Myanmar Growth Story - RHB Invest 2016-05-31: A Clearer Coast Ahead

Myanmar Growth Story

Myanmar Growth Story: A Clearer Coast Ahead

Post political transition, our RHB “On The Road” work trip reaffirms that:
1. Myanmar is still on a trajectory to experience multi-year economic growth;
2. Abundant opportunities abound in the banking, consumer, tourism, infrastructure, real estate & oil & gas sectors;
3. Direct access is rare, with only one listed company on the YSX to date.
Invest through Singapore and Thailand companies already operating or expanding into Myanmar.

We visited Myanmar for two full days, touted as the “last frontier economy in Asia”. Post the new cabinet euphoria, the situation on the ground is not as bad as it may have been perceived from the outside. The mood is generally pro-business, with both the Government and military eager to see progress for the nation.
Overall, we are more assured that the operating assets of the companies that we visited are robust and have solid fundamentals. That said, the macroeconomic concerns and the geopolitical risks remain, but we believe most of these issues would improve over time. Great strides have been made on the economic front, with the:
1. Banking reforms that allow foreign banks to enter the market, albeit at a restricted capacity;
2. Drafting of a revised Myanmar Companies Act that would modernise company structures and allow foreign shareholdings in local firms;
3. The new Myanmar Investment Law, Condominium Law and the opening of the National Stock Exchange with the listing of First Myanmar Investment (FMI) on 25 Mar.
Others in the pipeline include Asia Green Development Bank (AGD) and Myanmar Agribusiness Public Cooperation (MAPCO).
The key sectors for foreign investments are currently infrastructure, oil & gas, followed by manufacturing, mining, real estate development, hotels and tourism. Domestic investments are mainly concentrated in the manufacturing, construction, hotels and tourism sectors.

We were pleasantly surprised that there was already a deluge of Singapore companies (albeit more private entities) operating in Myanmar. We stayed in a hotel operated by Keppel Land (Sedona Hotel Yangon), had breakfast at Ya Kun Coffee & Toast and lunch at Astons. We also spotted a Yongnam vehicle at the Yangon International Airport. Singapore brands such as Bee Choo Origin (Hair Treatment), Bata, Super and Haw Par are readily found. In the city, the branch offices of DBS and Singapore Airlines (SIA) were clearly visible.
Singapore companies stand in good stead to ride on the country’s current stage of development. Interestingly, we experienced six power outages over two days in Yangon, emphasising the city’s dire energy needs, with burgeoning demand far outstripping the limited supply.

Myanmar stands at a pivotal juncture amidst a slew of social, political and economic reforms. To ride on this theme, we highlight 10 publicly-traded companies with meaningful exposure below.
We also initiate coverage on Carabao (CBG TB, BUY, TP: THB48.00) and Yoma Strategic (Yoma) (YOMA SP, BUY, TP: SGD0.78), with the latter being our Top Pick as the most direct play on Myanmar’s boom.

Ong Kian Lin RHB Invest | Kasamapon Hamnilrat RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-31

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