• We visited Yoma’s impressive office campus at Pun Hlang Estate in Yangon, which housed major business units such as Yoma Land, Wave Money and Yoma Fleet. The malls we visited had the usual traffic jams in the city centre. We also saw new infrastructure underway that will improve connectivity to their flagship StarCity project.
• Preparation for the preliminary works on-site in the iconic Yoma Central project in the heart of Yangon is commencing after its suspension in 2021. The project's residential tower will be relaunched this year.
• Operating challenges in the current environment include the long delivery time to import building materials, constant power disruptions, rising inflation, and availability of foreign currency. These challenges also meant opportunities. Demand for real estate for projects such as Yoma Land with quality materials and reliable power supply jumped as households hedged rising inflation and depreciating local currency. Yoma continues to capitalise on the demand for affordable housing. Another trend is the fast adoption of digital finance, supported by the central bank.

• Following the pandemic and coup in 2021, Yoma has undergone a major de-leveraging and rightsizing exercise. Net debt has shrunk from US$326mn in September 2021 to US$134mn in September 2023. The company disposed of investment properties, restructured Yoma Central debt, resized F & B operations, lowered manpower costs and generated operating cash flow.
• Real estate development has been the key performer for Yoma. Revenue has more than tripled in 1H24 to US$48mn. As of September 2023, there is a further US$65mn of unrecognized revenue. Buyers are seeking hard assets in an environment of rising inflation, negative real interest rates and a depreciating kyat currency.
• The macro environment in Myanmar has been extremely challenging. Myanmar's GDP (in USD nominal terms) contracted 17.5% YoY in 2021 and 8.9% in 2022. Inflation is running at 20% p.a. and the kyat currency is officially down 60% since 2021. Yoma is responding to these challenges by de-gearing its balance sheet, disposing of non-core assets, localising costs and rebalancing its headcount. The share price is currently trading at a 71% discount to its book value of US$0.189.

Company Background

Listed on the SGX since 2006, Yoma is a leading conglomerate in Myanmar, with businesses

spanning real estate, mobile financial services, leasing, F&B, automotive & heavy equipment and investments. In November 2019, Ayala Corporation acquired a 14.9% stake in Yoma at S$0.45 per share, valuing the company at S$1,055mn. In December 2022, Yoma together with a consortium of investors completed the acquisition of Telenor's 51% interest in Wave Money, raising Yoma's effective stake in Wave Money to 65%. In terms of EBITDA in 1H24, the key divisions are real estate (67%), wave money (18%) and food and beverage (13%).

1H24 FINANCIAL RESULTS

• Revenue: 1H24 revenue spiked 173% to US$111.6mn. The key driver to growth was the 245% YoY rise in real estate development revenue to US$47.9mn and contribution from Wave Money after raising its stake from 44% associate to 65% subsidiary in Dec23.
• EBITDA: There is an almost 4-fold spike in EBITDA to US$18.8mn. Around 2/3 of the jump came from the jump in property earnings. The next three major contributors were Wave Money, leasing and F&B.
• Profit After Tax: In 1H24 Yoma's net loss narrowed from US$11.3mn to US$1.3mn and PBT turned positive to US$2.4mn. Finance costs have been the largest drag on earnings, rising 51% to US$8.3mn. Interest expense related to Yoma Central had previously been capitalized as part of the development cost. 1H24 interest expense from Yoma Central was US$4mn.

YOMA LAND

• Projects: Yoma has several property projects in Yangon, Myanmar: (i) City Loft @ StarCity: Apartments launched in November 2018.; (ii) Star Villas: Landed housing launched in 2020 May 2020; (iii) City Villas: Affordable landed homes launched in August 2022; (iv) City Loft West* (May23); (v) The Estella* (Oct23).
• Track record: Since 2018, Yoma has shifted its strategy toward more affordable housing. It has built up a brand name in project quality and completion. The payment terms for purchases are typically 20-30% upfront and the remaining balance in progressive payments. Yoma Land also works with banks to secure mortgages for its customers.
• Outlook: As of September 2023, there is US$65.2mn of unrecognised revenue from the property division, not included in this number are the 515 of the 527 Estella units which have been sold and booked since the launch in October 2023. Future launches include Phase 4 of the Estella (163 units) and City Loft West 3rd tower (247 units). There is another 6.2mn sft landbank (Star City 1.4mn, Pun Hlaing Estate 4.8mn) which Yoma can develop on its own or with partners.

• 3Q21 revenue in line, at 55% of our 2H21e estimate. Yoma F&B and Motors performed better than expected, led by resumption of food delivery services and sale of automotive vehicles despite limited credit processing and closure of dealer showrooms in April.
• Third wave of Covid-19 led to stay-at-home orders from 17 July to 15 August 2021. Business was disrupted, especially for Yoma Motors, as automotive showrooms were shut.
• Maintain NEUTRAL with a lower TP of S$0.129, from S$0.147. We roll over to FY22e and lower our book value by 4.6%, after accounting for 10%/5% impact on trade receivables and investments in associate companies from closures, offset partially by FX. Our TP remains pegged at 0.45x P/BV, slightly above its 2007-2010 average P/BV of 0.41x during major conflicts, political upheavals and natural disasters.

The Positives

+ Held up by real-estate development; better-than-expected F&B and Motors. 3Q21 revenue in line, at 55% of our 2H21e estimate. This was held up by a 46% YoY increase in real-estate development, as construction resumed at StarCity and Pun Hlaing Estate. Conversion rates of bookings to sales at both Star Villas and City Loft @ StarCity were healthy. F&B and Motors performed better than expected, driven by a resumption of food delivery services and sale of automotive vehicles despite limited credit processing and the closure of dealer showrooms in April.

+ 3Q21 core operating EBITDA positive; cost-cutting in place. Core operating EBITDA remained positive in 3Q21, with gross profit covering interest expense. Yoma also paid down US$10mn of gross loans and extended several loans in 3Q21. It continued to cut operating expenses and defer non-essential capex. Staff costs were slashed by more than 60% through job cuts, furloughs and pay reductions. Consolidated cash balance improved QoQ.

The Negatives

- Lower real-estate service revenue. Revenue from real-estate services fell 5% YoY, attributable to lower occupancy at Pun Hlaing Estate as expatriate residents left. This was partially offset by higher leasing by locals, supported by lower rents, better amenities and security provided by the estate.

Outlook

The current third wave of Covid-19 in Myanmar could further disrupt business in the coming quarter. Public holidays were declared for 17 July-15 August 2021 and stay-at-home orders implemented in 86 townships in 10 regions and states. Only healthcare facilities, banks and shops selling essentials, medicines and medical supplies were allowed to remain operational.  F&B establishments could only open for takeaways and/or deliveries.

These measures are expected to affect Yoma F&B and Motors. F&B sales are currently 30% below pre-pandemic levels. Most automotive showrooms were forced to close during this period. Revenue from real estate may be resilient as construction is still going on at StarCity, despite a slowdown in sales. Yoma financial services are likely to hold up as Yoma is looking at improving the efficiency of the asset base of Yoma Fleet. Wave Money’s monthly active users grew by double digits MoM in May, after the resumption of mobile 4G network services. However, people’s preference for physical cash in a tight credit environment is likely to affect transaction volumes for the coming quarter.

Yoma is rightsizing its restaurant platform to focus on its two main brands: KFC and YKKO. Previously guided at 30%, it is now looking to close around 25% of the restaurants permanently or temporarily if they can no longer be operated profitably. Yoma closed Little Sheep Hot Pot on 1 July 2021. Auntie Anne’s will cease operations by end-August. We are expecting revenue loss of about 1%. For Motors, Bridgestone tyres ceased operations as of end-July as the brand could no longer operate competitively in Myanmar after price hikes. Yoma Strategic has a 30% interest in the Bridgestone tyre business. We estimate that write-offs from closures will affect trade receivables and investments in associate companies by 10% and 5% respectively in 4Q21.

Maintain NEUTRAL with lower TP of S$0.129, from S$0.147. We roll over our estimates and lower our FY22e book value by 4.6%, after accounting for 10%/5% impact on trade receivables and investments in associate companies respectively due to write-offs from closures. This is partially offset by higher US$/S$ assumptions of 1.36 from 1.34.

Accordingly, our TP drops to S$0.129. This remains pegged at 0.45x P/BV, slightly above its 2007-2010 average P/B of 0.41x during major conflicts, political upheavals and natural disasters. What could turn us more positive are widespread Covid-19 vaccinations and a turnaround in Myanmar’s political situation.

• Myanmar’s military junta has declared a state of emergency for a year. Expect business disruptions and political instability to affect medium-term investment sentiment and economic growth.
• Yoma’s fundamentals are intact. International lenders and investors still supportive of company.
• Maintain BUY with a revised SOTP TP of S$0.34 (previously S$0.46) to reflect lower land bank prices for Yoma Land. We also cut FY21-22 earnings by 27% and 35% to capture impact of Covid-19 lockdowns and slower growth forecasts.

What’s new

Just three months ago in November 2020, Aung San Suu Kyi’s National League for Democracy achieved a landslide victory in elections, bagging 83% of the 1,171 the seats available. On 1 February 2021, the military alleged discrepancies of more than 10mn votes. It has declared a state of emergency to take control of the country for one year and dismissed 24 ministers and deputies, making 11 new appointments in their place. It has also pledged to hold fair elections in a year.

What’s next for Yoma

1. Supportive lenders and investors amid unrest. While the coup came as a shock, international lenders and partners have not pulled out their funds. We believe that Ayala (AC PM, Not Rated) will proceed with its second-tranche equity investment in the company by 11 May 2021. Ant Financial’s transaction in Wave Money is also close to completion. Yoma’s deal to buy out Telenor in Wave Money is ongoing. Yoma will be deploying its cash conservatively.
2. Business disruptions, near term. During the coup, state telecommunication services were disabled, the streets were quiet and all construction work ceased. Although most operations have returned, we are anticipating business disruptions in the short term. There could be fewer OTC and digital transactions through Wave Money as consumers conserve cash. F&B sales are also likely to be lacklustre due to weak consumer sentiment. Given the pause in construction at Yoma Central, we believe its completion may be delayed till 3Q22, from 1H22. This results in a 19% dip in FY22 topline.
3. Political instability to affect investment sentiment and medium-term growth. FDIs into Myanmar largely stem from Southeast Asia, with Singapore and China contributing 46% and 14% to date. Although China may continue its investments given that Myanmar is a vital piece of Beijing's Belt and Road infrastructure initiative, FDIs as a whole may drop due to political instability. This could affect the country’s economic growth.
4. Covid-19 impact. Ahead of Yoma’s 1Q21 update, we cut FY21 forecasts to account for Covid-19 lockdowns implemented from October to December 2020. Our growth forecasts for all its business lines for FY21-22 have been trimmed from 5-7% to 0-2%. Wave Money’s contribution to FY21 income has been lowered by 20%, offset by higher contributions from an additional 10% stake acquired on 13 October 2020. Overall, FY21-22 earnings have been cut by 27% and 35% respectively.
5. Possible depreciation of kyat (MMK). As of September 2020, Yoma had not entered into any currency hedging. Any MMK depreciation against US$ could result in an Other Comprehensive Income loss, which has a negative impact on Yoma’s net asset value. As of September 2020, US$ net debt was US$212mn.

Recommendation

Maintain BUY with a revised SOTP TP of S$0.34, from S$0.46. The change in our TP mainly captures downward adjustments in land bank prices for Yoma Land (Figure 1) to the lower end of the range guided by management in 4Q20. This reflects slower property development and sales in the near term. In addition, we estimate a 5% impact on asset values, assuming a 10% depreciation of MMK/US$ to spot levels of 1,470-1,500 (Figure 2). Our 20% conglomerate discount is unchanged.

Developments to monitor:

1. Sanctions from foreign nations
2. Ayala’s and Ant Financial’s investments
3. MMK currency movements

• 6M-Sep 20 and FY20 topline met expectations, at 98%/100% of our forecasts. Core operating EBITDA remained positive. FY20 double whammy from lower gross profit margins and net fair value losses for investment properties in Myanmar and China. As a result, net loss was 15x more than expected.
• Mid-term outlook remains mildly positive, underpinned by unrecognised real-estate revenue and new projects.
• Maintain BUY and SOTP TP at S$0.46.

The Positive

+ 6M-Sep 20 and FY20 topline met; core operating EBITDA remained positive. Despite Covid-19, revenue in 6M-Sep 20 increased 25% YoY. This was aided by real-estate development (+117% YoY) and automotive and heavy equipment (+34% YoY). Partially offsetting the gains was weakness in real-estate services due to competitive leasing and the consumer segment during lockdowns in April, May and September. Full year, the consumer segment held up, led by the consolidation of YKKO and KOSPA for the entire FY20. Real-estate service revenue was down 65% YoY due to lower operator fee income as a result of fair-value losses. 6M-Sep 20 and FY20 core operating EBITDA remained positive at US$2.9mn and US$2.6mn respectively.

The Negatives

- FX, impairment and associate losses. The bulk of 6M-Sep 20 losses came from subsidiaries’ conversion of US$ valuation into MMK (-US$34mn). An impairment loss on prepayments and operating rights for Yoma’s agricultural investments was also booked (-US$6mn). Netting off fair-value gains/losses and interest income, “other income” loss was US$16mn. Additionally, Yoma booked its share of losses from Memories Group, whose tourism operations were affected by Covid-19 and translation losses on borrowings (-US$7mn). All in all, net loss was US$48mn for the half year.

- FY20 double whammy from lower gross profit margins and net fair value losses. FY20 gross profit margins plunged from FY19’s 50% to 32%. This was blamed on lower real-estate service revenue. The segment contributes one of the highest gross profit margins to Yoma. Other culprits were lower-margin products at Star City and lower consumer margins following higher packaging and delivery costs. Coupled with net fair value losses of US$12mn vs net other gains of US$9mn in FY19, FY20 net loss increased 77% YoY. 

Outlook

Myanmar is reeling from a second wave of the pandemic. Movements are now restricted within townships, with stay-home orders and prohibitions on restaurant dine-in. As the number of new cases slightly dwindles from its highs, the authorities are easing some of the measures. We are cautiously optimistic on a recovery in 2021

F&B and Yoma Motors are expected to be weak in the near term. That said, FY21 group topline should be supported by significant unrecognised revenue at Yoma Land and Yoma Motors. As of 9M-Sep 20, Yoma Motors had sold an estimated 200+ Mitsubishi units that are pending recognition (c.US$10mn). Over at Yoma Land, three out of its six City Loft buildings are 25-65% completed. Unrecognised revenue here amounts to c.US$12mn. Following its recent launch, Star Villas Phase 1 - Yoma’s first landed development in Star City - has sold 27 out of 32 units, accumulating c.US$15mn for recognition. Star Villas is expected to be completed in the next 12-15 months. Phase 2 will be launched in the coming months following the success of Phase 1. These projects are expected to support FY21’s topline.

We are looking at a turnaround in FY22, when Yoma Central and Star Hub will be completed. Yoma Central is in advanced leasing negotiations with anchor tenants for its office and retail space. Upon completion in mid-FY22, it is expected to generate US$90-110mn of recurring revenue - equivalent to FY20 revenue. Additionally, Yoma recently launched Star Hub, its first suburban commercial property at StarCity. Target date of completion is end-2021. Prominent technology and financial-service companies have already committed to more than 50% of its office space. Rental yields here are estimated in the mid-teens, to be generated from FY22.

Maintain BUY and SOTP TP of S$0.460. We updated our segmental assumptions following Yoma’s latest valuation guidance. Our valuation metrics and TP remain largely unchanged, including our 20% holding-company discount. Yoma Land constitutes 86% of its total valuation after net debt and overheads.

The report is produced by Phillip Securities Research under the ‘Research Talent Development Grant Scheme’ (administered by SGX).

• Overall revenue saw 3.2% growth YoY underpinned by 21.4% and 33.3% growth in Yoma Land and Yoma Motors respectively, offset by -30.9% YoY performance by Yoma F&B.
• Yoma Land’s revenue is well supported by a backlog of unrecognized revenue, while Yoma Motors’ growth is attributable to pent up demand in the Heavy Equipment segment.
• Maintain BUY with an unchanged target price of $0.46.

The Positives

+ Yoma Land’s revenue is well supported by backlog of unrecognized revenue. Although sales were minimal this quarter (8 units of CityLoft and 1 unit of Peninsula Residence) amidst cautiousness in big-ticket expenditure and delays in paperwork, Real Estate Development registered a 45.5% YoY revenue increase. It is largely attributable to the revenue recognized from the completion of City Loft. Unrecognised revenue now amounted to US$17mn as at 3Q20 vis-à-vis more than US$20mn in 2Q20. Real Estate Services revenue was lower YoY due to lower occupancy levels and rental rates at Pun Hlaing Estate and StarCity. However, the lower rental rates and the amenities and services offered amidst COVID-19 had driven a partial recovery in occupancy levels in recent months.

+ Yoma Motors registered revenue growth of 33.3% largely attributable to the Heavy Equipment segment; Passenger and Commercial Vehicles (PCV) segment held up. Despite the COVID-19 impact from border closures and falling crop prices, more tractors and implements were sold due to pent up demand after many quarters of weaknesses arising from the exceptionally heavy monsoon last year. New Holland sold 124 tractors in the quarter compared to 61 tractors in 3M-Jun2019. Higher PCV revenue was driven by the sale of 16 Volkswagen vehicles and 22 Ducati motorbikes. Mitsubishi and Hino also saw significant improvements with 184 Mitsubishi vehicles (65 vehicles in 3M-Jun19) and 26 Hino trucks (9 trucks in 3M-Jun19) being sold. Mitsubishi sales were boosted by the popular Xpander model and there remains c.US$7.5mn backlog of unfilled orders.

+ Revenue from Yoma Financial Services increased by 5.6% YoY underpinned by an enlarged finance lease portfolio in Yoma Fleet; Wave Money remains EBITDA positive despite weaker transaction numbers. Vehicle numbers for Yoma Fleet grew by 11.1% year-on-year to 1,290 vehicles and third-party assets under management stood at US$45.6 million as of 30 June 2020. As finance leases carry higher gross profit margins, we are expecting a larger flow-through from Yoma Fleet to the bottom line in 2H20.

Due to the Thingyan holidays amidst the Myanmar New Year in April and COVID-19 measures, Wave Money’s OTC business was largely affected, which resulted in a decline in revenue and transaction numbers of 16.5% and 25.3% respectively from the previous quarter. However, its e-wallet business continued to record double digit growth rate month-on-month as more people opt for cashless transactions and is on track to reach its 1.3 million MAUs target by December 2020. EBITDA for Wave Money remained positive due to economies of scale and cost control. 

The Negatives

- Yoma F&B revenue was down 31% YoY due to COVID-19 measures. 3Q20 revenue declined 31% YoY due to government-imposed lock downs, curfews and prohibitions on dine-in between April to mid-May and temporary store closures in severely affected trade zones. The month of April was most affected as revenue fell 50% YoY. During the initial stages of COVID-19 there was a large shift towards delivery, which mitigated some of the shortfall in dine-in revenue. Delivery accounted for 40% of the total sales in April at the peak, which normalised to 15%-20% as restrictions eased and some of these customers return to restaurants. June recorded a smaller decline of c.25% YoY since the Myanmar government allowed restaurants to resume operations conditional upon adherence to certain guidelines at the end of May.

Outlook

Pre-COVID, CityLoft has been recording a healthy booking rate at >50 units per month. Amidst COVID-19, interest in the property remained high as the team continued to engage customers through virtual show flats. However, CityLoft’s booking rate slowed significantly from April to May. As the economy started to reopen at the end of May, buying interest noted a recovery. Booking rate was nearing half of pre-COVID levels by July. 

According to World Bank’s June report, the agriculture sector had been resilient and is expected to grow by 0.7% for the year. This is mostly due to an increase in production of crops, such as rice, and beans and pulses. Meanwhile, the Myanmar government and NGOs are also supporting the agricultural industry by providing lower-interest loans for buying inputs and giving greater flexibility on loan repayments. These initiatives will spur demand for tractors which is beneficial for Yoma Motors.

During this period, Wave Money will continue to work with various organisations such as Myanmar Agricultural development to disburse loans for farmers and Social Security Board to disburse medical and COVID-19 quarantine relief through the adoption of Wave Pay. We are expecting the growth of the e-wallet business to be fast-tracked by these schemes to make up for fewer transactions in the OTC business.

Yoma F&B witnessed improved performance MoM as business starts to recover in the coming quarter. Sales for July was nearing-pre-COVID level with same store sales growth recorded in certain days. The accelerated adoption of delivery services positioned Yoma F&B better to capture sales thwarted due to dine-in prohibitions. Yoma’s target of opening 2-3 KFCs by the end of 2020 remains unchanged.

Maintain BUY with an unchanged TP of S$0.460. Our target price translates to a total upside of 58.6%. Property and financial services will constitute 68% and 19% of the valuation respectively. A conglomerate discount of 20% has been applied (Fig.1).

The report is produced by Phillip Securities Research under the ‘Research Talent Development Grant Scheme’ (administered by SGX).

• Acquisition of Telenor’s 34.2% stake in Wave is at an attractive price of $76.5mn, a 20% discount to our projected valuation of Wave.
• Yoma will become the controlling shareholder of Wave through Wave Holdco at 63.7%. Yoma’s effective stake to increase up to 40.7% with a further US$25mn investment. We expect deeper collaboration and integration with Yoma’s other consumer businesses.
• Maintain BUY with an unchanged target price of $0.46.

Acquisition Details

The aggregate consideration for the acquisition is US$76.5mn in cash for Telenor’s stake (34.2%) in Wave Money (Wave). Yoma intends to restructure the holding of its interest in Wave through a newly incorporated investment holding company in Singapore, Yoma MFS Holdings (Wave Holdco). Wave Holdco will hold the Group’s existing interest (29.5%) in Wave.

As at 24 June 2020, Yoma plans to invest up to a further US$25.0mn into Wave Holdco for an additional stake of up to 11.2% in Wave. A consortium of investors, as new shareholders of Wave Holdco, would contribute the remaining amount for the acquisition. The consortium comprises of private equity and financial institutions, most of which Wave has existing relations with. Upon completion of the acquisition, Wave HoldCo will hold up to 63.7% interest in Wave Money. Yoma’s effective interest in Wave will be up to 40.7%.

Acquisition Impact:

+ Acquisition of stake at an attractive price of $76.5mn for a 34% stake, a 20% discount to our projected valuation of Wave. Wave’s over the counter (OTC) as well as e-wallet and digital payment business (WavePay) are currently valued at US$162mn and US$117mn respectively based on a EV/EBITDA metric of 9x and USD/MAU* metric of 90x (CY20**: OTC EBITDA – c.US$18mn, CY20: WavePay’s MAU – c.1.3mn). Over the past month, WavePay grew by more than 30% in MAU. Yoma is projecting for WavePay to hit its MAU target of 11.2mn by CY24.

+ Better strategic focus for Wave post-Telenor’s exit. Telenor has made a strategic decision that telecommunications will continue to be their core business. It has divested several smaller businesses prior to the current Wave transaction. Nonetheless, Wave will remain the preferred e-wallet business for Telenor and their business relationship is expected to continue. Post Telenor’s exit, Wave will be more focused in its strategy to grow, underpinned by Ant’s strength in financial services and technology coupled with Yoma’s local presence and expertise.

+ No change in management team or operations. In the early stages of Wave’s growth, Wave leveraged on Telenor’s network and technological infrastructure for its operations. However, within the past 2 years of operations, Wave successfully built its own standalone network and infrastructure. Although Wave’s key management team comprises members originated from Telenor (e.g. Wave’s CFO), the team has been with Wave since inception and has agreed contractually to stay for the next few years. Therefore, we are not expecting any change in the way Wave operates, nor in its management team.

+ Controlling stake to increase collaboration between WavePay and the Yoma’s existing business lines. The collection of data from WavePay’s digital payment business will help Yoma better identify the drivers behind Myanmar’s consumerism. Additionally, this collaboration is expected to drive potential end-user financing and integration with Yoma’s existing businesses through certain payment functions (e.g. in consumer and real estate services) as well as a closer alignment of new products and features on WavePay (e.g. in Yoma Fleet). (Fig. 1)

*MAU = Monthly Active Users

** CY20 = Calendar Year 2020

Maintain BUY with an unchanged TP of S$0.460. Our target price translates to a total upside of 53.3%. We increased the valuation of Yoma’s stake in Wave Money, offset by a 15% devaluation in Pun Hlaing Estate’s land bank due to the expectation of a weaker outlook in the premium property space. Property and financial services will constitute 68% and 19% of the valuation respectively. A conglomerate discount of 20% has been applied (Fig.2).

The report is produced by Phillip Securities Research under the ‘Research Talent Development Grant Scheme’ (administered by SGX).

• Entrenched foothold in Myanmar’s most attractive and fast-growing consumer segments, namely mobile finance, property, F&B and motor vehicles.
• Large property land bank worth 10-15 years of sales. Financial services poised for stellar growth on the back of a 5x YoY spike in revenue for Wave Money. F&B growth underpinned by at least 60% growth in KFC stores over the next three years.
• Initiate coverage with BUY rating and a target price of S$0.46. We view current valuations as depressed given structural growth opportunities ahead.

Company Background

Listed on the SGX since 2006, Yoma is a leading conglomerate in Myanmar, with businesses spanning real estate, F&B, automotive & heavy equipment, financial services and investments. In Nov 19, Ayala Corporation acquired a 20% stake in Yoma at S$0.45 per share, valuing the company at S$1,055mn. In May 20, Ant Financial bought 33% of Yoma’s fintech, Wave Money, for US$73.5mn.

Investment Merits

1. Attractive valuations. Our SOTP target price of S$0.46 implies an 87.8% upside. This is after applying a 20% conglomerate discount. In our SOTP model, property and financial services constitute 73% and 17% of assets respectively. The outstanding 10% comprises the remaining business lines - such as F&B, automobiles and heavy equipment.

2. Huge land bank equivalent to 10-15 years of sale. Yoma Land has a land bank of 20mn sqft, equivalent to 10-15 years of current sales. The projects in the pipeline to monetizing this land bank include Yoma Central, StarCity and The Peninsula Yangon. Yoma Land also has a revenue backlog of more than US$20mn from yet-to-be-recognized sales of CityLoft @ StarCity. This should support FY20 top and bottom lines, post-completion.

3. Stellar growth in financial services. Yoma owns a 29.5% stake in a fintech, Wave Money (Wave). The company is already profitable, with revenue up by c.5x YoY and 16.2% QoQ in Mar 20. Money-transfer volumes tripled to US$4.3bn in 2019 from a year ago. Serving a population of 54mn, where is 80% unbanked, Wave enjoys a formidable distribution network of 57,000 agents across the country. This is more than 20x the number of bank branches (c.2000) nationwide. Other growth drivers include raising the limits of the money transfers, introducing micro-loans and widening e-commerce transactions.

4. Largest F&B operator in Myanmar with 91 stores. Revenue from its restaurants doubled YoY in 6M-Mar 20, attributable to its acquisition of YKKO (42 stores) and opening of 12 new KFC stores. By FY23, Yoma aims to increase KFC stores 67% from 45 to 75. It has a target of 125+ stores nationwide. Myanmar’s economic growth and rapid urbanization are expected to fuel its F&B growth.

5. Heavy equipment/motor to benefit from infrastructure improvements and rising affluence. a) Heavy equipment: Yoma JCB is positioned to benefit from a rollout of infrastructure and increased construction activity in the country; b) Passenger & commercial vehicles: growth in sales of Volkswagen and Mitsubishi vehicles will come from rising affluence and GDP growth.

We initiate Yoma with a BUY rating. Our target price is S$0.46, implying a total return of 87.8%.

Revenue

YOMA generates its revenue through 4 key business lines: property (FY19: 44%), F&B (24%), motors (23%) and financial services (7%). Property development has historically been the biggest contributor to Yoma’s topline. However, as Yoma moves towards opening more F&B stores and growing Wave Money, we expect a shift in portfolio towards these growth segments.

A. Yoma Land
Yoma Land is a leading property developer in the country. Boasting one of Myanmar’s largest land bank at 9.3mn sqft, Yoma Land is transforming Yangon’s cityscape across three strategically located flagship developments - StarCity, Yoma Central and The Peninsula Yangon and Pun Hlaing Estate [Fig. 5]. Yoma’s real estate business will be the main beneficiary of the city’s rapid urbanization, rising middle-class population and steady population growth at 0.6%.

Key ongoing projects

1. StarCity. Located along the shore of the Bago River, StarCity is a residential development with a land area of 5.9mn sqft in Thanlyin Township and is the only large-scale residential development located near the Thilawa Special Economic Zone. StarCity is being developed in phases and is expected to feature some 10,000 homes and 1.7mn sqft of commercial space when completed. More than 2,000 properties at StarCity have been sold. Currently, the estate has more than 2,000 residents.

2. Pun Hlaing Estate. Pun Hlaing Estate are luxury homes set on a peninsula between the Hlaing and Pan Hlaing Rivers with a land area of 28.4mn sqft. The estate mainly comprises landed houses and low-rise apartments, set within lush green spaces. The estate offers a unique lifestyle for families with a wide range of amenities, including a world-class 18-hole Gary Player designed golf course which spans across 9.6mn sqft and a sports and country club. More than 400 properties at Pun Hlaing Estate had been sold and currently, the estate has around 800 residents.

3. Yoma Central and The Peninsula Yangon. Yoma Central and The Peninsula Yangon are part of a 0.4mn sqft integrated mixed-use development with a total GFA of approximately 2.44mn sqft. Yoma holds a 48% stake in Yoma Central and a 24% stake in the Peninsula Yangon. Both Yoma Central and The Peninsula Yangon are expected to be completed in 2021. With the collaboration of international partners and financiers and an investment of more than US$800mn, Yoma Central and The Peninsula Yangon are to-date the largest foreign direct investment in Myanmar’s real estate sector and will help to rejuvenate downtown Yangon.

Investment Merits

1. Huge land bank equivalent to 10-15 years of sale. Currently comprising 9.3mn sqft across the three developments in Yangon, Yoma’s land bank can accommodate 20mn sqft of gross floor area (GFA) [Fig.5]. The land bank will be developed progressively over the next 10 - 15 years.

2. Myanmar’s growth of middle-class to benefit sales of CityLoft @ StarCity. To take advantage of Myanmar’s growing middle class and the untapped demand for smaller but competitively priced units in Yangon, Yoma Land marked its entry into the mass market segment with CityLoft. As Myanmar’s middle-class population is expected to reach 19mn by 2030, from 7.3mn in 2016, demand for homes in the affordable market segment is expected to gain more traction in the long term.

3. ~8 months equivalent of revenue backlog from CityLoft to boost FY20 earnings. As of 2Q20, 79% of a total of 791 units launched in 6 buildings have been sold/booked. Construction for the initial 5 buildings are between 13% - 61% completed. As percentage of completion method is used, Yoma accumulated a revenue backlog of more than US$20mn from CityLoft’s sales in FY19 that has not been recognized. This will support FY20’s top and bottom-line post-completion.

4. Completion of Yoma Central to boost recurring revenue. Demand for expatriate and corporate housing is expected to grow in line with the expected increase in activities by foreign companies. Recurring revenue stream from retail and commercial leasing is expected to grow significantly post completion of Yoma Central in 2021.

Risks:
1. Delay in the construction activity to impede revenue recognition for land development. Amidst COVID-19, some of the construction works are either at a standstill or operating at a sub-optimal level. Revenue for CityLoft @ StarCity and Peninsula Residences are recognized on a percentage of completion basis, hence recognition will be correspondingly slowed. In the case of Yoma Central, it continues to be in the construction phase without revenue recognition.

2. Slower leasing activity in the near term to impact rental income from land services. In 2Q20, rental and occupancy rates of Pun Hlaing Estate and StarCity declined as a result of a more competitive leasing environment. Considering the lockdown measures in place which will deter physical inspections and dampen consumer sentiment, leasing activity for 3Q may continue to see more downside.

3. Demand for affordable housing is constrained by a nascent mortgage market and by relatively low returns for developers. Clarifying regulations, resolving uncertainties regarding immovable property rights and ownership records, and expanding credit access could help realize the potential of residential construction.

B. Yoma Financial Services
Yoma Financial Services comprises of 2 business lines – Yoma Fleet and Wave Money (Wave). Yoma Fleet is one of the country’s largest vehicle leasing and rental operators while Wave Money is Myanmar’s leading provider of mobile financial services (MFS) that is licensed to provide mobile-money services such as money transfers, airtime top-ups, bill payments and cash/salary disbursements.

Investment Merits
1. Continued growth in fleet size and improved GPM to benefit top and bottom line for Yoma Fleet. As of 6M-Mar20, the fleet size increased by 9.5% YoY to 1,269 vehicles [Fig. 11] and its total assets under management grew by 34.3% to US$46.2mn. As finance leases recognise only the interest component of the lease payment as revenue, the shift in portfolio mix towards finance lease products resulted in better gross profit margins. Separately, post-acquisition of a 20% stake, Tokyo Century - one of Japan’s largest leasing companies - will now partner with Yoma to look at other forms of credit extension to capture a wider opportunity in the non-bank financial services sector.

2. Accelerating growth in Wave Money. Myanmar is largely a cash-based economy with limited bank lending outside of the key cities. Its financial inclusion remains low with over 80% of the population (54mn) currently unbanked, creating opportunities for MFS to provide consumers with a source of credit [Fig. 12]. Currently, there are 5 major bank-led MFS providers and 5 nonbank providers licensed to provide mobile-money services, wire transfers, and direct bill payment. Founded in 2016, Wave Money (Wave) is the first licensed MFS operator in Myanmar. It has 2 main businesses – Over the Counter (OTC) and e-wallet via WavePay.

Profitable and scalable business model attributable to its brand leadership and large network of Wave agents for OTC transactions. Due to the inefficiency of Myanmar’s banking system, Wave leverages on consumers’ desire for money transfer services that are cheaper, reliable and more accessible. To date, Wave has more than 17mn unique customers on its platform and a c.90-95% market share in the OTC business. Covering 93% of the country, Wave’s agent network consists of 57,000 agents, making it more than 20 times larger than that of the traditional bank branches at 2,000 branches. Like banks, consumers just need to visit one of Wave’s agents (be it a local grocery or a pharmacy) to execute a money transfer transaction. However, unlike banks that are charging 5-10%, Wave is offering transaction charges of 1.5% which is 3-6x cheaper. [Refer to Appendix II for a typical OTC transaction and more supporting information on Wave]

In 2019, its transfer volume more than tripled, reaching US$4.3bn (~6% of Myanmar’s GDP). In the same period, its revenue and transaction numbers also tripled. The OTC business continued to grow consistently through the expansion of distribution reach, while the growth in monthly active users (MAUs) accelerated from the investment in marketing and partnerships in the digital business [Fig. 14].

Adoption of WavePay to drive growth for Wave. WavePay was introduced in 2019 as Wave’s digital payments and e-wallet business. To date, WavePay has over 1mn downloads on the Google Play Store and 92 billers integrated into the wallet. 60% of its transactions in Mar20 is attributable to airtime purchased by customers. In Feb20, WavePay announced that it is giving its customers in Myanmar access to merchants of 2C2P – a global payments platform – through a tie-up, which will be rolled out progressively over the coming months. As WavePay continues to integrate more merchants into its platform, we are expecting the adoption of the e-wallet to accelerate past that of the OTC business by 1H21.

Alipay to become a significant minority stakeholder. In May 20, Wave announced that Ant Financial, formerly known as Alipay – the highest valued FinTech company in the world – will join Yoma Group and Telenor Group – one of the world's largest mobile telecommunications companies – as one of its significant stakeholders. Ant Financial plans to inject US$73.5mn into Wave for a 33% stake, highlighting its confidence in Wave’s business model. After which, Telenor Group and Yoma Group will be diluted down to 34% and 33% respectively. With this partnership, Wave will be able to tap into the experience of Alipay to promote financial inclusion and better serve the underbanked individuals and SMEs in Myanmar.

In the 6M-Mar20, Wave Money’s revenue and transaction number grew by 16.2% and 13.9% QoQ with sustained positive EBITDA. The share of revenue registered from Wave Money of US$4.3mn has yet to reflect the additional 10% stake that Yoma acquired (34%  44%) and the share dilution post stake acquisition of Ant Financial (44%  29.5%).

Growth of MFS fast-tracked by COVID-19. Amidst the COVID-19 outbreak, mobile money providers are considered essential businesses and are permitted to operate. The Central Bank of Myanmar promotes the use of mobile money over face-face transactions by increasing the daily transaction limit from 500,000 kyat (S$500) to 1,000,000 kyat (S$1,000), which is favourable for Wave in terms of transaction volume and ticket size. Moving forward, bank branch penetration in Myanmar will continue to be low given that the country sees more closing than openings of bank branches. As Wave embarks on more governmental and B-B projects like helping banks and microfinance companies disburse pensions and collect loans, we are confident that Wave still has lots of room for growth.

C. Yoma F&B
Yoma F&B owns the largest F&B platform in Myanmar. It comprises 3 segments: Restaurants, Bottling and Logistics.

Investment Merits
1. Resilient Restaurants to pull through even through tough times. The new contribution from YKKO [Fig. 18] and new net store openings at KFC (Mar19: 33 stores) resulted in 6M-Mar20 Restaurants’ revenue almost doubling that of Mar19. Additionally, improved margins were generated through KFC’s optimization of their cost of goods sold and YKKO’s higher gross profit margins. Amidst COVID-19, Yoma F&B saw a significant increase in delivery sales, from 1.1% of sales in January to 12.4% of sales by the end of Mar20 which cushioned impact from closed dine-in restaurants. Separately, there was little disruption to the restaurants’ supply chains as most of them are localized.

2. Long term outlook for Restaurants hinge on the rising middle-class and economic climate. The Restaurants segment is expected to expand due to the rising discretionary disposable income from Myanmar’s growing middle class. This group of spenders is forecasted to reach 10mn by 2022. Considering the weaker economic climate, Yoma F&B will be closing some of its non-performing stores. It targets to open approximately 2-3 more KFCs by the end of 2020. Should Myanmar’s economy turnaround, it aims to operate 125+ stores nationwide, including 75 KFCs by FY23 [Fig. 19]. Without further economic growth and improved infrastructure and transport, we are looking at a 4-5 net store growth YoY instead of 10-15 stores YoY.

3. More cost synergies from Logistics and the Restaurant business. With the growth of FMCG and other sectors in Myanmar and the increase in cross-border trade, especially with China, the need for reliable logistics is expected to increase as both governments are working to create ‘economic cooperation zones’ along the Myanmar-China border. In 6M-Mar20, KOSPA, Myanmar's premier third-party logistics provider, has been consolidated as a subsidiary with a 50% stake post-SF Express’s 25% stake acquisition. It benefitted from higher transport and warehouse utilization rates and volume from existing customers.

Yoma also has a 15% stake METRO Myanmar, a leading specialist in food wholesale and retail. METRO Myanmar will offer customers a virtual one-stop-shop solution that combines online trading with delivery services which are made by KOSPA’s fleet of trucks. We see potential cost synergies from these joint ventures moving forward as this end-to-end distribution and logistics platform can complement Yoma’s F&B restaurant businesses.

Risks
1. Continued weakness in the Bottling segment. Despite an improvement in performance in 6M-Mar20 and share dilution in Seagram MM (Seagram) from 50% to 19.8%, Seagram – the joint venture designed to produce and distribute alcoholic beverages in Myanmar – is still registering losses. Notwithstanding the new launches in place, we are not optimistic about the sale of premium alcoholic beverages amidst a weakened economy.

2. Competition in the wholesale and retail arena. Wholesale and retail markets are becoming more competitive as they extend their reach into underserved areas. Supported by foreign investment and improved logistics services, retail and wholesale markets expanded geographically and grew at an estimated rate of 7% in 2019, according to Myanmar Economic Monitor. We are expecting the wholesale and retail markets to remain competitive as Myanmar continues to draw FDI into the country. This may impede Yoma F&B’s growth.

D. Yoma Motors
Yoma Motors manages a portfolio of automotive brands covering the agricultural and construction equipment (Heavy Equipment), and passenger and commercial vehicles (PCV).

Investment Merits
1. Scalability and profitability of the PCV segment to support Yoma Motors’ top and bottom line. The overall gross margin improved in 6M-Mar20 due to better margin from PCV. Despite lower contributions from Heavy Equipment, its scalability also resulted in a 5x increase in revenue YoY which pushed Yoma Motors closer to breakeven. The increased revenue was driven by the sale of Volkswagen vehicles and Ducati motorbikes.

2. Demand for PCV underpinned by low vehicle penetration and government policies. Supported by a low vehicle penetration rate in Myanmar at 1 unit per 100 people and new government policies to help raise the number of new cars on the road (including control measures on imports of used righthand drive vehicles, which now dominate the market), the demand for PCV is expected to increase.

3. Backlog of PCV sales to support FY20 revenue. Amidst COVID-19, many offices were operating at a reduced capacity, which resulted in a backlog of sales for Volkswagen and Mitsubishi vehicles. The delay in recognition will support the top line in the coming quarters.

4. National Transport Master Plan to lift demand for PCV and Construction Equipment over the next 10 years. Under the National Transport Master Plan, the Myanmar Government is planning to allocate US$21.4bn to rail, road, port and aviation projects by 2030. In Mar19, Yoma JCB successfully landed its first government tender to supply five 20-ton excavators and two 8-ton excavators to the Yangon City Development Committee.

Several large-scale infrastructure projects (e.g. Upgrade of the Yangon-Bago railway and the construction of the India-Myanmar-Thailand trilateral highway) are currently either underway or in the pipeline which will create a healthy demand for construction equipment. As Myanmar continues to urbanise, we believe that the Yoma JCB and PCV segment will remain a pillar of support for Yoma Motors.

Risks
1. Weaker sales expected from New Holland (Heavy Equipment) amidst a drop in agriculture demand. In 6M-Mar20, fewer tractors were sold as a result of continued weakness in the agricultural sector attributed to COVID-19 due to falling crop prices, persisting export restrictions to India and initial border closures with China and Thailand. Notwithstanding the relaxation of lockdowns, the sales contributed by New Holland from the Heavy Equipment segment is expected to remain slow as tractors are big ticket items for farmers, and they are likely to be cash-strapped from the devoid of sales last quarter.

2. Weather conditions to impact New Holland sales. In 2019, the sales of tractors fell by 35% due to heavy rainfall in the months of May to October [Fig. 20]. According to ASEAN Specialised Meteorological Centre, the rainfall over the northern ASEAN region is forecasted to be below-normal in 2020. Nevertheless, it is still identified as a key risk given that the business can be severely affected by the monsoon season.

3. Although the business environment is improving, the slow recovery of residential projects continues to hinder the growth of the construction sector. According to Myanmar Economic Monitor, the risk of time and cost overruns is discouraging people from buying residential buildings, which account for 50% of total construction activity. Strengthening the mortgage market and expanding credit access could unlock the potential of the residential subsector.

E. Notable Investments

1. Yoma Micro Power (YMP) to gain market share from diesel and promote the use of Wave. In Mar20, one of Yoma’s joint ventures - YMP has finished building 250 micro solar-hybrid power plants which will help power rural Myanmar. As part of YMP's business model in Myanmar, mobile network operators and tower companies are its anchor clients. They buy electricity generated by the power plants at a cost lower than diesel, which was what the towers previously relied on. The connection is extended to nearby communities which include households, schools, shops and businesses through mini-grid distribution networks. Rural households can pay for the electricity using cash or through Wave Money.

2. Divestment of Edotco Myanmar and potentially Dalian Mall to focus on core assets. Yoma divested its remaining 12.5% stake in Edotco Myanmar for US$57.5mn, monetizing a gain of US$48mn which it will use to expand its core businesses and repay debt. Separately, Yoma has initiated on-going discussions to dispose of its investment in The Grand Central Shopping Mall in Dalian, China. It has thus reclassified the investment as "disposal group classified as held-for-sale", resulting in the non-recurring fair value loss of approximately US$32mn.

Risks
1. Recent fraud case at its subsidiary and lockdowns to pressure performance of Memories Group (MG) in 2020. MG is a leading integrated tourism company in Myanmar which Yoma owns a 33% stake. In Apr20, MG discovered a case of fraud at its wholly-owned Myanmar subsidiary. Any impact of this misappropriation will be reflected in the financial statements of MG for the period ending Sept20. Separately, travel lockdowns that are in place globally amidst COVID-19 will impede MG’s business which is heavily reliant on tourism. These factors will cause a negative overhang for MG in the near term.

Strategic Investor – Ayala Corporation

Ayala Corporation (Ayala) is the oldest and one of the largest conglomerates in the Philippines with core interests in real estate, banking, telecommunications, and power. It has a market cap of US$10.1bn (PHP $507.2bn).

In Nov19, Ayala Corporation (Ayala) has invested US$155mn (S$211mn) for a maximum 20% stake in Yoma, making it the second-largest shareholder. The move is part of an overall US$237.5mn investment by Ayala into the Yoma Group - a 20% stake each in Yoma Strategic and its affiliate First Myanmar Investment Public Co, making it the largest foreign direct investment made by a Philippine company into Myanmar.

Highlighting Ayala’s faith in the future of the country as well as Yoma’s business model, Ayala paid an issue price of S$0.45 per share for its Yoma stake, which represents a 36% premium over its VWAP on 12-13 Nov19. At least half or more of the placement proceeds will go into funding the growth and expansion of Yoma's various businesses, while the remainder will be used to refinance existing indebtedness and for general corporate purposes.

As both Ayala and Yoma emphasize similar key business segments, we anticipate important collaboration between the two companies which will help strengthen Yoma’s foundation for future growth.

Outlook in Myanmar

1. Hard hit by trade and tourism in the near term. Myanmar’s growth may face strong headwinds due to its exposure to the slowdown in China and around the world. The COVID-19 outbreak has limited global demand and elevated global economic uncertainty, which is likely to have a material impact on Myanmar’s tourism-related services, agricultural exports to China, and supply-chain disruptions to the manufacturing sector.

a. Tourism: Representing 16% of GDP, income from hotels, restaurants and transport activities, which are partly supported by tourism, have been significantly impacted. In 2019, Chinese nationals accounted for 20% of tourist arrivals. Growth in China is projected to decline to 2.3% in 2020, from 6.1% in 2019.

b. Agricultural exports to China: The agriculture sector remains the biggest employer in Myanmar, accounting for 78% of the rural labour force. Farmers are suffering from declines in production and prices associated with a reduction in exports to China. Agricultural exports to China represent 10% of total exports (2019: 4% of GDP, World Bank).

c. Supply-chain disruptions to the manufacturing sector. Garments’ manufacturing accounts for 13% of exports. Nearly 15,000 garment manufacturing workers lost their jobs as factories were forced to close due to a lack of raw materials from China and cancellation of orders from the European Union countries. FDI inflows could be hampered as well, hitting the manufacturing sector which relies on labour and imports of raw materials.

Economic growth in Myanmar was projected to increase to 6.4% in 2020 and 6.7% in 2021. However, since the COVID-19 outbreak, economic growth is expected to decline sharply in 2020 to 2-3%.

2. Gradual recovery expected post-lockdown from COVID-19. In 2021, economic growth is expected to recover in the range of 4-6% with the improved business sentiment, better access to electricity and improved availability of credit.

Myanmar will continue to work closely with its neighbouring countries to discuss the future FDI opportunities. Chinese investments are expected to continue. However, the economic blow dealt by the outbreak may place Myanmar in a weaker position as it negotiates with China over a series of large infrastructure projects.

Besides China, Myanmar inked a deal with Singapore’s Infrastructure Asia (IA) in May 20 where IA will identify suitable investors for infrastructure projects in Myanmar that are aligned with the country's sustainable development plan. The mutual collaboration will provide and promote growth in both countries.

Looking ahead, rapid urbanization and positive GDP growth underpin the long-term prospects for Myanmar’s real estate industry. Growth of restaurants should sustain due to the rising discretionary disposable income from Myanmar’s growing middle class. Myanmar's location between China and India makes it strategically significant in China's Belt and Road Initiative. Investment growth in transport and telecommunication will sustain, as the government plans for more infrastructure spending. Construction sector activity is also expected to improve, with positive proxy indicators such as building permits and large FDI commitments.

Risk Factors

1. Slowdown of Myanmar’s economy exacerbated by lower external demand and FDI. Slowing global and regional growth, especially in China, can also transmit to Myanmar through the trade channel by lower external demand and inbound foreign investments.

2. Private-sector growth is hindered by supply-side constraints and a restrictive business environment. The top three impediments to firms’ ability to grow in Myanmar are access to factors of production (i.e., finance, land, and skilled workers); poor physical and digital connectivity; and difficulty in doing business.

3. Depreciation of the Myanmar Kyat (MMK) due to macroeconomic and/or political uncertainty. The MMK could weaken in the coming quarters as a result of renewed trade tensions between the US and China. The upcoming 2020 general elections could add another source of uncertainty.

4. Other risks: Insecurity in border areas with violence and forced displacement of refugees in Rakhine, and uncertainty from legal proceedings could affect investors’ sentiment.

Peer Comparison

Valuation
We initiate coverage on Yoma with a BUY rating and a SOTP-derived target price of S$0.46 to reflect the diverse nature of its business lines. Barring downside risks from a severe domestic outbreak, we are bullish on the development of Myanmar post COVID-19. In our SOTP model, property and financial services constitute 73% and 17% of its assets respectively. The outstanding 10% comprises the remaining business lines - such as F&B, automobiles and heavy equipment. Downside risks to our valuation include the depreciation of USD against SGD. A conglomerate discount of 20% has been applied.