Stock Review: Yoma Strategic Holdings

Yoma's founder is an enterprising man, Mr Serge Pun (63). He is a Myanmar national who started a company in Hong Kong in real estate development, progressed into real estate investment. His business spanned Bangkok, Shenzhen, Kuala Lumpur, Chengdu, and then finally Myanmar.

Yoma's business is primarily about real estate development business in Myanmar, managed by Serge Pun's two sons, CEO Melvyn Pun (38) and Cyrus Pun (36). The business also diverged into automotive (tractors), F&B (KFC) and tourism (balloons), with real estate still forming majority of the business.

There are a few figures in the financial report that I will dig into.

Profit Margin
What I could not find in the financial report was the expense per sector to find which sector was the most profitable. Instead, revenue was the only number that was categorised. As a result, I am forced to calculate the profit margin for the business as a whole -- 39% in 2016 and 35% in 2015 which are extremely high margins for a property developer.

Revenue categories extracted from financial report

Balance Sheet
Net cash is positive, however assets are largely contributed by development properties and land development rights. Asset value increased $100M to ~$950M as at 31 Mar 2016, contributed by increase in trade receivables, higher values of development property and land development rights. I didn't like it that the report didn't explain whether the higher values were due to higher valuations or increase in stock. There was a brief description about valuation gains for their investment properties.

Revenue Driver
Revenue driver appears to be driven by debt, which does not look sustainable to me -- debt steadily and proportionally increasing with revenue.

Star City
ALL the properties are in this little carved out "world" called Star City or Thanlyin. On the map, it appears to be a plot of land separated from the Yangon city centre by a river. It is marketed as a new township for the upper class.

extracted from Google Maps

What puzzles me is Star City is surrounded by farm land (at least to me it seems like it on the map). Yet the residential buildings are 8 to 12 storeys high, which will require lifts. I consider it too expensive a commodity to maintain. I would have believed a little bit more in the township and planning story had it been a combination of landed houses and 4 storey walk-up apartments spanning a wider area to help people move into homes they can afford.

Myanmar is also a relatively poor country with GDP per capita of US$1,183 in 2013. For comparison sake, Singapore's GDP per capita was US$54,648 in 2013. Indonesia, US$3,475. Vietnam, US$1,867.

Conclusion
While Myanmar is just beginning their path to democracy, it will take a lot of hard work and cleaning up (of corruption, crime, etc.) to be able to improve its citizens' standard of living. Building high-rise buildings with international schools in a ring-fenced, secured, Star City will not help the average citizen afford a better education or house. Unfortunately, it reminds me a lot about Malaysia's Iskandar township story. I wouldn't place my money on Yoma Strategic at its current price of 56 cents. Dividend was 0.25 cents or 0.4% yield. However, it could become an overnight darling like Genting Singapore if there are many speculators in Thanlyin, but the bubble will definitely burst for this one because high prices are not supported by fundamental wage growth and affordability in Myanmar.

References:

1. Full Year 2016 Financial Report
2. FY2016 Presentation Slides