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Myanmar: The Land Of Promises?
Perspective | 08 June 2012
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By: Simeon Ang
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By: Louis Kent Lee
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As world leaders listened attentively to one another and try to come up with ideas to make things better for the European debt crisis, much limelight was stolen by Myanmar’s pro-democracy leader Aung San Suu Kyi as she spoke at the World Economic Forum for East Asia (WEF) in Bangkok about Myanmar. Myanmar has been the hot topic investors and market watchers have been talking about ever since its president Thein Sein said his government will build on the sweeping reforms it began last year and it is committed to democratic change.

Commitment To Reforms
The steps to achieve reform are deemed to be plentiful, which span from strengthening its rule of law, improving the country’s backward infrastructure, to boosting private businesses and most importantly, better the lives of people in Myanmar.

Reiterating the commitment to ensure its reforms are irreversible, Aung San Suu Kyi stressed that Myanmar is seeking for investments that could create jobs and not investments which could mean more corruption or more privileges to the already privileged. She also called out to investors to bring job and training for the young people in Myanmar to enable its people to earn a decent living.

In a push to further reinforce its commitment, Myanmar has passed a new foreign investment law which offers a straight five-year tax exemption, with an extension of three years if certain measures are met. This law also specifies usage of land terms, legal structures and sweeteners (incentives) for foreign companies.

To many, Myanmar is currently a blank canvas, waiting to be filled with strokes and colours. Opportunities for strokes of new roads, train lines, sea ports, real estate and colours of telecommunication continue to be open to onlookers and investors.

Myanmar’s Growth, Energy Investment Possibilities
Myanmar’s economy grew from 5.3 percent in 2010 to 5.5 percent in 2011 and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) expects a 6.2 percent growth and 6.2 percent inflation for Myanmar in 2012. UNESCAP attributed the economic growth of Myanmar to the increased oil and gas, other energy and mining sectors’ investment.

With the help of further foreign injections, this figure might just be reached faster than we think. In an interview with Bloomberg Television at the WEF, Thailand’s Industry Minister Pongsavas Svasti revealed that after his meeting with Martin Ferguson, Australia’s Minister for Resources, Energy and Tourism, Australians have expressed interest and are eager to invest in the energy business in Myanmar through formed partnerships with Thai firms.

Strong Local Partner Is Essential To Venture Into Myanmar Market
Despite the enthusiasm to invest in Myanmar, many investors are taken aback by the difficulties of investing and conducting business in Myanmar. This ranges from problems pertaining to poor infrastructure to no 24-hour electricity supply.

Quoted from the Business Times, Dr Alistair Cook, a visiting research fellow of the National University of Singapore’s East Asian Institute shared that whilst opportunities are certainly apparent in Myanmar, not much can be done if you do not have a good local network.

“You can’t go there on a weekend shopping spree to invest your money. You’ve still got to rely on networks there, which takes a lot longer to build up”, said Dr Cook.
Indeed, investing in Myanmar is not as simple as logging into Facebook. We have thus identified two companies which have direct exposure to the Myanmar market, where not only do they have a reliable local network, but are also well positioned to reap the benefits that could come forth as Myanmar progresses into what “it could become”.

Super Group: Stable Position In Myanmar
Super Group (Super) was featured in our 2011 year end stock pick piece “12 Gems To Include In Your 2012 Portfolio” when it closed at $1.32 (also the high of the day) on 31 December 2011. Since then, Super has turned on its super mode and raced past price barriers, with an all-time high seen on 21 May 2012 when it traded at $2.16, representing a 63.6 percent increase from its 31 December 2011’s high before closing at $1.99 on the same day.

Since our stock pick piece till date (31 May 2012), Super’s stock price has jumped a whopping 50 percent as it moves along its strategic path to focus on its dual engine of growth, Branded Consumer and Ingredients business segment. Reiterating our liking of Super’s diversified geographical reach, you might want to be let in that out of the 50 countries Super’s products are distributed to and the 13 manufacturing plants of Super, Myanmar is one of the countries where Super distributes and manufactures its products.

Exclusive Partner And Leading Market Share In Myanmar
As mentioned earlier that a strong local partner is crucial to in the Myanmar market, Super is on solid grounds with its established distribution network in place and an exclusive local partner of 15 years.

In addition to that, Super has a more than 30 percent market share in Myanmar, translating to a strategic positioning and strong brand presence established in the region. In our opinion, we feel that Super will be in a beneficial position when the Myanmar market opens up further, with possible entrants of hyper marts and more product distribution possibilities.

More importantly, Super has already laid the foundations “new players” need to establish in Myanmar, and this first mover advantage, coupled with its established presence and extensive value chain will seek to boost Super’s position further as the big boys in the Myanmar market.

Yoma’s Myanmar Stake, A Bridge Not Too Far
Envision a land of gold – where pagodas and monasteries are covered in gold leaves. Myanmar, otherwise known as the golden land, is a country in which Yoma Strategic Holdings has set its sights on. Even before the recent hoo-hah surrounding political and economic reforms in the country, Yoma already had foresight into a country that largely fell behind its neighbours in terms of economic and social development.

Way back in 2008, the company had already commenced its investments in the real estate market through various developments such as the Pun Hlaing Golf Estate, FMI City – Orchid Garden and the Evergreen Condominiums.

Building on this early start in a country that was seemingly cut off from the rest of the world, Yoma had sought to build a bridge of economic success to link Myanmar and Singapore. No matter what others might have thought about such a venture – be it a roulette or gamble of sorts, Yoma held firm to the belief that ultimately, such an investment would yield results for the company. This firm belief has begun to bear fruits as seen by its recently released results.

The Burmese Belief Bearing Fruit
Yoma released its unaudited FY12 results on 25 May 2012, which subsequently left analysts at Maybank Kim Eng raving about the counter. Yoma had managed to raise its top line performance by a remarkable 3.5 fold as it realised increased contributions from the sales of housing and land development rights (LDRs) in Myanmar. In demonstration of the marked increase in interest in the real estate market of Myanmar, Yoma notes that it had sold LDRs equivalent to 222 plots of land as compared to the 35 plots in FY11.

Revenue from the sale of houses also achieved a 4.7 fold jump while Yoma’s recent automobile dealership reaped in a considerable $1 million in revenue for FY12. In line with the slew of increased contributions, FY12 net profit attributable to shareholders grew at an astounding 117 percent. Indeed, Yoma was amongst the small crop of companies who could boast such growth during the tumultuous earnings season we have just witnessed.

The Architect Of Growth – Real Estate
Post results, analysts at Maybank Kim Eng highlighted that Yoma had reported strong FY12 results, benefiting from “heightened interest in Myanmar real estate”. The research house went on further to say that few other companies can stake a claim to having focused on the emerging market of Myanmar and its real estate market.

Perhaps, in further testimony of its continued focus on the country, Yoma had on 1 June 2012, completed the acquisition of an additional 70 percent economic interest in the remaining LDRs of the Star City real estate project in Yangon. The acquisition was made possible under an existing first right of refusal deed that Yoma has with its Myanmar-based partner, SPA Group. To fund this acquisition, Yoma has initiated a rights issue that would seek to raise approximately $100 million in net proceeds. The project is expected to provide Yoma with a strong pipeline for the next six to eight years while Yoma continues to develop other business interests in Myanmar.

Perhaps, Andrew Rickards, Yoma’s chief executive officer put it best in words as he mentioned in Yoma’s media release that the financial performance for FY12 was a testament of Yoma’s dominance in the Myanmar property development market. Rickards felt that given the recent political and economic changes spurring growth in Myanmar, Yoma’s shareholders will be well-positioned to benefit.

Myanmar – Promising To The Weary Investor?
While we have highlighted two counters that have vested interests in the rising jewel of South East Asia, we have also compiled a list of local counters with known exposure to the country as well as counters that have taken concrete steps to gain exposure to Myanmar.

Table of locally listed counters with exposure to Myanmar

In all, it is not surprising if you see the list increasing. It’s almost like everyone is queuing to get a piece of this Myanmar pie. But is it really one that delivers more than everyone is hoping for? No one knows. But it doesn’t hurt to roll the dice and see what comes up in this land of promise now does it.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Yoma Strategic Hldgs  0.315 -0.010 -3.08%   
Business: Co operates mainly in Myanmar under several business segments. [FY18 Turnover] Automobile (40.5%), real estate (20.8%), real estate services (18.4%), consumer (12.9%), financial services (6.2%), investments & others (1.2%).

Insight: Feb-19, 3Q19 revenue jumped 12.1% to $27m mainly a... Read More

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