Yoma Strategic Holdings Ltd’s Latest Earnings: Is There More Room to Grow?

Yoma Strategic Holdings Ltd (SGX: Z59) had released its fiscal fourth-quarter earnings (for the three months ended 31 March 2015) this morning.

The company’s one of the rare few listed firms in Singapore that does a significant amount of business in Myanmar.

In fact, Yoma Strategic might even be able to act as a solid tracker for the progress of Myanmar’s economy given that the company has business interests in many different sectors in the country such as real estate, automotive, retail, agriculture, tourism, and construction.

With that as a backdrop, let’s dig into the firm’s latest earnings.

Financial highlights

For the fiscal year ended 31 March 2015 (FY2015), Yoma Strategic’s revenue grew by 10.4% to S$110.9 million.

At first glance, the higher top-line seemed to have done wonders for the bottom-line as Yoma Strategic ended the year with S$39.3 million in net profit, up 64.3% from a year ago.

But, it should be noted that most of the company’s profit had come about from the “Other gains, net” line, which includes fair value as well as currency gains, in its income statement. If we adjust for those gains, Yoma Strategic’s operating profit would have actually decreased by 35% from S$18.8 million in FY2014 to S$12.2 million.

On the balance sheet front, Yoma Strategic ended 31 March 2015 with S$661.8 million in shareholder’s equity, a huge jump from the figure of S$371.5 million seen a year ago. The large increase had been mainly due to a private placement made in July 2014 and a rights issue that occurred in February 2015.

Yoma Strategic ended the year in a strong financial position given that its net-debt to equity ratio (where net-debt refers to total borrowings minus total cash) is less than 1%. But, it’s worth pointing out that the firm’s balance sheet had deteriorated compared to a year ago when it had more cash than debt; this has happened even as Yoma Strategic had raised extra capital from the aforementioned private placement and rights issue.

Business highlights

Operationally, Yoma Strategic continues to depend mostly on its real estate business; during the year, 79.7% of its annual revenue had come from the sale of residences and land development rights (LDR).

The growth in the firm’s revenue this year had come mainly from strong increases in its Automotive (a spike in revenue from S$0.70 million to S$8.83 million) and Tourism (from S$5.3 million to S$7.8 million) businesses.

There’s something else investors might want to note: While double-digit revenue growth is always welcome, the 10.4% increase in FY2015 is a significant slow-down from previous years when revenue of just S$4.6 million in FY2010 had ballooned to S$100.5 million in FY2014, representing a compound annual growth rate of 116%.

A future outlook

Despite suffering a decline in operating profit (as mentioned earlier), Yoma Strategic is still optimistic about its potential for growth.

In particular, the company had pointed out Myanmar’s fast economic growth (the Asian Development Bank had forecasted an 8.3% growth rate for the country in 2015/2016) and the strong flow of investments into important industries in the country which can help improve infrastructure there.

But, the company also cautioned about a number of headwinds, such as increased supply in the real estate market in Myanmar.

Yoma Strategic is also looking to continue its strategy of diversification and to that point, the firm will be making moves into the consumer market with the impending launch of Myanmar’s first ever Kentucky Fried Chicken store.

At its current share price of S$0.52, Yoma Strategic is trading at 24 times its trailing earnings and 2 times its tangible book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above.