Setting up 40/60 JV with leading infrastructure conglo to construct Star City. Yoma’s wholly-owned subsidiary SPA Project Management will be forming a 40/60 joint venture company, BYMA Pte Ltd (BYMA), with Dragages Singapore Pte Ltd to construct apartments for Yoma’s Star City project. Dragages is a unit of French-listed Bouygues S.A., a leading global infrastructure conglomerate. Yoma is expected to pay S$400,000 for its 40% stake in this JV.
JV will tap on Dragages’ experience and know how to speed up construction and maintain quality of Star City. The JV will leverage on the large-scale construction experience of Dragages to construct 1,043 apartments for Star City. Subject to the Myanmar government’s approval for this construction project, work is targeted to start by end of April 2013 and complete in January 2016. The total construction value is estimated to be c. US$94m, broadly in line with our construction cost assumption for Star City.
JV to benefit from the tremendous growth opportunities within Myanmar’s construction industry. Yoma reported that BYMA is already pursuing several other projects besides Star City.
Positive development as the slow pace of construction led to weak earnings delivery in the last two quarters. Despite selling 366 units out of the
528 units in two blocks that were launched, we estimate that only less than 40 units are being constructed and recognized as earnings as of 3Q13 results. Assuming average completion of over 300 units in a year based on the above completion schedule, we see potential for upward earnings revision from FY14 onwards. If faster construction pace can eventually lead to higher than expected take up rates, there could be potential to raise RNAV and hence TPs.
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