The Good And The Bad: What Investors Should Know About Yoma Strategic Holdings Ltd’s Latest Fiscal First Quarter Earnings
Yoma Strategic Holdings Ltd (SGX: Z59) is a conglomerate that focuses on Myanmar. It has business interests in a wide variety of sectors, such as real estate development, agriculture, tourism, vehicle distribution, and even food & beverage retail.
In late July, Yoma Strategic released its first quarter results for its fiscal year ending 31 March 2018 (FY2018). There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:
1. The overall numbers
Here are the important numbers from the income statements for Yoma Strategic for the first quarters of FY2018 and FY2017:
Source: Yoma Strategic earnings release
As you can see, the first quarter of FY2018 was a solid quarter for the company. There was strong double-digit growth in revenue, gross profit, as well as net profit attributable to shareholders. The conglomerate’s top-line growth was driven mainly by improvements in its Automotive & Heavy Equipment, and Consumer business segments.
2. The positives
Firstly, the Automotive & Heavy Equipment business grew revenue by a strong 61% year-on-year (from S$7.41 million to S$11.94 million) due to an increase in sales of New Holland tractors and higher vehicle leasing activity.
Secondly, Yoma Strategic’s Consumer business segment (which houses its KFC franchise business in Myanmar) experienced a 42.3% year-on-year increase in revenue to S$3.06 million. There was a higher number of stores in the reporting quarter. Currently, Yoma Strategic has 13 KFC stores in operation and plans to reach 22 stores by March 2018.
Thirdly, Yoma Strategic’s gross margin improved from 38.8% a year ago to 40.6%, driven mainly by a higher margin in the real estate-related businesses.
3. The negatives
Firstly, a significant amount of the conglomerate’s profit-growth in the reporting quarter was driven by a fair value gain from the transfer of development properties to investment properties. The sum involved was S$7.4 million. If this gain was excluded, Yoma Strategic would have recorded a loss in the quarter.
Secondly, the conglomerate’s debt grew significantly from S$108 million a year ago to S$195.5 million. Meanwhile, its cash position only increased slightly from S$13.1 million to S$23.3 million. Putting both together, we can see that Yoma Strategic’s balance sheet has deteriorated materially.