Yoma Strategic Holdings Ltd’s Latest Chairman Letter: 3 Things Investors Should Know About Its Growth Opportunities

Yoma Strategic Holdings Ltd (SGX: Z59) is a conglomerate that focuses on Myanmar. It has business interests in a wide variety of sectors in the country, such as real estate development, agriculture, tourism, vehicle distribution, and food and beverage retail.

In Yoma Strategic’s latest annual report for its fiscal year ended 31 March 2017 (FY2017), its executive chairman, Serge Pun, shared his thoughts on the company’s growth opportunities in his letter to shareholders. Below are three of the key points that he mentioned.

Let’s start with the first, which is on infrastructure investment in Myanmar (emphasis is mine):

“As the Myanmar economy moves from being principally agrarian and resource-based to one encompassing manufacturing, exports and digital, the need for essential infrastructure to enhance connectivity between regions within Myanmar becomes critical. The rise in infrastructure investment will likely result in increased demand for construction equipment where Yoma Strategic is well-positioned with our JCB distributorship.”

From the quote above, we can see that Yoma Strategic expects its Heavy Equipment business to benefit from the growth in infrastructure investments in Myanmar. The Heavy Equipment business provides New Holland tractors and equipment from JC Bamford Excavators (JCB). These equipment include backhoe loaders, heavy duty excavators, and more.

The second point is on the rise in consumer spending (emphases are mine):

“Likewise, the number of middle-income consumers is expected to double by 2020 and will naturally increase the demand for consumer goods and services, bringing a promising impact to our food and beverage retailing, distribution and cold chain logistics platform. As Myanmar leapfrogs into becoming a digital economy, we believe that our telecommunications towers business is central to providing the backbone for greater mobile penetration.“

Yoma Strategic expects that the growth in the number of middle-income consumers in Myanmar will benefit its consumer-focused businesses such as its KFC restaurant franchise, and investments in telecom towers.

The last point is on real estate:

“Greater affordability for housing supported by the recent introductions of long-term loans into the market, which did not exist in the past, is expected to bring about a significant increase in the demand for housing and will benefit our Real Estate business.”

The conglomerate sees long-term growth in its real estate business, driven by innovation in the financing market for houses in the country.

A Foolish conclusion

Myanmar had been an economically-reclusive country for a long time before it started opening itself up to the world in recent years. As a result, the country is expected to grow fast – the Asian Development Bank has a forecast for an 8% increase in GDP for Myanmar in 2018.

But, investors should also note that there can be a wide gulf between a country’s economic growth, and a company‘s business growth. Yoma Strategic is one Singapore-listed company that is looking to take advantage of Myanmar’s fast-growing economy, but there are no guarantees that it will succeed.

Source: The Motley Fool

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