Yoma Strategic Holdings Ltd (SGX:Z59), a SGD$994.13M small-cap, operates in the real estate industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year . Below, I will examine the sector growth prospects, as well as evaluate whether Yoma Strategic Holdings is lagging or leading in the industry. View our latest analysis for Yoma Strategic Holdings
What’s the catalyst for Yoma Strategic Holdings’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. In the previous year, the industry saw growth in the teens, beating the Singapore market growth of 7.92%. Yoma Strategic Holdings lags the pack with its negative growth rate of -28.50% over the past year, which indicates the company will be growing at a slower pace than its real estate peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 2.67% in the upcoming year.
Is Yoma Strategic Holdings and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 11x, in-line with the Singapore stock market PE of 14x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 7.37% on equities compared to the market’s 7.94%. On the stock-level, Yoma Strategic Holdings is trading at a higher PE ratio of 28x, making it more expensive than the average real estate stock. In terms of returns, Yoma Strategic Holdings generated 5.68% in the past year, which is 2% below the real estate sector.
What this means for you:
Are you a shareholder? Yoma Strategic Holdings’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in Yoma Strategic Holdings’s high price, suggested by its higher PE ratio relative to its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Yoma Strategic Holdings as part of your portfolio. However, if you’re relatively concentrated in real estate, the Yoma Strategic Holdings’s high PE may signal the right time to sell.
Are you a potential investor? If Yoma Strategic Holdings has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other real estate companies. However, that being said, its industry-beating growth prospects may be the reason for high relative valuation. I suggest you look at Yoma Strategic Holdings’s future cash flows in order to assess whether the stock is trading at a reasonable price on this basis.