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1 Important Investing Number Investors Should Know About Yoma Strategic Holdings Ltd

Conglomerates are companies with businesses in diverse fields. There are a number of conglomerates in Singapore’s stock market and Yoma Strategic Holdings Ltd (SGX: Z59) would be one of them.

The company, whose key geographical market is Myanmar, is involved in a wide array of businesses including real estate development, agriculture, construction, tourism, automobiles, and even food & beverage retail.

In 2014, Yoma Strategic managed to snag the franchise rights to run Kentucky Fried Chicken outlets in Myanmar from Yum! Brands. That’s one of Yoma Strategic’s major developments over the past few years.

Some of you may be surprised to know this, but Yoma Strategic has been one of the best performing stocks in Singapore’s market over the last five years – it’s gone up by 745% in price alone!

In here, I want to study the return on invested capital (ROIC) of Yoma Strategic. In an earlier article, I had explained how the RIC can be used to evaluate the quality of a business. Here’s the math needed to calculate a company’s ROIC:

ROIC table

The simple idea behind the ROIC is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs and the reverse is true – low ROICs are often associated with low-quality businesses.

The following table shows the ROIC for Yoma Strategic (I used numbers from the company’s last completed fiscal year):

yoma-strategic-roic-table
Source: Yoma Strategic’s financials

Yoma Strategic has a ROIC of 9.1%, which means that it generates only $0.091 in profit for each dollar of capital invested in the business.

It’s not uncommon for real estate development companies to have ROICs in the single digits. This holds true with Yoma Strategic as well, since its main business is in real estate development. It would be interesting to observe if the company’s ROIC can improve if it expands its other non-real estate related businesses, such as its KFC franchise restaurants.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.