With high-profile investors like Jim Rogers and George Soros showing a keen interest in Myanmar, it may be time for risk seekers to gain exposure.
While Myanmar continues to face headwinds on multiple fronts, the
World Bank said in a report in January that the resource-rich country
“is already seeing increased trade and investment from the wider
international community,” after decades of international isolation. This
is reflected in the World Bank’s 2012-2013 Myanmar GDP growth forecast
of 6.3%, which compares with 5.5% growth for the 2011-2012 period.
Among changes expected to support growth in Myanmar, brokerage DBS
Vickers highlights revised foreign investment laws aimed at enticing
foreign investors, employment provisions within the foreign investment
laws to ensure that Myanmar workers are not left behind, and
developments in the country’s infrastructure.
With Myanmar set to reintegrate into the world the question remains:
how can smaller investors invest in Myanmar given that direct access is
limited?
The best way, DBS Vickers says in a note, is to “invest through foreign companies already in or expanding into Myanmar.”
Opportunities are abundant, it says, but pure plays are scarce. It
tips Singapore-listed Yoma Strategic Holdings is the closest thing to a
pure play. “With close to 100% of its land bank in Yangon, Yoma is a
direct proxy to Myanmar’s booming real estate sector and is well
positioned to benefit from Yangon’s severe demand/supply mismatch for
quality residential, office, hotel/serviced apartment properties.”
DBS Vickers notes Singapore-listed Interra Resources 5GI.SG +2.13%
is the largest onshore oil producer in Myanmar with a 40% market share.
It tips a “significant production ramp up to drive near-term growth,”
and expects “potential further upside from exploration assets and bids
for new licenses.”
Competition in the energy space will be tough amid keen foreign
interest. Myanmar’s Ministry of Energy recently short listed more than
fifty foreign companies as potential bidders for thirty oil and gas
blocks. Asia-based bidders include Indian Oil Corp 530965.BY -0.25%and GAIL (India) Ltd. 532155.BY -0.91%
DBS Vickers notes that Singapore-based construction company Yongnam Holdings Y02.SG +4.17%
is currently bidding for two airport projects in Myanmar – the
expansion of Yangon International Airport and the development of new
Hanthawaddy International Airport. “(A) tender win could net S$10.4
million to FY14F earnings and S$0.12/share to valuation,” it says.
However, not everyone is overly optimistic about opportunities in
Myanmar. While Deutsche Bank acknowledges the country’s investment
potential, the house is “agnostic” on SingTel's Z74.SG +1.90%
bid for a telco license in Myanmar. Deutsche Bank expects the telcos to
face significant challenges seeding devices in Myanmar, where GDP per
capita ranks 205th in the world, and where an estimated 30% of the
population lives below the poverty line. Additionally, “there still
appears to be significant regulatory uncertainties and major reforms are
required to remove barriers to take-up,” it says.
With only two telecom licenses up for grabs competition looks tough.
Other companies in the running include Norway’s Telenor, India’s Bharti Airtel 532454.BY +1.14% and Japan’s KDDI 9433.TO -1.48%.
source: Wall Street Journal
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