Yoma Strategic Holdings:
BUY S$0.78 STI : 3,205.29
Price Target : S$ 1.02
Strong results, positive outlook;
•2Q14 earnings slightly ahead, driven by brisk property sales and pick up in construction
•Star City is still the bright spot as Landmark awaits progress
•Maintain BUY and S$1.02 TP
Net profit of S$3.3m was slightly ahead, compared to net loss of S$4.1m in 2Q13 and net profit of S$0.4m in 1Q14. Excluding S$0.8m of forex losses, core profit would have been S$4m vs our S$3.2m estimate. Revenue surged 132% y-o-y and 77% q-o-q to S$27m.
Property sales remains brisk, construction picks up pace. Yoma reported S$15.1m of Land Development Rrights for block B2 and B5 in Star City and S$2.25m incentive fees for meeting the sales target of block B1. In 2Q14, Yoma sold 10 units in blocks A3 and A4. Together with Zone B sales for the LDR investor, we estimated Yoma sold c.265 units this quarter, up from 174 units in 1Q14. ASP was stable at US$150 psf. Meanwhile, construction pace has improved markedly as Yoma recognised S$4m from sale of development properties in just this quarter compared to a total of S$7.2m recognised in previous periods.
Staff costs continued to expand to S$2.4m from S$0.8m due to increase in staff strength to meet business expansion.
Star City continues to shine. Given the strong take up rate of Zone B so far, we expect Yoma to sell LDRs of the two remaining blocks soon. The company would also receive more incentive fees accordingly. Furthermore, Yoma has c.S$49m of unrecognized revenue in Star City to be recognised over the next 15-21months as construction progresses.
Landmark still awaiting green light. Despite the delay in securing a new 70 years Master Lease for Landmark, development on the ground appears active. Yoma recently inked a MOU with Mitsubishi Group to invest and jointly develop Landmark. This is Yoma's second tie-up with an established corporation, after an earlier agreement with The Hongkong and Shanghai Hotels Limited (HSH) to develop a Peninsula hotel in Yangon. We believe the completion of this purchase would accelerate development and unveil more opportunities for Landmark.
Maintain Buy, TP unchanged at S$1.02. This is overall a good quarter with improvement in property sales and construction. We expect Star City to continue to provide earnings visibility and growth while the Landmark project remains a wildcard.