Global Expert Finds Road to Myanmar

08/06/2015 10:00 am EST

Focus: STOCKS

Vivian Lewis

Editor and Publisher, Global Investing

Vivian Lewis, editor of Global Investing, has uncovered a speculative opportunity for investors interested in gaining exposure to Myanmar; she cautions that this is a Singapore penny stock that is only suitable for those aware of the high risks of this emerging market.

The Singapore holding company Yoma Strategic Holdings (OP: YMAIF; XSES: Z59) closed its books on the 2014-5 fiscal year.

After taking over automobile and tire businesses last year and adding drink distribution and the ownership of a shopping mall in Dalian, China, the founder, the Burmese Serge Pun, consolidated more of its interests.

It owns stakes in a telephone tower business and agricultural land mostly producing coffee for global companies plus a UHT-treated milk company.

The chairman and founder's son, Melvyn Pun, is about to become its CEO replacing the non-Burmese Andrew Rickards of Australia who is retiring.

It partners with SPA (Serge Pun & Associates), the family enterprise of the Singapore-based Burmese founder. The younger Mr. Pun wants to match its real estate portfolio with a non-real estate one of the same size.

Besides property, Yoma already owns consumer businesses (like the recently opened Kentucky Fried Chicken franchise), logistics and warehouse facilities, and tourism businesses in Myanmar often operating alongside the Pun family's other holdings.

Yoma also offers balloon rides to view Myanmar's incredible Bagan Buddhist temples from the air. It also owns a tourism hotel in that holy city.

The first real estate gated township development in Myanmar, FMI City, near Rangoon, is now totally sold and leased on 465 acres of land. Its commercial leases include the first ever department store in Myanmar. There are 1345 additional acres for development as it grows.

The Pun Hlaing Golf Estate with an 18-hole course designed by Gary Player is also now selling homes, as of March 31. Star City, with 9000 apartments, and 10 million sq. ft. of residential space, and 1.7 million of commercial space is next to come out.

The ultimate in property will be Landmark Development with 2 million sq. ft. of gross housing and commercial area including the Yangon Peninsula Hotel and a 5-star condo building with executive serviced apartments.

The project—designed for business people working in Myanmar—is being built in partnership with Mitsubishi Estate and Mitsubishi Corp of Japan and Hongkong & Shanghai Hotels.

Serge Pun lured the Mitsubishi group into his businesses because Yoma markets Mitsubishi Motors and Hino cars in Myanmar.

With so many changes in ownership plus a new S$735 billion loan facility, the latest annual report is not really comparable to that of 2013-4.

What attracted me to the stock was the real estate and tourism arms, but having some other businesses probably reduces risk.

YMAIF revenues in 2014-5 rose 104% to S$111 million. This is small-cap, although huge for Myanmar.

Per share earnings this year came to 2 Singapore cents/sh vs 1.32 last year. Current assets rose to S$342.5 million from 176.2 million, offset by current liabilities of S$73.3 million this year and 42.4 million last year.

The company did a capital increase during the FY to buy out Pun holdings, as noted above. Net asset value per share is now Singapore cents 38.3, vs a mere 32.1 cents last year, the upslope is considerable.

While most numbers are up sharply, the gross profit margin fell last year, from 44.4% to 41.1%, still very high, as projects required marketing spending.

The capitalization is quite low vs a debt of S$735 billion, which sounds hairy, but the p/e ratio is only 22.36, not high for building a country more or less from scratch as Serge Pun and his family are doing.

While the bulk of the borrowing was from the private sector, Yoma also won $100 million in loans from the Asian Development Bank and smaller amounts from the World Bank's International Finance Corp.

What really grabs me is that an expat who has made his fortune outside Myanmar is setting out to finance the modernization of his country after decades of its being shut off from the world by a military junta.

The Pun clan are experimenting with a new way to modernize and democratize a country.

This is a penny stock listed on the main Singapore stock market, the only way into Myanmar. Of course it is high risk.

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