The Good And The Bad: Important Investing Takeaways From Yoma Strategic Holdings Ltd’s Latest Earnings

Yoma Strategic Holdings Ltd (SGX: Z59) is a conglomerate that focuses on Myanmar. It has business interests in a wide variety of sectors, such as real estate development, agriculture, tourism, vehicle distribution, and even food & beverage retail.

Last week, Yoma Strategic Holdings reported its fourth quarter and full year results for its fiscal year ended 31 March 2017 (FY2017). There are both positive and negative takeaways from the announcement that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

Here’s a table showing some of the important items from Yoma Strategic’s income statement for FY2017 and FY2016:

Source: Yoma Strategic FY2017 full year earnings release

Yoma Strategic enjoyed good revenue growth of 11.0% in FY2017, but its net profit was down. The lower profit was primarily due to an increase in finance costs as a result of higher borrowings and a rise in interest rates.

2. The positives

Firstly, Yoma Strategic’s gross margin improved from 36.4% in FY2016 to 40.3% in FY2017, driven mainly by higher margins achieved in the company’s real estate development and consumer businesses. As a result, Yoma Strategic’s gross profit for the year grew 23% despite revenue being up by “only” 11%.

Secondly, Yoma grew its non-property revenue from 39% of total revenue in FY2016 to 47% of total revenue in FY2017. In other words, the company has further diversified its income sources away from its traditional real estate business.

Thirdly, its cash flow from operations surged from S$13.6 million a year ago to S$65.4 million. This is important as this is a sign that Yoma Strategic is not neglecting its liquidity position while growing its business.

3. The negatives

Firstly, revenue from Yoma Strategic’s real estate business was down by 3.6% in FY2017. There were lower sales of residences and land development rights during the year.

Secondly, Yoma Strategic experienced a large increase in borrowings from S$89.7 million in FY2016 to S$165.9 million. Although the company’s gearing is still at healthy level – total debt is just 25% of shareholders’ equity – its finance cost had shot up from $3.1 million in FY2016 to S$16 million in FY2017.

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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.