RANGOON — Thura Swiss, a Rangoon-based economic research and
consulting firm, on Thursday released the first equity research report
to ever be written about a Burmese company.
The report is the first in a planned series, according to Thura Swiss
chief executive Aung Thura, and is intended to encourage more
transparency in Burma’s equity markets and to help investors make
informed decisions.
The report, on Burmese tycoon Serge Pun’s First Myanmar Investment
Company (FMI), details the company’s historic financial performance and
future prospects, assigning a “hold” rating to the company’s shares.
There are currently very few public companies incorporated in Burma.
Most of these were formed after October 2012, in the wake of new rules
passed by the Directorate of Investment and Company Administration
(DICA) making it easier for them to form.
But in Burma, even public companies remain shrouded in secrecy.
“There are companies here that are public, but nobody knows anything
about them,” Jeremy Rathjen, vice president of research at Thura Swiss
and the author of the report, told The Irrawaddy. “It’s kind of a
strange dichotomy—you’re public, but you’re not really public.”
While a bourse known as the Myanmar Securities Exchange Center (MSEC)
has been operating in Burma since 1996, it only trades shares for two
listed companies. Poor infrastructure means shares are traded the
old-fashioned way: on paper at the center itself.
Shares in the majority of Burmese public companies not listed on the
exchange are generally traded in private, among small groups of
investors. A lack of developed capital markets means that Burmese
companies also tend to turn to informal channels for financing. The
opacity of these funding sources raises the specter of corrupt practices
and money laundering, underscoring the importance of establishing
modern and accountable capital markets in Burma.
Despite the speculative hype surrounding Burma’s “frontier” economy,
foreign investment has been slow to actually arrive. President Thein
Sein claimed in May that Burma attracted US$1.4 billion in foreign
investment in the fiscal year 2012-13, a tiny fraction of the incoming
capital that will be needed to jumpstart Burma’s long-moribund economy.
A large reason for this slow investment is a lack of reliable
information about local companies available to prospective investors,
says Rathjen. “It’s a good thing to be more transparent because they
[local companies] will attract more investors,” he said. “If you’re not
transparent, you have a small group of friends or whatever, they might
invest in you because they know you. But if you want to attract more
capital, from the public, you need to… show people what you’re doing. We
see ourselves as trying to push in that direction.”
FMI is a subsidiary of Serge Pun & Associates (SPA), a sprawling
conglomerate chaired by Serge Pun, one of Burma’s most prominent
tycoons. Pun’s companies are already reputed among observers of Burma’s
economy for their transparent business practices, and Rathjen admits
that Thura Swiss’ future research subjects might not be as forthcoming
with accurate data. “FMI has been very transparent and helpful to us, so
they’re maybe easier [to analyze] than some other companies are going
to be. So we’ll see how it goes,” he said.
Burma’s anemic securities exchange is set to be replaced in 2015 by a
brand-new, computerized stock exchange, which will be established using
funds and technical expertise provided by the Tokyo Stock Exchange and
Daiwa Securities Group, which helped set up the existing bourse. The
establishment of the exchange should serve as an important step toward
developing functional capital markets in Burma, but Rathjen says
barriers to entry will be high. “We’re only expecting maybe five to six
companies to be listed [at first],” he said. “From our conversations
with Daiwa and other key players, we know that the requirements to list
are quite stringent.”
A draft of the rules for companies to list on the exchange include a
minimum capitalization of 500 million kyat (US$530 million), as well as
two years’ proven profitability. “There are all these requirements that
we think a lot of companies will probably not be able to meet,” Rathjen
said.
By issuing equity research reports on companies that are either
unable or unwilling to list on the new exchange, Thura Swiss hopes to
promote good corporate governance and accountability. “So should we say
that because you’re not listed, transparency isn’t important? I don’t
think so,” Rathjen said. “In terms of those companies that don’t list,
or have other plans, we still want to encourage transparency for them.”
Whether Thura Swiss can convince more of Burma’s secretive public
companies to expose themselves to this kind of scrutiny remains to be
seen.
source: The Irrawaddy
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