Monday, October 28, 2013

Yoma Strategic Holdings: To operate VW’s first service center in Yangon (OCBC)

Yoma Strategic Holdings:
Fair value S$0.84
add: 12m dividend forecast S$0.01
versus: Current price S$0.77

To operate VW’s first service center in Yangon
• VW’s first service center in Yangon
• Similar agreement with Mitsubishi
• Continues to show deal-making ability

Yoma reported that it will operate Volkswagen’s first service center in Yangon, which is expected to begin operations in Oct 13. Yoma’s 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft (“VW”) to provide maintenance and repair services.
We understand that the automotive market in Myanmar is currently dominated by Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar. Therefore, this agreement is expected to have limited financial impact over the near term. That said, we see this deal further strengthening the growth potential of the group’s automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing. The group is expected to report 2QFY14 results in early November and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City. Maintain HOLD. Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our valuation model to reflect higher risk-free and discount rates.

Service agreement with Volkswagen
Yoma reported that it will operate Volkswagen’s first service center in Yangon, which is expected to begin operations in Oct 2013. Yoma’s 70% owned subsidiary, German Car Industries Company will enter into a service partner agreement with Volkswagen Aktiengesellschaft (“VW”) to provide maintenance and repair services. We understand that the automotive market in Myanmar is currently dominated by Japanese vehicles and that VW has no manufacturing facilities or car show room in Myanmar. Therefore, this agreement is expected to have limited financial impact over the near term. That said, we see this deal further strengthening the growth potential of the group’s automotive division which, together with a similar service agreement with Mitsubishi earlier, is one that is steadily growing.

Continues to show strong deal-making ability
To recap, Yoma has a similar agreement with Mitsubishi to operate its automotive after-sales service center in Yangon. In addition, the group also recently announced an MOU for Mitsubishi Corp. and Mitsubishi Estate to invest in the Landmark project (excluding the Peninsula Yangon), and that it would enter into a strategic alliance with Mitsubishi Corp. to jointly explore business opportunities in Myanmar. We see these as major positives which points to management’s continued deal-making ability and ambitions to grow as a major conglomerate. In our view, the alliance with the blue-chip Mitsubishi also further cements Yoma’s reputation as a solid name (note that Mitsubishi Estate and CapitaLand are partners in Singapore) and would likely widen its access to capital and business opportunities in Myanmar.

Maintain HOLD
The group will report 2QFY14 results in early Nov and we anticipate a set of stronger numbers QoQ on the back of firmer contributions from sales in Zone B of Star City. Maintain HOLD. Our fair value estimate dips slightly to S$0.84, from S$0.87 earlier, as we update our valuation model to reflect higher risk-free and discount rates.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 24/10/13

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