Money Talk: Yoma Strategic, Singapore's consumer sector

We maintain Underweight on the sector and favour consumer staples over consumer discretionary as the former is less vulnerable to excessive sell downs. We continue to like Thai Beverage (Buy, $0.74), Sheng Siong Group (above) (Buy, $0.68) and Petra F
We maintain Underweight on the sector and favour consumer staples over consumer discretionary as the former is less vulnerable to excessive sell downs. We continue to like Thai Beverage (Buy, $0.74), Sheng Siong Group (above) (Buy, $0.68) and Petra Foods (Buy, $4.06) but not BreadTalk Group (Sell, $1.12). -- PHOTO: BERITA HARIAN FILE

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Yoma Strategic

Broker: OSK-DMG

Yoma Strategic has agreed with vendor Serge Pun & Associates (SPA) to vary the terms of its acquisition of a 80 per cent stake in Meeyahta International Hotel Limited, which holds the land development rights for the Landmark Development.

Yoma plans to develop a 2m sq ft mixed-use development on the site of the former railway station in downtown Yangon, with a five-star hotel (Peninsula Yangon), two office towers, a retail podium, a business hotel, serviced apartments and high-rise condominium.

The acquisition was premised on SPA obtaining a top-up of the land lease from the current 20+ years to 70 years by end June. Under the revised terms, Yoma will go ahead with the site acquisition based on the current lease tenure, paying a reduced amount of US$43.2 million against the original consideration of US$81.3 million, and have the option of topping up the difference upon SPA obtaining the top-up of the land lease.

Based on feedback from the authorities, SPA is confident of getting a lease top-up in due course. Funding for the acquisition will be through a revised one-for-eight rights issue at $0.38 per rights share, versus the earlier one-for-four rights issue at the same price.

We believe the latest newsflow will be taken positively by the market in view of the affirmation by both SPA and the company on getting the potential lease top-up, given the accretive value of the Landmark development to Yoma's net asset value.

2. Singapore's consumer sector

Broker: OCBC

We believe regional consumption growth ahead in China and selected Asean (Singapore, Malaysia, Indonesia, Philippines and Thailand) economies will be supported by three factors.

These are: forecast 2014 GDP growth in excess of 5 per cent for four of the six countries, retail sales growth outpacing GDP growth as seen in Q1 this year, and consumer optimism in four of the six countries.

However, the sector indices are currently trading at forward price-earning ratios of more than 1 standard deviation above their two-year historical averages, bringing back memories of the sector run-up in the second half of last year.

Hence, we maintain Underweight on the sector and favour consumer staples over consumer discretionary as the former is less vulnerable to excessive sell downs. We continue to like Thai Beverage (Buy, $0.74), Sheng Siong Group (Buy, $0.68) and Petra Foods (Buy, $4.06) but not BreadTalk Group (Sell, $1.12).