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Corporate dynasties join forces to defy Myanmar market gloom


The Pun corporate empire has secured the support of a fellow Southeast Asian business dynasty, signalling their confidence in the future of Myanmar despite the ineffectual economic reforms and uncertain fallout from the Rakhine crisis.

Serge Pun says Asian companies still see value in Myanmar and are “smarter” than their Western competitors.

Ayala Corp, a Philippine conglomerate active in real estate, telecommunications, energy and infrastructure, will take 20 percent stakes in Singapore-listed Yoma Strategic Holdings and Yangon-listed First Myanmar Investment valued at a combined US$238 million. It marks the first major foreign investment in a company listed on the Yangon Stock Exchange, which is set to open the door to non-Myanmar buyers.

The new capital raised from this partnership is important for Yoma Strategic’s real estate portfolio as well as adding a degree of confidence to the Myanmar conglomerate, according to DBS analyst Derek Tan, who also sees its mobile money operator Wave Money as a possible “dark horse”.

Jeremy Mullins, country director at business consultancy Vriens and Partners, called the investment “a great vote of confidence in the potential of the broader Myanmar market, as well as the specific companies themselves”. Ayala in turn receives exposure to several promising industries in Myanmar, he added.

“The Ayala deal is a trailblazer for Myanmar in many respects and sets a positive precedent for future investments in Myanmar companies by international investors,” he told this newspaper.

Asked by The Myanmar Times whether the investment signals support for Daw Aung San Suu Kyi and her government’s economic policies ahead of the 2020 elections, Mr Pun said “this vote of confidence” is not about the polls or “which government we are supporting.”

“It’s about what we want to do for Myanmar and the Myanmar people,” he said, speaking at a news conference in Singapore as chair of both Yoma Strategic and FMI.

And asked whether the deal reflects the fact that it is harder to attract investments from Western countries, Mr Pun replied that it “signifies that our Asian and ASEAN investors are a lot smarter than Western investors.”

Melvyn Pun, CEO of Yoma Strategic and son of Serge Pun, told this newspaper that the company is “optimistic heading into the election year.” “A lot of the recent policies focusing on economic growth are helping to make doing business easier, and the government is showing a much stronger desire to improve the economy.”

In the joint corporate announcement, Jaime Ayala noted the “solid, decades-long reputation” of the Pun family business, referring to its position at the forefront of corporate governance reforms in Myanmar. For example, FMI is consistently ranked among the most transparent local companies, having the second highest disclosure scores in the 2019 Pwint Thit Sa report out of 104 companies.

“I do think the benefits of our approach to corporate governance are clear to see,” Melvyn Pun added.

While Serge Pun and the family benefited from extensive exposure to modern business practices through their education and business life overseas before returning to Myanmar after 1989, many other tycoons remained in the country under military rule, making fortunes in timber, jade and construction through forging close relationships with the elite.

“Those days are over,” said Vicky Bowman of the independent Myanmar Centre for Responsible Business. “What you now see is that the companies whose leaders can show they understand compliance, safety, due diligence, sustainability and have the management systems and team in place to make this happen are cleaning up in all senses of the word.”

Looking ahead, the investment comes at a time when Yoma Strategic is in need of cash owing to heavy exposure to Yangon’s real estate market and project delays.

After a lacklustre performance in property sales, the company last year launched City Loft, an affordable housing project targeting the underserved middle-income market. Located in Thanlyin, southeast Yangon, City Loft will build a total of 1400 apartments. So far, four buildings comprising 455 units have been launched with more than 90pc of these already sold. A fifth building with 98 units was launched last week.

“Our real estate market has been pretty cold, stagnant for two or three years. Having said that, we at Yoma Land have been able to sell an average of 60-70 units a month on our new product called City Loft,” Serge Pun said. “I think we’ll be selling more than 100 units a month going forward.”

What it means for Yoma group and Myanmar

A few corporate titans in the region, such as Thai Charoen Pokphand Group and Robert Kuok’s Kerry Group, have established a presence in Myanmar for some time, but usually with a project focus.

But Ayala Corp has pursued a different approach, said Mr Mullins of Vriens and Partners, by directly investing in two Myanmar conglomerates, FMI and Yoma Strategic, with both involved in real estate, banking, healthcare and other industries.

“The deal provide a valuable cash injection into the group which provides them with ammunition to continue growing its real estate business and target new opportunities,” Mr Tan of DBS commented. The injection will allow Yoma to undertake a more long-term perspective in terms of their strategic planning because they have a lot of landbank on the balance sheet, giving them a long runway of projects to be delivered into the market over the next 5-10 years.

“The key catalyst apart from its real estate business is Wave Money; which has a lot of opportunities to be the mobile wallet of Myanmar. This is huge,” the analyst noted.

Wave Money is one of Myanmar’s fast-growing mobile money operators. Yoma Strategic this month acquired an additional 10pc stake in Wave Money from FMI for $6 million, valuing Wave Money at $60 million at the time. Following the acquisition, Yoma increased its stake to 44pc while Telenor holds 51pc.

The fact that Ayala Corp is seen as a patient shareholder with a longer-term investment horizon creates synergies between the two groups, Mr Tan added.

“We have a ‘buy’ call on the [Yoma] stock and I believe that [the Singapore stock] market has somewhat reflected the renewed confidence from the new stake from Ayala, but not the potential longer term turnaround in their results or real estate business as the funds will come in timely to recapitalise the balance sheet,” he said.

Shares of Yoma Strategic closed November 26 at 37 Singapore cents, little changed from a year ago but well down on more than 50 cents two years ago. At the current level, the firm has a market capitalisation of S$702.5 million.

Mr Tan said a series of fund raising in the past may have diluted the share price a little. At the same time, the Myanmar growth story, despite its longer term attraction, may have been side-lined by weaker global growth due to the US-China trade war. Investors’ pursuit of yields has also focused attention on safer instruments.

At his press conference Serge Pun also made an oblique attack on those western governments and companies which he said only saw Myanmar through the prism of Rakhine while “the East however sees Myanmar in a different lens… and for that they think we have to engage.” Pun did not name any governments or companies, saying the pressure came from “certain regions in the West.”

Former Malaysian foreign minister Tan Sri Syed Hamid Albar commented that Serge Pun was “trying to understate the seriousness of the [Rakhine] situation”. Speaking to The Myanmar Times, he said: “It’s no longer an internal matter of Myanmar” and referred to the recent involvement of the International Criminal Court and the International Court of Justice.

“Myanmar is trying to resist but ASEAN is softly engaging her to come to a long-term solution without being seen to interfere in its internal affairs. There must be a face-saving exercise for Myanmar. We accept that Myanmar has a myriad of problems but this should not be used to legitimise genocide and gross human rights violations,” the former minister said.

The African nation of Gambia filed a case against Myanmar at the ICJ this month, and the State Counsellor is to lead a legal team in defence.

“At the initial stage ASEAN refused to get involved on the principle of non-interference. However recently as the evidence is getting more glaring it started to discuss, though they are looking at it from a different perspective,” said Tan Sri Syed Hamid Albar.

Source: Myanmar Times

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