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YOMA STRATEGIC HOLDINGS LTD. Collateral damage

SINGAPORE | REAL ESTATE| UPDATE 10 March 2021 NEUTRAL (Downgraded) . 2Q21 to be washed out by political instability and Covid-19. Spillover into 3Q21 likely. LAST CLOSE PRICE SGD 0.157 . ’s political regression and ongoing violence to thwart Yoma’s growth prospects. FORECAST DIV SGD 0.000 . Downgrade to NEUTRAL from BUY with a revised TP of S$0.156, down from S$0.34. We TARGET PRICE SGD 0.156 change from SOTP to 0.45x P/B valuation, slightly above its average historical low in 2007- TOTAL RETURN -0.6%

2010. This reflects the stock’s negative outlook over the next one year amid violence, COMPANY DATA strikes and business disruptions. BLOOMBERG CODE: YOMA SP O/S SHARES (MN) : 2,237 2Q21 likely to be washed out by political instability and Covid-19 MARKET CAP (USD mn / SGD mn) : 259 / 349 52 - WK HI/LO (SGD) : 0.34 / 0.15 Since the coup on 1 February, peaceful protests have swiftly escalated into violent protests. The 3M Average Daily T/O (mn) : 9.66 military has opened fire on demonstrators and conducted overnight raids to arrest residents. As of date, more than 50 people have been killed, which is more deadly than the Saffron MAJOR SHAREHOLDERS (%) Revolution in 2007. The 2007 protests were triggered by a decision of the military government SERGE PUN 28.1% AYALA CORPORATION 14.9% to remove price subsidies for fuel. The number of casualties in that crisis was estimated at 13- STANDARD LIFE ABERDEEN PLC 6.4% 31. PRICE PERFORMANCE (%) The situation is also not yet as bad as 1988 when over 3,000 people were killed across Burma, 1MTH 3MTH 1YR COMPANY (17.5) (42.9) (42.9) as Myanmar was then known. Before the crisis, Burma had been ruled by the repressive and STI RETURN 3.7 6.3 4.0 isolated regime of General Ne Win since 1962. The was triggered by the announcement of withdrawal of newly-replaced currency notes, which wiped out citizens’ PRICE VS. STI savings instantly. 0.50 0.40

Over the past month, state telecommunication services have been disabled intermittently. All 0.30 major construction work has ceased. On 8 March 2021, Myanmar’s biggest trade unions began 0.20 widespread strikes in their latest attempt to force the country’s generals to step down. At least 0.10 18 labour organisations representing industries such as construction, agriculture and Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 manufacturing called on workers to stop work to restore ’s elected YOMA SP Equity FSSTI Index government to power. The impact has been felt at every level of the national infrastructure, Source: Bloomberg, PSR with hospitals, ministry offices and banks all unable to operate. Major shopping centres have KEY FINANCIALS also been closed and factories are not operating. Y/E Sept (US$'000) FY19 FY20 FY21e FY22e Gross Rev 91,015 103,358 81,864 108,336 Apart from US sanctions against the top military brass, Britain has frozen the assets of a few Gross Profit 45,289 33,058 35,999 52,787 military generals and imposed travel bans on them. Canada is imposing sanctions against nine EBITDA 8,519 (23,021) 564 14,459 NPAT (37,154) (65,738) (39,761) (25,588) military officials. The EU will press ahead with sanctions this month and withhold some P/NAV (x) 1.08 0.59 0.61 0.64 development aid. Political instability is expected to damage investment sentiment and hurt P/E (x) nm nm nm nm economic growth in the country. ROE (%) (5.30) (8.28) (4.99) (3.34) Source: Company, PSR We are anticipating major business disruptions to affect at least a quarter of Yoma’s FY21 VALUATION METHOD revenue. There could be fewer Wave Money transactions as consumers conserve cash. F&B and 0.45x P/B (prev. SOTP, 20% conglomerate discount) Motors sales are also likely to be lacklustre. Given the pause in construction work, Yoma may Tan Jie Hui (+65 6212 1850) not be able to recognise revenue from the completion of its property-development projects in Research Analyst the next 3-6 months. Yoma Land has US$45mn worth of revenue yet to be recognised from City [email protected] Loft @ Star City, The Peninsula Residences and Star Villas.

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MCI (P) 006/10/2019

Ref. No.: SG2021_0013

YOMA STRATEGIC HOLDINGS LTD. UPDATE Figure 1: Slowdown in FDIs to affect Myanmar’s GDP growth Major conflicts, political events and natural disasters in Myanmar since 18,000 16.00% Yoma's listing in 2006: 16,000 14.00% 14,000 12.00% 1: 12,000 10.00%  August 2007 – November 2007, 10,000 8.00% September 2008 – October 2008 8,000 6.00%  Cause: military government 6,000 removed price subsidies for fuel. 4.00% 4,000 Diesel and petrol prices jumped 2.00% 2,000 by 66-100%. The price of natural 0 0.00% gas skyrocketed 500% in less

than a week

2008 2020 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019  Casualties: 13-31 FDI value (USD mn) Real GDP growth (%) 2. Cyclone Nargis 2008 Source: CEIC, Trading Economics  April 2008 – May 2008 Downgrade to Neutral with a revised TP of S$0.156, from S$0.340. We change our valuation  Casualties: 84,537 from SOTP to P/B, using its average historical price tanks during major conflicts, political upheavals and natural disasters. Before the 2010 general election, Myanmar was under military 3. 2012 riots rule. Given that the current in Myanmar is expected to last a year and  June 2012, October 2012 violent protests are not likely to cease in the near term, we believe a P/B discount of the similar  Casualties: 350 (June), 400 magnitude as in 2007-2010 is warranted. Excluding 2007 when Yoma traded at its low of 1.45x (October) P/B, its historical 2007-2010 had averaged lows of 0.41x P/B.  Cause: triggered by gang rape and murder of a Rakhine woman Our 0.45x P/B TP is slightly above its 2007-2010 low of 0.41x, given that Yoma is now a bigger by Rohingya . conglomerate with more resilient businesses such as Financial Services. Our FY21e book value is US$0.257. We believe Ayala will proceed with its second tranche US$46mn investment in 4. 2013 Myanmar anti-Muslim riots Yoma. At US$/S$ rates of 1.35, our valuation translates to a TP of S$0.156.  March 2013 – October 2013  Cause: tensions between Re-rating catalysts could come from significant improvements in the political situation, a Buddhist and Muslim ethnic sanctions uplift and a return to normalcy. groups  Casualties: over 50 Figure 2: Yoma’s lowest P/B since listing in 2006 was 0.19x 5. 2015 elections 3.00  November 2015  NLD won by a landslide and Aung San Suu Kyi assumed power as 2.50 1+2 3+4 5 6+7 state counsellor

2.00 6.  October 2016 – January 2017, 1.50 August 2017 – present  Cause: attacks on border police posts by Rohingya 1.00 Salvation Army, historic mistreatment of Rohingya by the 0.50 government, tensions between Buddhist and Muslim 0.00 communities 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020  Casualties: 10,000. 700,000 refugees fled abroad

Source: PSR, Company 7. Annual earthquakes, landslides and

flash floods

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YOMA STRATEGIC HOLDINGS LTD. UPDATE Financials

Income Statement Balance Sheet Y/E Sept, (US$’000) FY18 FY19 FY20 FY21e FY22e Y/E Sept, (US$’000) FY18 FY19 FY20 FY21e FY22e Revenue 99,631 91,015 103,358 81,864 108,336 ASSETS Cost of sales (67,940) (45,726) (70,300) (45,866) (55,549) Investment properties 366,637 310,359 273,379 273,379 273,379 Gross Profit 31,691 45,289 33,058 35,999 52,787 Land development rights (NC) 210,144 150,530 149,789 149,789 149,789 Finance expenses (11,896) (29,605) (21,599) (21,599) (21,599) PPE 71,563 65,066 182,434 165,486 148,538 Administrative expenses (53,945) (50,255) (55,124) (57,880) (60,774) Others 189,247 151,172 152,362 146,094 159,363 Other items 80,287 (140) (18,901) 4,500 4,500 Total non-current assets 837,591 677,127 757,964 734,748 731,069 Profit/(loss) before tax 46,137 (34,711) (62,566) (38,981) (25,086) Development properties 330,028 276,944 299,465 382,736 339,505 Taxation (2,042) (2,443) (3,172) (780) (502) Trade receivables 98,167 85,776 114,313 49,415 86,005 Profit/(loss) after tax 44,095 (37,154) (65,738) (39,761) (25,588) CCE 32,579 29,877 46,418 83,272 30,682 EBIT 58,033 (5,106) (40,967) (17,382) (3,487) Inventories 26,061 18,401 24,594 20,004 34,010 EBITDA 67,649 8,519 (23,021) 564 14,459 Others 134,758 113,753 100,861 100,861 100,861 Total current assets 621,593 524,751 585,651 636,288 591,063 Total Assets 1,459,184 1,201,878 1,343,615 1,371,036 1,322,132 Per unit data Y/E Sept FY18 FY19 FY20 FY21e FY22e LIABILITIES NAVPS (US$) 0.27 0.29 0.27 0.26 0.24 Trade payables 136,214 76,129 86,502 96,960 88,204 EPS (US$ cents) 2.33 (1.96) (2.61) (1.70) (1.09) ST borrowings 128,302 116,156 77,201 77,201 77,201 DPS (US$ cents) 0.25 - - - - Others 5,313 4,143 10,469 10,469 10,469 Total current liabilities 269,829 196,428 174,172 184,630 175,874 LT borrowings 185,004 218,493 274,612 274,612 274,612 Others 104,770 85,368 100,897 115,475 104,770 Cash Flow Statement Total non-current liabilities 289,774 303,861 375,509 390,087 379,382 Y/E Sept, (US$’000) FY18 FY19 FY20 FY21e FY22e Total liabilities 559,603 500,289 549,681 574,718 555,256 CFO Net income 45,111 (37,154) (65,738) (39,761) (25,588) Net assets 899,581 701,589 793,934 796,319 766,876 Adjustments (73,193) 62,289 73,527 33,173 32,895 Represented by: WC changes 28,255 (41,007) 40,071 16,523 (41,093) Share Capital 674,396 513,716 624,890 670,890 670,890 Cash generated from ops 173 (15,872) 47,860 9,935 (33,786) Retained profits 96,057 90,313 (9,919) (54,179) (84,267) Others (1,551) (833) 1,046 (780) (502) Others 129,128 97,560 178,963 179,608 180,253 Cashflow from ops (1,378) (16,705) 48,906 9,156 (34,288) Total equity 899,581 701,589 793,934 796,319 766,876

CFI Valuation Ratios Additions to development properties (137,224) (74,684) (64,153) - - Y/E Sept FY18 FY19 FY20 FY21e FY22e Additions to IP (56,510) (610) (4,726) - - P/NAV (x) 1.17 1.08 0.59 0.61 0.64 Additions to PPE (23,252) (20,836) (26,385) - - P/E (x) 14 nm nm nm nm Others (44,396) (39,031) (44,040) - - EV/EBITDA (x) 16 123 -37 1472 61 Cashflow from investments (261,382) (135,161) (139,304) - - Growth & Margins Growth CFF Revenue -29.1% -8.6% 13.6% -20.8% 32.3% Proceeds from issuance of units 82,150 - 108,573 46,000 - Gross profit -46.0% 42.9% -27.0% 8.9% 46.6% Proceeds from borrowings, net 105,256 123,338 (6,529) - - EBITDA -3.4% -87.4% nm nm 2463.5% Interest paid (12,511) (21,768) (19,605) (18,302) (18,302) EBIT -1.2% nm nm nm nm Others 40,932 55,382 26,456 - - Margins Cashflow from financing 215,827 156,952 108,895 27,698 (18,302) Gross profit margin 31.8% 49.8% 32.0% 44.0% 48.7% EBITDA margin 67.9% 9.4% -22.3% 0.7% 13.3% Net change in cash (46,933) 5,086 18,497 36,854 (52,590) EBIT margin 58.2% -5.6% -39.6% -21.2% -3.2% Cash at the start of the period 63,603 10,776 15,835 35,414 72,268 Key Ratios Currency translation (1,825) (27) 1,082 - - ROE 4.9% -5.3% -8.3% -5.0% -3.3% Others 17,734 14,042 10,944 11,004 11,004 ROA 3.0% -3.1% -4.9% -2.9% -1.9% Ending cash 32,579 29,877 46,358 83,272 30,682 Gearing 38.4% 41.6% 40.9% 41.9% 42.0% *nm - not meaningful

Source: Company, Phillip Securities Research (Singapore) Estimates

Page | 3 | PHILLIP SECURITIES RESEARCH (SINGAPORE)

YOMA STRATEGIC HOLDINGS LTD. UPDATE Ratings History

0.60 Source: Bloomberg, PSR 0.50

0.40

0.30

0.20 Market Price Target Price

0.10

Mar-… Jun-20 Mar-… Jun-21 Sep-21 Dec-… Mar-… Dec-… Jun-19 Sep-19 Dec-… Mar-… Sep-20 Dec-…

1 2 3 4 5

PSR Rating System Total Returns Recommendation Rating > +20% Buy 1 +5% to +20% Accumulate 2 -5% to +5% Neutral 3 -5% to -20% Reduce 4 < -20% Sell 5 Remarks We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation

Page | 4 | PHILLIP SECURITIES RESEARCH (SINGAPORE)

Research

Benny WANG Dealing Director (852) 2277 6720 [email protected]

ZHANG Jing Kevin CHIU Research Analyst Research Analyst Transportation and Automobiles TMT and Education (86) 21 51699400-103 (852) 2277 6514 [email protected] [email protected]

Parker CHAN Timothy CHONG Research Analyst Research Analyst Communication and Technology Hardware Consumer and Property Management (852) 2277 6527 (852) 22776515 [email protected] [email protected]

Sales

Aric AU Yoshikazu SHIKITA Manager, Corporate & Institutional Sales Manager, International Sales (852) 2277 6783 (852) 2277 6624 [email protected] [email protected]

PHILLIP RESEARCH STOCK SELECTION SYSTEMS

Total Return Recommendation Rating Remarks > +20% Buy 1 >20% upside from the current price +5% to +20% Accumulate 2 +5% to +20% upside from the current price -5% to +5% Neutral 3 Trade within +/- 5% from the current price -5% to -20% Reduce 4 -5% to -20% downside from the current price < -20% Sell 5 -20% downside from the current price

We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock’s risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation

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