Yoma Strategic Holdings Limited - How much debt will Yoma raise for expansion?

22/5/2014 – Yoma Strategic Holdings' CEO Andrew Rickards will take the debt route to finance his company's future investment requirements.

He made the comment in an on-camera interview with Investor Central.

Yoma had raised more than S$200 mln through a rights issue and a private placement in the previous financial year.

Mr Rickards said the company remains excited about the prospects in rapidly developing Myanmar, and wants to participate in developments across the board.

Currently, he acknowledges the real estate business makes up 90% of revenue.

About Yoma's various joint ventures with Mitsubishi, Mr Rickards said the relationship was a "strategic" one.

More senior level management has been hired to manage growth.

Also to cope with growth, Mr Rickards said a dashboard approach and effective budgeting are critical tools.

Autonomy in operations still lies with the investees.

A couple of quarters ago, Yoma set a goal to diversify revenue from non-real estate businesses to 50% from the current 10%.

This should be attainable within the next five years.

Fourth quarter earnings showed a manifold rise in profits attributable to minority interests during FY14.

Mr Rickards says a large part of this increase is attributable to sister company First Myanmar Investment Co Ltd (FMI), which is a 30% partner in Yoma's Star City project.

FMI is a public company in Myanmar controlled by Mr Serge Pun, who is also the controlling shareholder of Yoma.

Without FMI and its local knowledge, Mr Rickards feels it is impossible for Yoma to do business in Myanmar.

Looking ahead, Mr Rickards feels Myanmar does not have many businesses worth acquiring and Yoma would take on more greenfield projects.

About deadlines for the Landmark Development being repeatedly extended, Mr Rickards said the company went public about it too early because it does take time for the authorities to process the paperwork.

On the telecommunications licenses Yoma did not win, Mr Rickards said there was a silver lining to it because the company set up is now building transmission towers for the Qatari companies which won – Telenor and Ooredoo.

This might yield greater rewards in the end.

For upcoming greenfield projects, Mr Rickards said Yoma will raise debt so that overall leverage stays below 35%, but he did not specify how far below this would be.

These are the company's Q4FY14 earnings results:

Revenue: +34.4% to S$27.5 mln
Profit: -44.9% to S$6.4 mln
One-off gains/losses: S$5.2 mln vs S$9.1 mln
Cash flow from operations: (S$14 mln) vs (S$2.8 mln)
Dividend: Nil vs 0.5 cents per share
Order book: Not disclosed

Revenue increased to S$27.5 mln from S$20.5 mln because sales of residences and land development rights.

As at March 31, 2014, Star City's 528 units of Zone A buildings A3 and A4 have been fully sold.

Out of the total contractual revenue of S$61.1 mln (based on exchange rate as at March 31, 2014) for these two buildings, only S$24.78 mln was recognised based on Yoma's revenue recognition policy for its real estate business.

The remaining S$36.3 mln for buildings A3 and A4 is expected to be booked within the next nine to 15 months as construction progresses.

As at March 31, 2014, cash deposits and instalments totalling S$28.89 mln have been received from buyers.

Incentive fees of S$3 mln came from the sales of land development rights and residential units of Zone B buildings B2 and B5 through a third party investor agreement.

The incentive fees for B3 and B4 will be recognised as and when sales targets are met in coming quarters.

Still on revenue in this fourth quarter, Balloons Over Bagan contributed S$3.3 mln.

Gross profit increased 49% to S$12.8 mln but net profit attributable to shareholders decreased to S$5.8 mln from S$13.1 mln.

Profit attributable to non-controlling interests increased to S$1.7 mln from (S$0.01 mln) because of higher revenue from Star City and the tourism business.

Cash balance was S$16.7 mln, down from S$106.2 mln a year ago.

This was a result of buying new subsidiaries worth S$13.9 mln; financial assets for S$8.4 mln; S$10.7 mln for advanced deposits for new land; advanced payment of S$4.2 mln for buying Asia Beverages Co., Ltd; partial repayment of borrowings and interest expenses of S$15.3 mln incurred by Xun Xiang, and S$5.8 mln for dividend payment.

Additionally, S$29.3 mln (previously S$0.79 mln), was incurred because of higher working capital in line with expanding operations.

Yoma says its residential projects, Star City and Pun Hliang Golf Estate, are getting a tremendous response as foreign investors continue to flock to Myanmar.

Debt as at March 31, 2014 was at S$14.3 mln which is repayable after one year.

This amount is the leftover from debt taken by wholly-owned subsidiary Xun Xiang in FY2013 and it is secured by its investment property (a retail mall) in Dalian, China.

We thank Mr Andrew Rickards for his time on camera.

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