Can This Be A Major Growth Development For Yoma Strategic Holdings Ltd?

Yoma Strategic Holdings Ltd (SGX: Z59), a conglomerate with diverse business interests in Myanmar, announced earlier today that it has struck a new deal for its automotive segment. Can this grow into something big in the future?

The new deal

Yoma Strategic’s new deal is a joint venture (JV) with Mitsubishi Corp to distribute the latter’s vehicles in Myanmar. The JV will take over management of two Mitsubishi Motors Service Centres which are currently managed by Yoma Strategic. It will also operate a new Mitsubishi Motors showroom in Yangon, the largest city in Myanmar.

Given Myanmar’s gradual opening of its economy to outsiders, the automotive sector looks likely to be one area of growth for the country.

Growth driver(s)

From a Solidiance report, private car ownership in Mynamr has been increasing at 10.8% annually from 2008 to 2014. But despite the double-digit growth over the past few years, there appears to be plenty of runway left for expansion.

The number of registered passenger cars in Myanmar is still below 400,000 as of 2014. For a country with a population of 53 million in the same year, the car ownership ratio is less than 0.8%.

In Malaysia, there were 10.5 million registered private cars in 2013, indicating a car ownership ratio of about 34% back then. Even for a country like Singapore, in which car ownership is regulated with high car prices, the private car ownership ratio is well over 10%. If Myanmar’s economy can continue to grow over the next few decades, the demand for vehicles is likely to grow in tandem.

With an early entrance into the market, Yoma Strategic might be well positioned for any future growth in automotive demand in Myanmar.

A bright future

Yoma Strategic currently has multiple partnerships with Mitsubishi in businesses that involve tyres, airport operations, and even elevators. With the wide business-scope that Mitsubishi has to offer, there might be opportunities for further collabboration in the future with Yoma Strategic.

All that being said, while the developments we’ve seen are highly positive for Yoma Strategic, how they would translate to the company’s bottom-line is as yet unknown. But for now, the growth story of Yoma Strategic is getting brighter.

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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 writer Stanley Lim does not own any companies mentioned above.