Yoma Strategic - Stock Analyst Research

–  We visited Yoma’s impressive office campus at Pun Hlang Estate in Yangon, which housed major business units such as Yoma Land, Wave Money and Yoma Fleet. The malls we visited had the usual traffic jams in the city centre. We also saw new infrastructure underway that will improve connectivity to their flagship StarCity project.

–  Preparation for the preliminary works on-site in the iconic Yoma Central project in the heart of Yangon is commencing after its suspension in 2021. The project’s residential tower will be relaunched this year.

–  Operating challenges in the current environment include the long delivery time to import building materials, constant power disruptions, rising inflation, and availability of foreign currency. These challenges also meant opportunities. Demand for real estate for projects such as Yoma Land with quality materials and reliable power supply jumped as households hedged rising inflation and depreciating local currency. Yoma continues to capitalise on the demand for affordable housing. Another trend is the fast adoption of digital finance, supported by the central bank.

Company Background

Listed on the SGX since 2006, Yoma is a leading conglomerate in Myanmar, with businesses spanning real estate, mobile financial services, leasing, F&B, automotive & heavy equipment and investments. In November 2019, Ayala Corporation acquired a 14.9% stake in Yoma at S$0.45 per share, valuing the company at S$1,055mn. In December 2022, Yoma, together with a consortium of investors, completed the acquisition of Telenor’s 51% interest in Wave Money, raising Yoma’s effective stake in Wave Money to 65%. In terms of EBITDA in 1H24, the key divisions are real estate (67%), wave money (18%) and food and beverage (13%).

VISIT HIGHLIGHTS

Day 1 – 8Jan24: Pun Hlaing (North of Yangon) / Wave Money / City Loft West

·       Pun Hlaing

This is a 650-acre estate with a focus on low to mid-density luxury homes and an 18-hole golf course. We visited the Yoma campus (Figure 3), which houses key divisions such as Wave Money and Yoma Land (Figure 4). The site houses about 800 employees. The homes we visited in the area were semi-detached and luxury bungalows (Figure 5). The new launch was Lotus Hills, with selling prices of around S$800,000+.

·       Wave Money

There are largely two major sources of revenue:

1)       OTC: Around 70% of the revenue is from over-the-counter (OTC) money transfers, and the balance is 30% from digital transactions. OTC is currently more lucrative due to the commission structure, which is shared with the merchant. The demand for OTC is due to the low penetration of banking in the country. Only 20-30% of the population has a banking account. Furthermore, 60% of the population live more than one hour from a bank branch. Wave Money is the leader in OTC and relies on its 55,000+ agent network, 60% of which are in rural areas.

2)       Digital: The growth in the business is now in the digital business. P2P wallet transfers by customers incur no fees. Revenue is generated from the float in the digital wallet and merchant fees. Other opportunities will come from lending, which will utilize payment data to credit score potential customers. The central bank is introducing a universal QR payment code whereby any of the current 16 payment wallets can be used to settle with the merchant. The differentiator for Wave Money is the customer can access cash with agents, especially in rural areas. KPay and WavePay have a combined market share of more than 90%.

During the pandemic, the adoption of digital wallets spiked. However, during the coup, there was a 2-3 month period when the 4G network was shut down, thus negatively impacting the operations in 2021. However, operations have since recovered.

·       City Loft West

Launched in mid-2023, this project has been a success, with 70% of the launched units sold within the first week. Of the two towers launched, 461 of the 494 units have been sold and booked as of 31 December 2023 (Figure 9). A third tower will be launched early this year. Each tower houses around 250 units. Key selling points of the project are the affordability and riverside living along the Hlaing River (Figure 10). The average selling price is MMK380,000 per sft (or S$60k per unit). Financing is available from multiple banks, including Yoma Bank. Units are sold off plans, and 30% is paid to the developer within one month of launch. Construction starts when 60-70% of units within a tower are sold. Yoma projects are known for their quality and imported materials (Figure 11).

Day 2 – 9Jan24: KFC (Junction City Mall) / Yoma Central (Yangon downtown)

·       KFC

Launched in 2015, the initial expansion plan was 50 restaurants in five years to raise market share. Due to the pandemic, the number of outlets is currently down to 36, with around 1000 staff. KFC enjoys several thousand customers per day. The nearest fast-food competitor, Korean Lotteria, has around 40 stores. We tasted fried chicken when visiting the restaurant in Junction City Mall (Figure 13). It was delicious as fresh chicken was used. The price of the chicken is fixed for 12 months to reduce volatility. Localisation of the supply chain is slowly creeping up from 60% pre-pandemic to 70% currently. The imported items are mainly seasoning, packaging, and fries. The meals are priced around MMK8,000 per pax or MMK11,000 for two pax. Most outlets may face 6-8 hours of power cuts per day. Power generators are used to reduce disruption but can cost 10x more in utilities. The flip side of power cuts is households will dine out more as their ability to cook at home is affected.

·       Yoma Central *

The planned iconic development is in central Yangon and comprises one residential block,  one business hotel & serviced apartments, a 4-storey mall, and two office towers on a 6.3-acre land (Figure 15 to 17). There are hardly any other new developments in the downtown area. The project was suspended in early 2021. The focus is to relaunch the 112-unit residential towers, of which 20  of the 30 launched units have been sold and booked. The price range is US$1.2mn for a 2-bedroom to a US$5.5mn penthouse. The residential tower was launched in 2019 but was suspended when the coup occurred. Preparation of the preliminary works is commencing.  

Day 3 – 10Jan24: StarCity (East of Yangon)

·         New bridge: To enter the 484-acre StarCity (Figure 18), we had to cross a congested bridge. However, we saw a new parallel 4-lane bridge being constructed (Figure 19), which will critically ease the traffic into StarCity. Other modes of transport included a ferry. Around 135 acres of StarCity are owned by Yoma Strategic.

·         Large sports facility: StarCity Sports City (SCSC), which was formerly part of Dulwich College, offers many sports and recreational facilities in StarCity. We saw football pitches (Figure 20), tennis courts, basketball courts, and F&B establishments. SCSC now has a membership sports club, which generates incremental recurring revenue.

·         Renting Galaxy Towers apartments: We visited some of the completed Galaxy Towers (Figure 22), and around 200 units are available for rent at a 4-5% rental yield. Some of the investment units in Galaxy Towers have been sold in 6M-Sept 2023 with a disposal gain. Yoma Land will look to commence construction for the third tower of this development.

·         Established neighbourhood. From barren land, Yoma created a flourishing township (Figures 23 and 24) with 7,000 residents, 4,000 plus homes, and a golf course.