Yoma Strategic posts S$15.9m Q1 loss due to currency translation losses

MYANMAR-FOCUSED Yoma Strategic Holdings fell into a loss of S$15.9 million for the three months ended June 30, 2018, as the stronger US dollar resulted in a S$11.3 million currency translation loss from its US dollar-denominated borrowings.

This first quarter loss, from a net profit of S$2.8 million for the same period a year before, came despite a 13.9 per cent growth in revenue to S$29.4 million from S$25.8 million previously. (see amendment note)

The group's revenue contribution from its real estate businesses increased for the first quarter. Real estate development contributed S$10.2 million, up from S$6.2 million, representing 34.7 per cent of revenue, up from 24.1 per cent previously. For the first quarter, revenue from this segment came mainly from sales of completed houses and land plots in Pun Hlaing Estate, with revenue also recognised from the sales of uncompleted development properties over the construction period. Real estate services contributed S$4.97 million or 16.9 per cent of revenue, both up from the same period a year ago.

Of the group's core businesses, Yoma Land, Yoma F&B and Yoma Financial Services recorded revenue increases, helping to offset lower revenue from Yoma Motors. Revenue from the automotive and heavy equipment segment, dealing mainly in the trading of New Holland tractors and JCB construction equipment, fell 26.9 per cent to S$7.51 million from S$10.27 million for Q1 2018. This was mainly due to a delay in buyers taking delivery of a second 500-tractor order secured under the Ministry of Agriculture and Irrigation's nationwide mechanisation programme, said Yoma, which expects revenue from the progressive sales of the remaining 420 tractors to continue fuelling the growth of the New Holland business.

"Yoma Land's revenue growth points to a stabilising property market. Whilst Yoma F&B and Yoma Financial Services continue to grow steadily, our results are negatively impacted by the large currency translation losses from our USD borrowings, which are used to finance our businesses tied to USD. Although the accounting currency translation losses are undesirable, we believe the economic value of the business is appropriately hedged," said chief executive officer Melvyn Pun in the group's results announcement before the market opened on Tuesday.

Yoma's administrative expenses rose by S$4.6 million to S$17.0 million, due mainly to an increase in administrative expenses related to the Yoma Central project and the expansion of the group's businesses. Finance expenses rose by S$13.7 million to S$15.6 million as the US dollar strengthened against the Singapore dollar and Myanmar kyat. Interest expenses on borrowings also rose to S$4.9 million for Q1 2019 due to increased borrowings and a rising interest rate environment.

Yoma's total group borrowings as at June 30 was S$307.2 million, up from S$243.5 million as at March 31. The increase was substantially due to the first S$46.2 million drawndown under the Yoma Central loan facility with the Asian Development Bank, the International Finance Corporation and other B loan lenders.

"As the group's reporting currency is in SGD, it continues to be exposed to currency fluctuations in its financial reports as the majority of its borrowings are in USD. The USD borrowings are primarily used to fund the expansion of the group's businesses where economic value is tied to USD, which management considers appropriate," said the group. Its financial gearing ratio stands at 23 per cent, below its maximum targeted gearing ratio of 40 per cent.

Yoma Strategic shares last closed at 41.5 Singapore cents on Monday, up 0.5 Singapore cent.

Amendment note: An earlier version of this story incorrectly compared Yoma's first quarter loss to a net profit of S$3.9 million for the same period a year before. It should have been S$2.8 million. The article above has been revised to reflect this.