Brokers' take: Yoma's investment in Wave Money should pay off over longer term

Published Wed, Mar 7, 2018 · 02:35 AM

ALTHOUGH Yoma Strategic Holdings' planned investment in Myanmar Wave Money is expected to have a limited financial impact for now, analysts like the idea of the Myanmar-focused company gaining exposure to mobile payments, which they think will pay off over the longer term.

In a Wednesday report, DBS analysts Derek Tan and Rachel Tan wrote: "While still loss-making at this juncture, we note that Wave Money is expected to turn cashflow positive in the 2019 financial year, and profitable thereafter.

"In fact, since January 2017, the number of transactions through Wave Money (measured by volume of transfers) is growing at a compounded monthly growth rate (CMGR) of over 30 per cent. Monthly revenue for Wave Money has also been accelerating upward, growing at a CMGR of 22 per cent in the same period."

On Tuesday, Yoma announced plans to acquire a 34 per cent stake in Wave Money from First Myanmar Investment (FMI), a related party, for US$19.4 million.

Wave Money is the first licensed provider under the Central Bank of Myanmar's Mobile Financial Services Regulation to offer mobile financial services to consumers in Myanmar.

The DBS report said: "The business is just coming out of the incubation phase. The ability for Wave Money to scale up is supported by the lack of formal banking infrastructure (banks are capital constrained and operate under an under-developed retail financial regulatory framework) in Myanmar and aided by high mobile penetration rate in the country."

However, DBS kept its target price for Yoma at S$0.75.

Separately, OCBC Investment Research analyst Joseph Ng concurred that Yoma's investment in Wave Money "should be beneficial in the mid to long term".

But given the relatively early stage of Wave Money's growth, as well as the continued oversupply of condominiums in Yangon, Mr Ng adjusted his fair value estimate for Yoma's shares downwards, from S$0.55 to S$0.51.

Yoma's shares were trading up S$0.015 or 3.57 per cent at S$0.435 at 10:30am on Wednesday.