in working capital Others Cash flow from operations Investing activities (Purchase)/sale of PPE (Purchase)/sale of op. & inv. rights & dev. prop. (Purchase)/sale of investment in associates & JVs (Purchase)/sale of subsidiaries Others Cash flow from investing Financing activities Equity raised/(repaid) Increase/(decrease) borrowings Dividends (paid) Other Cash flow from financing Change in cash Opening balance Effect of exchange rate Ending balance
FY2011A 2.63 0.07 (0.63) (3.53) 0.00 5.83 (1.85) (5.69) 2.49 0.78 1.71 1.03
FY2012A 6.08 0.15 (0.79) 0.18 (0.02) 15.58 (4.67) (4.22) 5.36 12.05 1.52 19.16
FY2013F 6.29 0.12 0.70 0.00 0.00 0.00 0.00 (5.96) 15.97 10.01 0.16 17.27
FY2014F 6.40 0.12 0.70 0.00 0.00 (10.00) (0.75) (2.99) 7.80 (5.94) (0.70) 0.57
(0.33) 0.00 0.00 1.20 0.00 0.87
(0.28) 0.00 (0.17) 0.00 0.00 (0.45)
0.00 (230.00) 0.00 0.00 37.94 (192.06)
0.00 10.00 0.00 0.00 (1.02) 8.98
0.00 (2.23) 0.00 0.00 (2.23) (0.34) 2.80 0.04 2.51
0.00 (1.21) 0.00 0.00 (1.21) 17.50 2.51 0.07 20.08
201.31 0.00 0.00 (0.33) 200.98 26.19 20.08 0.00 46.27
0.00 0.00 0.00 0.00 0.00 9.56 46.27 0.00 55.82
Rights issue in Jun 2012 for Star City acquisition Yoma completed a rights issue exercise in Jun 2012 where it raised S$101.3m to finance the S$91m acquisition of Star City. Mostly as a result of that, net assets to shareholders increased to S$239.0m (end Jun 2012) from S$135.8m (end Mar 2012). Though Yoma has a 70% stake in Star Citys LDRs, the site was wholly consolidated into Yomas books because Yoma was deemed to have a controlling interest in the asset. Healthy balance sheet as of end 1QFY12 As of end Jun 2012, Yomas balance sheet was healthy with S$80.2m in cash, including S$40.2m reserved for balance payment for the Star City stake. Book value per share stood at S$0.25, which translates to a PB ratio of 1.5 times given the last closing price of S$0.375.
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Forecasting another round for equity raising for acquisitions Our forecast expects that shareholder equity will increase to S$342.9m by end FY13 and also assumes that Yoma will allocate an additional S$100m for land acquisitions in the remainder of FY13 through a rights exercise at S$0.40 per share. We believe this is a reasonable assumption given the recent offer by SPA (Myanmar) Ltd. to acquire a prime 10-acre site acquisition in central Yangon. In addition, we believe that, as the authorities continue to award land for real estate development, the SPA Group is in a competitive position to acquire additional land pipeline. This being so, Yoma could look to raise additional capital to buffer its acquisition warchest.
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Section H: SWOT analysis
Exhibit 33: Yoma - SWOT analysis STRENGTHS - First mover advantage - Stable balance sheet and access to capital - Affiliation with the SPA Group and competitive position - Management track record OPPORTUNITIES - Future acquisitions are likely - Joint ventures with foreign firms
Source: OIR
WEAKNESSES - Does not directly own Myanmar land assets - Geographical concentration risk for revenues - Skilled domestic labor bottleneck
THREATS - Outcome of liberalization still uncertain
Strengths First mover advantage As Myanmar opens up its economy, there are a limited number of domestic companies that, after a prolonged period of isolation, have the depth in management and organizational maturity to fully leverage on the economic opportunities. As part of the SPA Group one of the largest Myanmar conglomerates with track records in diverse industries we believe that Yoma has a first mover advantage in terms of developing its business and seizing business opportunities in Myanmar. Stable balance sheet and access to capital With S$80m (USD 64m) in cash and no debt, Yomas balance sheet provides significant financial flexibility. In addition, as a listed company in Singapore, Yoma enjoys healthy investor interest and access to capital for business expansion. (Note Yoma recently raised S$101m (USD81m) for the Star City acquisition.) We believe this to be a significant strength, particularly relative to most companies in Myanmar which are private. Affiliation with the SPA Group and competitive position The SPA Group has had a significant business presence in Myanmar for over twenty years and has established a good understanding of business procedures and norms in Myanmar. Over the last two decades, the SPA Group has also demonstrated the ability to successfully obtain land, raise capital, market and develop large residential projects in Myanmar. This puts the SPA Group and Yoma, both majority owned by Dr. Serge Pun, in a class of its own amongst domestic competitors. Management track record Yoma has a strong bench of management professionals. The executive Chairman, Serge Pun, is a Myanmar national who set up the SPA Group in 1991. The SPA group has grown today to include 30 operating companies in multiple businesses. The CEO of Yoma, Andrew Rickards, was a former investment banker with Schroders, Goldman Sachs and
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N.M Rothschild and Sons. Both of them have significant experience doing business in emerging markets and have a strong understanding of the financial markets and business environment in the region.
Weaknesses Does not directly own Myanmar land assets Because Myanmar laws do not allow foreigners to own land directly, Yoma uses legal structures (including a condition deed of assignment and joint development deed) to derive economic benefits from land sites owned by companies in the SPA Group. This present several challenges, i.e., Yoma may not easily secure bank financing in Singapore as these land rights may not be suitable as collateral, In addition, there is limited clarity about the path to recourse, under Myanmar legislation, for these legal structures. Geographical concentration risk for revenues Almost all of Yomas revenues are derived from Myanmar which yields a significant degree of geographical concentration risk. The outlook of Yomas businesses at present is heavily dependent on the envisioned development and growth of the Myanmar economy. Lack of skilled domestic labor As Myanmar opens up and economic activities intensify, we believe that there would be an exponential need for skilled labor in diverse industries. This issue of a labor bottleneck is particularly magnified after decades of brain-drain where educated Myanmar nationals left the country. In particular, we note that Yoma and the SPA Group have had to supplement their local workforce with foreign nationals, many of them being of Myanmar descent.
Exhibit 34: Myanmar - net migration statistics shows steady "brain-drain"
200 0 No. of individuals -200 -400 -600 -800 -1,000 -1,200
1985
1990
1995
2000
2005
2010
Source: Worldbank statistics
Opportunities Future acquisitions are likely We believe that the Myanmar authorities are keen to promote the real estate sector, particularly in the greater Yangon area, as an effective way to promote urbanization, job creation and attract foreign investments. This being so, we believe the government could continue to award land sites to domestic developers with strong track records and access to capital. We believe that the SPA Group is likely in a favorable position for new land acquisitions.
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Joint ventures with foreign firms Because of Yomas track record, financial strength and relationship with the SPA Group, we believe that it would be an attractive partner for established international companies and brands seeking to expand into Myanmar. In particular, we note that Yoma has recently signed an MOA with Parkson Retail Asia Ltd, a Southeast Asia based departmental store operator with extensive network of 54 stores, to open and operate the first retail department store in central Yangon.
Threats Outcome of liberalization still uncertain The constitution and political system in place are possibly open to future abuse as they concentrates power in the military. The constitution guarantees military appointees 25% of the legislative chambers seats and the militarys presence is collectively still present. Hence, a possible return to a closed military rule cannot be ruled out. The next elections are expected in 2015 and a victory for National League for Democracy (NLD), led by Aung San Suu Ky, is almost assured. President Thein Sein, now 67 years old, has indicated that he would likely step down then and it remains to be seen if the military will peacefully hand over power.
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Section I: Valuation
i. Scenario-weighted surplus RNAV method We use a scenario-weighted revalued net asset value (RNAV) methodology to value Yoma. Because Yomas business prospects are greatly dependent on the outcome of Myanmars economic and political reforms, we analyze Yomas respective values under a set of binary scenarios, namely our base case for a sustained and successful liberalization process (80% probability), and our bear case reflecting reform failure (20% probability). The surplus revalued net asset value (RNAV) methodology simply adjusts the valuation of real estate assets on Yomas balance sheet (usually held at cost) by adding the net present value (NPV)9 of future profits from the sale of these assets. The resultant shareholder equity due to this adjustment is the RNAV.
Exhibit 35: Calculation of Yomas fair value estimate As of 1QFY13 (in S$m, unless otherwise stated) Dev. prop Myanmar Other Total Op. rights + Land dev, rights Myanmar Others Total Inv. rights Myanmar China Total Other net assets Valuation surplus Total RNAV Shrout (m) RNAV per share (S$) Premium Fair value (S$) Diff. from current price (S$0.375) 0.0 32.7 32.7 0.7 153.1 392.1 949.8 0.41 25% 0.52 38% 0.0 32.7 32.7 0.7 4.2 243.2 949.8 0.26 -25% 0.19 -49% 0.45 20% 197.6 0.0 197.6 197.6 0.0 197.6 8.1 0.0 8.1 8.1 0.0 8.1 Base case (80%) Bear case (20%) Scenario Weighted Fair value
Source: OIR estimates, company financials Notes: To calculate the valuation surplus, we assume a 12% discount rate for profits spread out over 5 years (equivalent to a 0.72 factor). Fair value is calculated as (0.8*S$0.52)+(0.2*S$0.19)=S$0.45 Applying a half-Kelly criterion to the scenario payoff structure yields a 27.5% portfolio allocation weight.
We assume a discount rate of 12% over profits spread out over 5 years (equivalent to a factor of 0.72).
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ii. The base case (80% probability of 38% price upside)
Our base case calculations are shown in Exhibits 35 and 36, where we calculated and applied a total surplus of S$153m to arrive at a base case RNAV of S$392m. In addition, we judged it sound to apply a 25% premium to Yomas RNAV. This is a key step, in our view, because RNAV is primarily a measure of Yomas valuation given current projects and does not give credit for two compelling dynamics for future profit growth: 1) Likely potential accretion from raising and deploying additional capital ahead, 2) Access to potential pipeline of acquisitions and growth opportunities due to affiliation with SPA Group. To put the premium in perspective, a 25% RNAV premium translates into S$98m similar to the NPV of Star City (S$96m by our calculations). Our base case fair value is S$0.52 per share, implying a 38% price upside from the current share price.
iii. The bear case (20% probability of 49% price downside)
Under our bear case, we assume Yoma would sell land directly at cost and stop constructing homes for sale. We continue to include S$4.7m of surplus from the set of five launched developments already significantly sold and completed. In addition, we apply in our bear case scenario a 25% discount to RNAV as we expect Yomas ability to raise and redeploy capital to be meaningfully diminished and that prospects for accretive opportunities would be muted. Our bear case fair value for Yoma is S$0.19, implying a 49% price downside from the current share price.
Scenario weighted fair value estimate of S$0.45 Our fair value estimate for Yoma is S$0.45, based on a scenario weight surplus RNAV methodology, implying a 20% price upside from the current price of S$0.375.
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Exhibit 36: Base case scenario: Calculation of surplus to RNAV

Constr. Cost (Ks. m /unit) (Ks. m /unit) (Ks. m /unit) (%) (%) (%) '000 USD/unit '000 USD/unit USD m '000 S$/unit '000 S$/unit S$ m Break-even Selling EBT margin Sold (Jun 12) Completed (Jun 12) Breakeven Selling Profit (100% stake) Breakeven Selling Profit (100% stake)
(In USD)
(In S$)
NPV (effective stake) S$ m
Stake
Units
Land Cost
(Ks. m /unit)
Launched developments 74 246 363 179 60 6.9 Constr. Cost Sold (Jun 12) (%) 0% 0% 0% 104.0 Constr. Cost (Ks. m /unit) 74 246 179 60 246 246 308 20% 0% 0% 290 362 60 75 20% 0% 0% 70 88 179 255 30% 0% 0% 210 300 246 352 30% 0% 0% 290 414 74 106 30% 0% 0% 87 124 2.7 29.2 11.5 118.9 2.6 133.0 243.9 (Ks. m /unit) (Ks. m /unit) (%) '000 USD/unit '000 USD/unit Break-even Selling EBT margin Breakeven Selling Breakeven '000 S$/unit 109 362 263 88 362 Selling '000 S$/unit 155 518 375 110 453 na 20 26 27.5 25 na 10 30 72.0 13 na 4 13 4.4 5 (%) USD psf USD psf USD m S$ psf S$ psf 17 38 33 Completed (Jun 12) Breakeven Selling Profit (100% stake) Breakeven Selling (Ks. psf) na na na 16.8 22.3 25% 8.8 25.7 66% 3.2 11.2 72% ('000 Ks. psf) ('000 Ks. psf) (%) Break-even Selling EBT margin 60 75 16% 92% 5% 70 88 2.9 88 110 186 255 27% 73% 48% 219 300 3.1 273 375 461 680 32% 50% 30% 543 800 0.8 678 1,000 1.0 3.9 3.7 8.6 Profit (100% stake) S$ m 5.5 90.0 34.4 130.0 310 485 36% 45% 53% 364 571 3.3 455 713 4.1 94 170 45% 100% 63% 111 200 7.3 139 250 9.1 1.3 2.3 0.6 1.8 1.8 4.2 NPV (effective stake) S$ m 2.1 45.4 17.4 64.9
FMI houses (Orchid/Fontana)
53%
102
20
PHG - Ivory Court
100%
20
63
PHG - Bamboo Grove
100%
98
PHG - Lakeview (Block E-G)
100%
48
Star City - Building 3
70%
264
Total
Stake
NSA
Land Cost
('000 sq ft)
('000 Ks. psf)
Unsold land
FMI city - land
53%
585
3.2
PHG - land
70%
4512
8.8
Star City - land
70%
5277
16.8
Total
Stake
Units
Land Cost
(Ks. m /unit)
Sold (Jun 12) (%)
Completed (Jun 12) (%)
Profit (100% stake) USD m
Profit (100% stake) S$ m 3.4 36.5 14.4 148.6 3.3 166.3 304.9
NPV (effective stake) S$ m 1.3 18.4 7.3 75.0 1.6 83.9 153.1
Expected future home construction
FMI houses
53%
91
na
PHG houses
70%
294
na
37
PHG apartments
70%
160
na
Star City - Apartments
70%
8448
na
Star City - Houses
70%
45
na
Total
Combined total
Note: 1 USD = approximately 850 Ks; S$1 = approximately 680 Ks.
Yoma's stake in launched developments in PHG are 100% because they have acquired the remaining 30% from the minority partner.
NSA = net saleable area, we assume that only 80% of total remaining land at PHG and Star City is saleable
Section J: Investment thesis and recommendation
i. Investment thesis
Our investment thesis for Yoma rests on three points: 1) High likelihood of a successful liberalization process 2) Yomas key role in the SPA Group 3) Attractive valuation currently
A successful liberalization process is likely A positive macro-economic environment in Myanmar is crucial to Yomas business outlook. With successful forward-looking reforms, we can expect abundant accretive opportunities for capital and healthy growth ahead. As discussed in Section C.iv, we see good odds for a sustained and meaningful liberalization process in Myanmar ahead.
Yomas key role in the SPA Group As a listed company in Singapore, Yomas ability to access capital and acquire attractive assets from the SPA Group (SPA) allows SPA to focus on what we view to be a core competency and competitive edge: seeking, gestating and recycling capital to a pipeline of accretive Myanmar opportunities.
Exhibit 37: Yoma's key role in virtuous capital cycle
Potential accretive opportunities
Capital Markets
Raise capital
Yoma
-Listed on SGX -Access to capital - Healthy investor interest
The SPA Group recycles capital
Capital reallocation
The SPA Group

-Access to growth opportunities and diverse businesses in Myanmar -Established track record and business presence
Capital reallocation
Incubating diverse set of businesses
Buys attractive assets
Portfolio of real estate/ business assets
- Strong execution from management - Stable balance sheet
Yoma buys attractive assets
Capital recycling
Pipeline of real estate/ business assets
Source: OIR
This niche Yomas key role in the larger virtuous dynamic of capital flow is crucial in addressing two common investor concerns. First, that Yoma does not have direct ownership of its land in Myanmar; second, that transactions between Yoma and SPA may involve conflicts of interest. Because Yomas access to capital a precious commodity is clearly underpinned by its long-term financial transparency and health, we see it in the SPA Groups paramount interest to be a careful fiduciary of Yomas land assets and ensure transactions at arms-length prices.
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Attractive valuation currently Finally, we think that the valuation is sufficiently attractive at current prices. Our scenario weighted fair value estimate of S$0.45 implies a 20% price upside from the current price of S$0.375. In addition, we expect the potential acquisition of a prime 10-acre site in Yangon to be a likely price catalyst ahead.
ii. Recommendation
Initiate with BUY and fair value estimate of S$0.45 We initiate coverage on Yoma with a BUY rating with a fair value estimate of S$0.45, based on a scenario-weighted surplus RNAV methodology. This implies a 20% price upside from the last closing price of S$0.375.
39
Appendix 1. Key statistics and facts of Myanmar
GDP growth and forecast Myanmars economy expanded steadily by 6.3% on average in the past 5 years, even through the 2008 financial crisis and ongoing eurozone debt crisis.10 The IMF forecasts for 2012-13 economic growth to beat emerging and developing economies by 0.29% and 0.03% respectively. Notably, Myanmar is also expected to grow faster than two BRIC members, Russia and Brazil, by 1.3%-3.5%.
Exhibit 38: Myanmar's and selected countries' GDPs 2007 Myanmar Nominal GDP EIU (US$ m) BMI (US$ m) Myanmar Real GDP growth, % change y-o-y IMF Reference Real GDP growth, % change y-o-y Emerging and Developing Economies, IMF Russia, IMF Brazil, IMF
Source: EIU, BMI, IMF
2008
2009
2010
2011
2012f
2013f
2014f
16,741 22,600 12.0 8.7 8.5 6.1
23,925 33,000 3.6 6.0 5.2 5.2
28,406 39,400 5.1 2.8 -7.8 -0.3
34,635 52,100 5.3 7.5 4.3 7.5
45,209 59,800 5.5 6.2 4.3 2.7
49,079 61,700 6.0 5.7 4.0 3.0
55,875 73,600 5.9 6.0 3.9 4.2
NA 88,400 6.0 6.2 3.9 4.0
Economic production breakdown As shown in Exhibit 39, Myanmars economy is largely made up of primary and secondary industries. Agriculture, processing and manufacturing collectively makes up 58% of its output in 2011. In contrast, the services industry is relatively small. The transport sector, a necessity and low value-add service, was the largest service component at 16%.
Exhibit 39: Myanmar goods & services production (2011)

Ot hers 16% Agriculture 34% Livestock & Fishery 10%
Transport 1 6% Processing & M anuf acturing 24%
Source: Planning Department
10
GDP figures before 2012 should be treated with caution due to the multi-exchange rate system then.
40
Geography and natural resources Myanmar shares its border with Thailand, Laos and Bangladesh and rising economic giants China and India. Myanmar has ample land for cultivation of crops and possesses rivers and a coastline of over 2000km which can support a thriving fishing industry. Its high percentage of forested land is also a source of hardwoods such as teak. In an energyhungry global economy, Myanmar is blessed with 26.8 years and 11.7 years of proven reserves for natural gas and crude oil respectively. Finally, it is endowed with a wide range of mineral, ore and gemstones reserves.
Exhibit 40: Map of Myanmar and its neighbours
Source: Google Map
Population and demographics Myanmar has a total population of about 48 million in 2011 which has grown at less than 1% annually since 2001.11 As with most developing countries, it has a mostly broad-base population pyramid with a primarily young demographic caused by a lower life expectancy from limited access to healthcare.
11
World Bank statistics, 2011
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Exhibit 41: Myanmar's population demgraphics in 2010

65 Year and Above 60 t o 64 Year 55 t o 59 Year 50 t o 54 Year 45 t o 49 Year 40 t o 44 Year 35 t o 39 Year 30 t o 34 Year 25 t o 29 Year 20 t o 24 Year 15 to 19 Year 10 to 14 Year 5 t o 9 Year 0 t o 4 Year 0 500 1,000 1,500 2,000 in t housands 2,500 3,000 3,500 M ale Female
Source: Department of Population, Myanmar
Trade Myanmar enjoyed trade surpluses from 2007 to 2011. Its top 4 exports reflect the importance of commodities and related products in driving the economy, with the value of gas exports at more than twice the next biggest items. On the other hand, Myanmars imports are more diversified. It imports sophisticated machineries and certain processed goods that its economy lacks the technological capacity and human capital to produce. Its top trading partners are its Asian neighbors.
Exhibit 42: Myanmar's top imports and exports breakdown By Category Import 1 2 3 4 5 Export 1 2 3 4 5 Item Machinery Non Electric & Transport Equipment Refined Mineral Oil Base Metals & Manufactures Electrical Machinery & Apparatus Edible Vegetable Oils & Other Hydrogenated Oils Item Gas Agricultural Products Precious & Semi Precious Minerals Timber Garment Amount (Ks. mn) 4,908.22 3,674.33 1,992.92 977.02 975.89 Amount (Ks. mn) 15,854.00 7,188.00 5,169.00 2,691.00 1,544.00 By Country Country China Thailand Singapore Korea Malaysia Country Thailand China India Japan Korea Amount (USD mn) 5,307.46 3,095.48 1,333.60 733.55 615.60 Amount (USD mn) 2,974.95 1,524.94 1,143.36 538.691 271.487
Source: Customs, IMF Note: List is compiled using latest available data. Category and country data are dated 2010 and 2011 respectively.
42
Currency and exchange rate Since 1 Apr 2012, Myanmar has adopted a managed-float system, as part of its economic reforms, to unify exchange rates. Previously, the official exchange rate, which applied mainly to state-owned firms, was pegged against the IMF's Special Drawing Rights. The black-market rate used for other transactions was typically over 100 times the official rate in the last five years. For instance, the black-market rate was estimated to be Kt815:US$1 while official rate was Kt5.35:US$1 over 2011. Currently, the central bank announces a reference exchange rate against the US dollar followed by daily foreign-exchange-rate auctions conducted with authorized domestic dealer banks. Banks participating in the auctions can submit up to six different bids and are then permitted to buy and sell the currency in a trading band of 0.8% on either side of the reference rate accepted by the central bank.12
12
IMFs 2011 Article IV Consultation
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Appendix 2: Myanmar key events since 1948
1948 - Burma gains independence with U Nu as Prime Minister. 1962 - U Nu's camp ousted by General Ne Win in a military coup. The federal system is replaced with "the Burmese Way to Socialism" economy nationalisation, formation of a single-party state, and banning of independent newspapers. 1987 - Currency devaluation dwindles peoples savings and sparks off anti-government riots. 1989 - State Law and Order Restoration Council (Slorc) announces martial law, arrests thousands of people which include democracy and human rights activists. National League for Democracy (NLD) leader Aung San Suu Kyi is put under house arrest. Burma is renamed Myanmar. 1990 - Opposition NLD wins general election, but the military annuls the result. 1997 Myanmar is admitted to Association of South East Asian Nations (Asean) and Slorc is renamed State Peace and Development Council (SPDC). 2001 - Chinese President Jiang Zemin visits, shows support and calls for economic reform. 2003 - Khin Nyunt Khin Nyunt becomes Prime Minister. He proposes drafting new constitution in 2004 as part of "road map" to democracy. 2004 - Khin Nyunt is replaced as Prime Minister. 2008 - Government puts forth new constitution which assigns a quarter of seats in parliament to the military and bans Aung San Suu Kyi from holding office. 2009 - The EU extends sanctions for a year, but is open to review if there is progress towards democracy. 2011 March - Thein Sein becomes president of a new, allegedly civilian government. 2011 August - President Thein Sein meets Aung San Suu Kyi in Nay Pyi Taw. 2011 September - President Thein Sein halts construction of controversial Chinese-funded Myitsone hydroelectric dam, which is perceived as being receptive to public opinion. 2011 December - US Secretary of State Hillary Clinton visits. US offers to improve relations if the move towards democracy continues. President Thein Sein signs law legalising peaceful demonstrations for the first time; NLD re-registers as a political party in anticipation of 2012 parliamentary by-elections. 2012 April - NLD candidates win convincingly in parliamentary byelections, with Aung San Suu Kyi elected. The EU suspends non-military sanctions against Myanmar for a year. EU foreign policy chief Catherine Ashton, British Prime Minister David Cameron and UN Secretary-General Ban Ki-moon visit for talks on further democratic reforms. 2012 July - US eases financial and investment restrictions.
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Appendix 3: List of key projects in Myanmar
Exhibit 43: Key project database for Myanmar Project Name Coal-based power plants (3x 130MW, 6x 600MW) Companies Italian Thai Development (ITD), Ratchaburi Electricity Generating Holding, Dawei Development n.a. CGGC International Sinohydro Yunnan Construction Engineering Group, Yuzana Group National Hydroelectric Power Corporation (NHPC) National Hydroelectric Power Corporation (NHPC) China Railways Engineering Corporation Changi General Hospital of Singapore National Hydroelectric Power Corporation (NHPC) China Power Investment Corporation (CPI), China Gezhouba Group Italian Thai Development (ITD), Dawei Development Italian Thai Development (ITD), Dawei Development Italian Thai Development (ITD), Dawei Development, Japanese and Chinese investors Italian Thai Development (ITD), Dawei Development, PTT Italian Thai Development (ITD), Dawei Development, PTT Italian Thai Development (ITD), Dawei Development, Japanese investor Italian Thai Development (ITD), Dawei Development Italian Thai Development (ITD), Dawei Development Italian Thai Development (ITD), Dawei Development n.a. Timeframe 2012 - 2020
Kyaukpyu-Kunming railroad RCC embankment and Yeywa hydropower plant, Mandalay region First Road Construction Project: part of the 1079km Stilwell Road Shwezaye hydropower project, Chindwin River Tamanthi hydropower plant, Chindwin river Ruili-Muse-Kyaukphyu railway line (part of Kyaukphyu-Kunming railroad) First-ever liver transplant hospital Htamanthi hydropower project, Chindwin River Myanmar-China Myitsone Hydro-Electric Project, Irrawaddy River, Kachin state Deep-sea port, part of Dawei maritime hub project Cross-border road link (Dawei, Myanmar to Pu Nam Ron, Kanchanaburi, Thailand) Cross-border railway link (Dawei, Myanmar to Pu Nam Ron, Kanchanaburi, Thailand) Coal-based power plants, part of Dawei maritime hub project Petrochemical refineries, part of Dawei maritime hub project Steel smelting plant, part of Dawei maritime hub project Fertliser plant, part of maritime hub project Township for residential and commercial development, part of Dawei maritime hub project Tourism, resort and recreation complex, part of Dawei maritime hub project Urban railway system (elevated and underground tracks), Yangon
Source: Business Monitor International
2012-2015 2010 From 2011 From August 2011 From 2011 From 2011 From June 2011 From August 2011 September 2011 - 2019 2012 - 2015 2010 - 2012 2012 - 2020 2012 - 2020 2012 - 2020 2012 - 2020 2012 - 2020 2012 - 2020 2012 - 2020 From February 2012
45
Appendix 4: 1998 Foreign Investment Law
Exhibit 44: Foreign Investment Law passed in 1988 Tax Privileges 1. Corporate income tax exemption for the first three years of business. 2. Corporate income tax exemption for retained earnings to reinvest again within a year after profit is earned. 3. 50% income tax exemption from profits derived from exports. 4. The right to pay income tax for foreign staffs in the same rate of Myanmar nationals. 5. The right to pay income tax as of foreign staffs and can be put to cost of business. 6. The right to tax is deductible from the expenses of research and development. 7. The right to record depreciation in accounting. 8. The right to carry forward and set off losses for three consecutive years from the year loss is sustained. 9. Customs duty exemption for import of machinery and equipment during the time office is under construction. 10. Except customs for imported raw materials during the first three years. Land Ownership 1. Foreign investors cannot own the land, but they can rent up to 30 years or longer under consideration by the Myanmar Investment Commission and the government. 2. Under the Transfer of Immovable Property Restriction Law (1987), foreign investors cannot rent the land from the private sector more than a year
Source: Colliers International
46
Appendix 5: Biographies of key management personnel13
Serge Pun Executive Chairman and Executive Director Serge Pun is a Myanmar national and the Chairman of the SPA Group. He founded Serge Pun & Associates Limited in 1983 in Hong Kong and was then primarily active in real estate brokerage and development. Serge Pun has led many real estate investments as a general partner in real estate limited partnerships, including projects such as Stewart Terrace on the Peak in Hong Kong (1987 to 1988) and Village Gardens in Yau Yat Chuen, Kowloon (1988 to 1990), to name a few. In these partnerships, he was involved in the organisation, development, promotion and management of all the projects. In 1988, Serge Pun & Associates Limited opened its first overseas branch in Bangkok. Branches and subsidiaries in Kuala Lumpur (1990), Shenzhen (1988), Chengdu (1992) and Taipei (1992) followed in the ensuing years. Some of Serge Pun's more notable projects overseas were the Sand River Golf Club in Shenzhen (19911997); the 1 million sq. ft. premier office building in Bangkok Abdulrahim Place at 990 Rama IV (1989 to 2000) and the 1.2 million square feet mixed use development in Dalian PRC known as The Grand Central - a project in which YSH has taken an interest. In 1991, Serge Pun decided to return to his hometown in Myanmar and set up the SPA Group, which has today grown to include about 30 operating companies active in 6 key businesses including financial services, manufacturing, real estate development, trading and distribution, services, automobile assembly and distribution and agriculture. In 1999, Serge Pun was conferred the title of Doctorate in Philosophy (PhD) in Business Administration, honoris causa by the Southern California University for Professional Studies. Serge Pun was appointed an Honorary Business Representative of International Enterprise Singapore for Myanmar from 2004 to 2007. He has been invited to many international forums as guest speaker or panelist on subjects relating to China, Myanmar and ASEAN. He was appointed as a member of the Chinese People Political Consultative Conference (CPPCC) of Dalian, PRC since 2007. Appointed to the board of YSH on 17 August 2006, Serge Pun is the Executive Chairman and Executive Director of YSH.
Andrew Rickards CEO and Executive Director Andrew Rickards qualified as a Chartered Accountant in London in 1988 having read Engineering Science at Exeter University in the UK. He started his investment banking career in 1990 with Barclays de Zoete Wedd and subsequently worked for some major names in the field of investment banking including Schroders, Goldman Sachs and N.M.Rothshild and Sons. He has lived and worked in India, Hong Kong, Singapore, Japan and Australia and has been responsible for raising capital and advising on mergers and acquisitions in many emerging Asian countries, including India, Vietnam, Indonesia and China. He is also an Independent Director of Charm Communications Inc, a NASDAQ-listed Chinese advertising company. He is an active sportsman with interests in sailing, skiing and triathalon. His philanthropic activities include marine conservation, where he is Chairman of Bloom Association in Hong Kong, the Paris based marine conservation charity. He also supports medical and other philanthropic institutions in Myanmar.
13
Sourced from company
47
Appointed to the board of YSH on 21 November 2011, Andrew Rickards is an Executive Director of YSH.
Cyrus Pun Chi Yam Head of Corporate Development and Executive Director Cyrus Pun was educated in the UK and received a bachelor's degree in Economics from the London School of Economics in 2003. He gained his first work experience in China at the beginning of his career with an established manufacturer of building materials, where he headed a team to develop the export and trading market. Prior to joining the SPA Group an affiliated company of the Group in 2007, Cyrus Pun worked for Hutchison Port Holdings in the South China Commercial Division based in Hong Kong. His major responsibilities involve revenue analysis, setting price strategy, contract negotiation, and was responsible for account management for a substantial client portfolio. In February 2007, Cyrus Pun joined SPA Group and assumed a leading role in the development of Grand Central in Dalian, China a real estate project undertaken by SPA Grand Central (Dalian) Enterprise Co., Ltd, an associated company of the Group. He was appointed as the Head of Corporate Development of the Company and an alternate director to Mr Serge Pun on 11 June 2010. Following his appointment as the Head of Corporate Development, he has since headed various corporate exercises in identifying and developing new business opportunities as well as evaluating existing businesses of the Group. Appointed to the board of YSH on 21 February 2011, Cyrus Pun is an Executive Director of YSH and resigned as the alternate director to Mr Serge Pun.
Richard Neo Group General Manager Richard received his bachelor's degree in Business Administration from the National University of Singapore in 1985. He worked for a major international trading house as a business executive upon his graduation and diligently served the firm for 25 years. He was promoted through the ranks and retired as the Head of Business Department. His main responsibilities involved formulating business strategies and managing the day-to-day operation of the department to achieve the company's objectives. He has extensive experience in various aspects of business activities including trading, project evaluation, investment analysis and risk management. He has assumed the position of Group General Manager in Yoma Strategic Holdings Ltd in January 2011 and assists the CEO in the daily operations of the Group.
Ms Joycelyn Siow Group Finance Manager Joycelyn was educated in Singapore Polytechnic and obtained her Diploma in Banking and Financial Services. She went on to pursue her studies in ACCA. Joycelyn has 10 years of audit experience in international audit firms. During her years of audit experience, she was involved in audit services for publicly listed companies, multinational corporations and small and medium sized enterprises. Besides audit work, she was also involved in special assignments such as internal audit,
48
preparation of accountants' report for IPO and RTO and due diligence review. She left the international audit firm as Senior Audit Manager before she was appointed as Group Finance Manager of Yoma Strategic Holdings Ltd in June 2008.
49
Appendix 6 Major shareholders
Exhibit 45: Major shareholders Holders Name Pun Serge Noble Grand Investments Ltd Rickard Andrew Jonathon Dunvegan Associates Inc Vanguard Group Inc IFM - Independent Fund Mgmt ING Investment Management Korea Pioneer Asset Management SA
Source: Bloomberg
Amount held 482,208,863 26,000,000 14,500,000 669,000 380,000 200,000 166,000 125,000
% outstanding 50.01 2.7 1.5 0.07 0.04 2 0.02 0.01
50
Company financial highlights
Income statement Year Ended Mar 31 (S$m) Revenue Cost of sales Gross profit Expenses Operating profit PBT Income tax PBT Total profit PATMI
FY11 11.2 -8.6 2.6 -4.6 -1.4 2.2 0.2 2.2 2.6 2.6
FY12 39.2 -27.6 11.6 -6.4 6.3 6.2 -0.1 6.2 6.1 6.1
FY13F 56.9 -40.1 16.8 -8.4 8.5 8.5 -1.5 8.5 7.1 6.3
FY14F 70.5 -51.5 19.0 -9.2 9.9 9.9 -1.7 9.9 8.2 6.4
Balance sheet Year Ended Mar 31 (S$m) Cash and cash equivalents Properties under dev. Land dev. rights Investment rights Total Assets Trade and other payables Financial liabilities Total Liabilities Total Equity Total equity and liabilities
FY11 2.5 2.6 73.4 0.0 138.8 3.5 4.2 8.7 130.1 138.8
FY12 20.1 7.5 57.8 32.1 148.2 11.5 0.0 12.6 135.6 148.2
FY13F 46.3 7.5 287.8 32.1 410.3 27.5 0.0 67.5 342.8 410.3
FY14F 55.8 8.2 287.8 32.1 424.5 35.3 0.0 75.3 349.2 424.5
Cash flow statement Year Ended Mar 31 (S$m) Net profit Contributions from associates & JVs Total change in working capital Cash flow from operations Cash flow from investing Cash flow from financing Change in cash Opening balance Other adjustments Ending balance
FY11 2.6 -3.5 0.8 1.0 0.9 -2.2 -0.3 2.8 0.0 2.5
FY12 6.1 0.2 12.1 19.2 -0.5 -1.2 17.5 2.5 0.1 20.1
FY13F 6.3 0.0 10.0 17.3 -192.1 201.0 26.2 20.1 0.0 46.3
FY14F 6.4 0.0 -5.9 0.6 9.0 0.0 9.6 46.3 0.0 55.8
Key rates & ratios EPS (S-cents) NAV per share (S-cents) PER (x) P/NAV (x) Gross profit margin (%) Net profit margin (%) Net gearing (%) Dividend yield (%) ROE (%) ROA (%) Sources: Company, OIR forecasts
FY11 0.5 24.7 75.2 1.5 23.3 23.5 1.3 0.0 2.0 1.9
FY12 1.2 25.7 32.6 1.5 29.7 15.5 net cash 0.0 4.5 4.1
FY13F 0.5 28.6 71.6 1.3 29.5 11.1 net cash 0.0 1.8 1.5
FY14F 0.5 29.1 70.3 1.3 27.0 9.1 net cash 0.0 1.8 1.5
Company financial highlights
SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report hold NIL shares in the above security.
DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither given nor endorsed.
RATINGS AND RECOMMENDATIONS: - OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.
Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Pte Ltd
Published by OCBC Investment Research Pte Ltd
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Asia Pacific Equity Research | Singapore

YOMA STRATEGIC HOLDINGS | BUY

Photo Source: Company

ENTERING THE GOLDEN LAND

Please refer to important disclosures at the back of this document.

MICA (P) 035/06/2012

Singapore | Construction & Engineering

Asia Pacific Equity Research

YOMA STRATEGIC HOLDINGS | BUY

ENTERING THE GOLDEN LAND

Industr y Aver age

Please refer to important disclosures at the back of this document.

MICA (P) 035/06/2012

OCBC Investment Research Singapore Equities

C.i C.ii C.iii C.iv

D.i D.ii D.iii D.iv

E.i E.ii E.iii E.iv E.v E.vi

OCBC Investment Research Singapore Equities

OCBC Investment Research Singapore Equities

Section B: Brief business overview

Source: Company, OIR

OCBC Investment Research Singapore Equities

Exhibit 2: Yoma's revenue breakdown (FY12)

Exhibit 3: Yoma's asset breakdown (end FY12)

Others, S$52.1m, 32%

Real estate, S$73.1m, 44%

Source: Company annual report 2012

Source: Company annual report 2012

Exhibit 4: Yoma's corporate structure

Lion Century Properties Ltd (2)

Yoma Construction Industries Pte Ltd

Plantation Resources Pte Ltd (1)

Yoma Development Group Pte Ltd (1)

Wayville Investments Limited (2) 100%

Elite Matrix International Ltd

Land Development Rights

Wyndale International Limited (2)

Successful Goal Trading Co Ltd (3)

Pun Hlaing Golf Estate

Thanlyin Estate Development Ltd

100% SPA Design (1) Pte Ltd

51% Tol & SPA Design Pte Ltd

OCBC Investment Research Singapore Equities

Section C: Macro driver The Myanmar economy

Exhibit 5: Major events and Yoma's share price movement

Jul 12: US restrictions eased

May 12: Star City acquisition approved

Source: OIR, Bloomberg

OCBC Investment Research Singapore Equities

ii. Major reforms and policies to date

OCBC Investment Research Singapore Equities

iii. Our view: liberalization is real and sustainable

Source: Google Maps

OCBC Investment Research Singapore Equities

Source: IMF statistics and forecasts

OCBC Investment Research Singapore Equities

Section D: Company-specific driver Myanmar real estate sector

60,000 (VND Bn)

600 (CNY Bn)

OCBC Investment Research Singapore Equities

ii. The real estate story revolves around Yangon

Source: Colliers International

OCBC Investment Research Singapore Equities