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SINGAPORE RHB Research is maintaining its positive view on Yoma Strategic as the best proxy to invest in Myanmar and continues to rate the counter at “buy” with a target price of 78 cents, despite the group posting a 98.7% decline in 3Q17 earnings last month.

In a Tuesday report, analyst Goh Han Peng notes the group’s “strong and diversified business model”, in addition to its recent move to scale up its consumer and automotive businesses.

The analyst believes the group’s recent quarterly results reflect a sluggish real estate market in Myanmar, caused by uncertainty over new regulations governing foreign buying. However, he sees these as “hiccups in a long structural uptrend” driven by urbanizations, foreign direct investments, and financial liberalization.

Following its receipt of building permits from the Myanmar Investment Commission, Yoma’s management is now looking for “a suitable window” to soft-launch the residential units of its upcoming Yoma Central development sometime in 2Q17.

Nonetheless, Goh expects further bylaws to be passed to clarify the legislation of Myanmar’s newly-implemented Condominium Law before the nation’s sluggish real estate market sees any pickup in foreign investment demand.

The group also recently completed its divestment of 12.5% of its telecoms towers JV with Axiata, and intends to spin-off its tourism assets next into a separate listed vehicle via a reverse takeover (RTO) exercise – which Goh says would give the tourism business a separate platform to raise capital independently for expansion.

Additionally, he believes Yoma’s non-real estate business are “ramping up steadily” due to its continued ramp-up of its KFC store network and solid contributions from its automotive leasing and agricultural equipment units.

We expect the business momentum to be sustained on the back of a large 600-tractor order from the Ministry of Agriculture to be delivered over the following months and the roll out of another 10 KFC outlets in the next 12 months, bringing its store count to 22 by Mar 2018, says Goh.As at 11am, shares of Yoma are trading flat at 62 cents.

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