Yoma Strategic Holdings (Yoma) announced that in 3Q18, net profit increased by 4,916.2 percent year-on-year to $16.8 million, up from $0.3 million for 3Q17. The increase in net profit was a result of disposal gains arising from the disposal of the group’s tourism related businesses as well as higher revenue from its Automotive & Heavy Equipment and Consumer businesses.

The group’s 3Q18 revenue was at $24.1 million with the Automotive & Heavy Equipment and Consumer businesses together contributing 74 percent of the total revenue. Revenue from the group’s Automotive & Heavy Equipment business increased by 36.3 percent year-on-year to $13.9 million in 3Q18, largely driven by the significant growth in the New Holland tractors business which grew by 43.9 percent to $11.8 million. The group sold 241 tractors in 3Q18 compared to 181 tractors in 3Q17.

Revenue from Yoma Fleet had also increased by 12.5 percent to $1.8 million. As at 31 December 2017, the fleet size reached 649 vehicles.

Meanwhile, revenue from the group’s KFC business grew by 30 percent year-on-year to $3.9 million, mainly due to the addition of new stores.

Revenue from the group’s Real Estate development business contributed $1.4 million or 5.7 percent to the group’s 3Q18 revenue, a decrease from $6.1 million in 3Q17. The decrease in revenue was mainly due to the group’s change in sales strategy for StarCity’s Zone C following the recent buy-back of the development to keep some units for long-term rental while re-designing other units to meet the demand for smaller units.

Additionally, Real Estate revenue continued to be impacted by the group’s sales strategy to only sell near-completed units in Pun Hlaing Estate. Meanwhile, Real Estate rental revenue in 3Q18 remained stable at $4.9 million compared to $4.8 million in 3Q17. The group started recognising leasing revenue from the two Dulwich International Schools and The Campus (previously known as Yoma Office Park) in Pun Hlaing Estate. However, gross profit margins decreased to 27 percent from 41.4 percent in 3Q17, mainly due to the higher portion of revenue generated from the Automotive & Heavy Equipment segment, which has lower margins compared to the Real Estate segment.

Net other income increased 111.2 percent year-on-year to $27.2 million in 3Q18, mainly due to the fair value and disposal gain from the completion of the disposal of the group’s tourism related businesses. The group now holds a 47.6 percent-stake in Memories Group, which was listed on the SGX Catalist Board on 5 January 2018. An increase in total borrowings and a rising interest rate environment resulted in higher interest expense of $3.7 million, while administrative expenses increased by 31.9 percent to $14.6 million in 3Q18 largely due to the increase in the number of KFC stores and Convenience Prosperity branches as well as administrative expenses related to the Yoma Central project.

Yoma Chart

(Source: Press Release by Cogent Communications)

Commenting on the 3Q18 financial results, Mr Melvyn Pun, Yoma’s Chief Executive Officer said, “We are pleased with the high growth in our Heavy Equipment, Yoma Fleet Leasing and KFC businesses and expect them to contribute meaningfully to the group in the coming years. The current market provides us attractive expansion opportunities which focus on domestic consumption patterns, namely in the consumer and financial services sectors.”

Outlook

Real Estate Business

The Condominium by-laws issued by the Myanmar Ministry of Construction in December 2017 allows foreign buyers to own up to 40 percent of the total floor area of a condominium building. Furthermore, registered condominiums will soon be eligible for strata title and this will support the development of a domestic mortgage market. The group will explore the possibilities of applying for condominium status for its projects once the relevant committees and a Condominium Registration Office to administer the by-laws are established. With the continued progress in construction work for Yoma Central and the Peninsula Yangon helmed by joint ventures of Bouygues Construction and Taisei Corporation, the group is looking to formally launch sales of the Peninsula Residences in the coming months.

Automotive & Heavy Equipment Business

The group is currently fulfilling an additional order of 500 New Holland tractors organized by the government’s Agriculture Mechanisation Department with revenue expected to be recognised progressively in the coming months.

At the same time, the group is also seeing traction with its JCB construction equipment business and currently has five Yoma JCB branches with two more branches expected to open in 4Q18.

Consumer Business

The KFC store expansion outside of Yangon has been progressing well. Subsequent to 3Q18, the group opened three more KFC stores in Yangon and two KFC stores in Bago, bringing the total number of KFC stores nationally up to 21. The performance of existing KFC stores and new KFC stores is expected to continue to drive revenue growth.

KFC continues to be the leading quick service restaurant brand in Myanmar and aims to operate at least 32 KFC stores nationwide by the end of March 2019. As the consumer market in Myanmar continues to record a healthy growth, the group intends to explore other opportunities in this space.

Mr Serge Pun, Yoma’s Executive Chairman also commented, “All of our three core businesses are developing steadily. The soft property market will see a boost from the implementation of the Condominium Law in the coming months. As we focus on growing our key businesses, it has served a good purpose for us to spin-off our tourism assets into Memories Group Limited.”

Financial Ratio

Borrowings for the group has increased to $178.4 million as at 31 December 2017, as compared to $165.9 million as at 31 March 2017 with the group’s net financial gearing ratio currently standing at 14.9 percent as at 31 December 2017

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