Mainboard-listed Yoma Strategic Holdings has sold the land on which the StarCity project is to be developed on to Yoma Bank.

 

Yoma Strategic Holdings&rsquo subsidiaries, Thanlyin Estate Development Limited (TED) and Star City International School Company Limited (SCIS), entered into a sale and purchase agreement (SPA) with Yoma Bank on Dec 23.

 

TED is the developer of the StarCity project in Thanlyin, Yangon. The company had been granted leasehold rights over the land located at Plot 1B, No. 14, Kyaik Khauk Pagoda Road, Star City, Thanlyin Township, Yangon, Myanmar, as well as any buildings and structures to be built upon the land on March 20, 2018.

 

The land measures some 897,867 sq ft.

 

On June 10, 2019, TED had agreed to sublease the leasehold interest in the land to SCIS for a term equivalent to the entire term of the land grant.

 

Yoma Bank had leased two 3.5 storey buildings with a total floor space of 178,019 sq ft located on the land for a period of 10 years under a lease agreement dated Nov 22, 2021.

 

According to the filing by Yoma Strategic Holdings on Dec 27, Yoma Bank wants to purchase the entire leasehold interest of the land on which the buildings have been built. The land measures around 226,705 sq ft.

 

As Serge Pun is the executive chairman and controlling shareholder of Yoma Strategic Holdings and of First Myanmar Investment Public Co., Ltd which has a 61.99% interest in Yoma Bank, the transaction constitutes an interested person transaction (IPT) under the listing rules.

 

Consideration and conditions

 

The total consideration for the proposed disposal is US$40 million ($54.0 million), which is to be satisfied in cash. Of the total amount, 75% of the price will be paid by Yoma Bank to TED and SCIS within seven working days once certain conditions under the SPA are met. The remaining 25% will be paid upon the completion of the proposed disposal.

 

Under the SPA, TED and SCIS will have to obtain a no-objection letter from the Department of Urban and Housing Development, at the Ministry of Construction of Myanmar for the proposed disposal within three months from the SPA.

 

TED and SCIS will have to take the necessary steps to discharge or procure the discharge (as applicable) of any existing encumbrances on the land within three months from the date of the SPA.

 

Finally, TED and SCIS will have to get Yoma Strategic Holdings&rsquo shareholders to approve the transaction by way of an extraordinary general meeting (EGM).

 

The completion of the proposal is expected to take place on March 22, 2023.

 

Rationale

 

According to Yoma Strategic Holdings, the group reiterated its stance to continue focusing on cost discipline and generating positive cashflow to improve its balance sheet following its results for the FY2022 ended Sept 30, 2022.

 

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The proposed disposal is said to be in line with the group&rsquo s strategy to &ldquo de-leverage through asset sales to generate such positive cashflow.&rdquo

 

The purchase price is also 1.75 times over the historical cost, or 1.22 times over the carrying value of the land. In addition, the purchase price represents approximately 8.57% of the latest audited net tangible assets (approximately US$466.59 million) of Yoma Strategic Holdings as at Sept 30, 2021.

 

Based on the valuation of the land by independent valuer Colliers International Consultancy & Valuation (Singapore) Pte Ltd, the value of the land is at US$40 million. The amount was derived at by using the depreciated replacement cost method and income method.

 

Colliers International Consultancy & Valuation (Singapore) Pte Ltd was jointly appointed by Yoma Bank and Yoma Strategic Holdings to provide an independent valuation.