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An Fool’s Eye View Of Myanmar

Myanmar

As the great and the good gather in Myanmar for the latest World Economic Forum, some investors are keen to get a first-mover advantage in a country that has essentially been closed to the outside world for fifty years.

When I was invited to comment on today’s CNBC Capital Connection programme about Myanmar, one part of me was excited that a new market, with a population of the size of South Korea, might soon be open to investors. But my cautious side was telling me to tread carefully. This country’s economy is less than a twentieth the size of South Korea, which means that growth won’t be painless.

But as with any new market, it might be better to let someone else assume some of the risk first. And even then it might be prudent to build into your assumptions a sufficiently large margin of safety to protect yourself against the downside.

Earlier this week, Yoma Strategic Holdings (SGX: Z59) was highlighted as the Flyer of the Week. The company, with a market value of around S$1b, has a number of interests in Myanmar. It developed the country’s first gated compound; it owns a mixed-use apartment and shopping complex; it is involved in agriculture and it also owns a golf course. Last month, Yoma posted a 58% increase in full-year profits to 1.45 cents. This values its shares, which cost $0.995 a pop, at 68 times historic earnings.

Interra Resources (SGX: 5GI) is also involved in Myanmar, though in a completely different way to Yoma. It explores for gas and oil through a 60% interest in two of the largest onshore producing oilfields in Chauk and Yenangyaung. The contracts, which started in 1996, will last for just over 20 years. Interra also drills for oil in Indonesia’s Tanjung Miring Timur Field.

IT and telecom specialist Ntegrator International (Catalist: 5HC) recently won a S$3m contract to supply communication equipment to Myanmar Radio and Television – the state-owned broadcaster. The deal is equivalent to a tenth of the company’s previous year’s annual turnover. At the time of the contract win, the company said: “Our strategic move into the Myanmar market has continued to bear fruit, as the country’s economic liberalisation continues to generate opportunities for industry players.”

Indeed being in the right place at the right time has paid off for Ntegrator and also for Yoma and Interra. But it is good to remind ourselves that we are not investing in an entire economy but individual companies.

Recently, Vodafone and China Mobile pulled out of bidding for a licence in Myanmar because they no longer expect the investment to generate sufficient returns. That should be a salutary lesson for all of us. And with that, I’ll leave you with something to think about for the weekend: Yes, it is true that the early bird generally gets the worm. But the second worm often gets to live.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.