The Good And Bad That Investors Should Know About Yoma Strategic Holdings Ltd’s Latest Quarterly Earnings

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

In early February, the company reported its third quarter earnings update for its fiscal year ending 31 March 2018 (FY2018). There are both positive and negative takeaways that investors may want to learn about. But first, let’s run through the company’s numbers.

The results

Here’s a condensed income statement from Yoma Strategic for the third quarter of FY2018:

Source:  Yoma Strategic FY2018 third quarter earnings press release

We can see that the conglomerate’s revenue was flat compared to a year ago, but net profit grew tremendously. The bottom-line growth was mainly due to a one-off gain related to the spin-off of Yoma Strategic’s non-core tourism business in Myanmar during the reporting quarter. This tourism business is now a Singapore-listed company called Memories Group Ltd (SGX: 1H4).

The positives

Firstly, revenue from Yoma Strategic’s Automotive & Heavy Equipment business increased by 36.3% year-on-year to S$13.9 million in the reporting quarter. This was largely driven by significant growth in the New Holland tractors business, which grew by 43.9% to S$11.8 million.

Secondly, Yoma Strategic’s KFC restaurant business (which falls under the Consumer category) experienced a 30% year-on-year increase in revenue to S$3.9 million due to the opening of new stores. At the end of the third quarter of FY2018, Yoma Strategic had 21 KFC restaurants in Myanmar. The company has a target to reach 32 stores in the country by March 2019.

Thirdly, rental revenue from the company’s Real Estate business in the reporting quarter remained stable at S$4.9 million, compared to S$4.8 million a year ago.

The negatives

Firstly, as mentioned earlier, Yoma Strategic’s profit growth was driven mainly by a one-off gain related to the spin-off of its Myanmar tourism business. If the gain was excluded, Yoma Strategic would have made a loss at the operating profit level.

Secondly, the development portion of the company’s Real Estate business saw its revenue fall sharply from S$6.1 million in the third quarter of FY2017 to S$1.4 million.

Thirdly, Yoma Strategic’s gross profit margin for the reporting quarter had declined from 41.4% a year ago to 27.0%. This was mainly due to a higher proportion of the conglomerate’s revenue coming from the Automotive & Heavy Equipment segment, which has inherently lower margins compared to the Real Estate segment.

Lastly, Yoma Strategic’s balance sheet had weakened compared to a year ago. Back then, it had S$40.6 million in cash, and S$156.9 million in debt; in the reporting quarter, it had S$22.3 million in cash, and S$178.4 million in debt.

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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.