3 Stocks That Could Capitalise On Myanmar’s Growth

Previously an isolated country and largely overlooked, Myanmar has steadily opened its economy to outsiders in recent years and now looks capable of growing at a healthy clip with foreign direct investments (FDIs) pouring into it.

Moreover, with the recent landslide election-win by Aung San Suu Kyi’s political party in Myanmar in November, it could provide the crucial push for businesses that have been waiting on the sidelines to finally decide to set up shop in the country.

As reported in the Myanmar Times back in October, Hoe Ee Khor, deputy director for Asia and Pacific at the International Monetary Fund (IMF), said: “We hope after the election, assuming everything goes well, there will be a lot more investment into Myanmar, which will grow the economy.

For investors in Singapore who would like a piece of the action in Myanmar, they may be pleased to know that there are actually companies listed on the Singapore stock market that have a business presence in the Southeast Asian country. These companies might being beneficiaries of Myanmar’s potential economic growth in the years ahead.

Let’s take a look at three companies that derive a significant portion of their revenues from Myanmar:

1) Yoma Strategic Holdings Ltd (SGX: Z59)

Yoma is an investment holding company that has its fingers in many sectors of Myanmar’s economic pie. These include real estate, tourism, agriculture, and transport. According to S&P Capital IQ, nearly 99% of Yoma’s revenue in its fiscal year ended 31 March 2015 had come from Myanmar.

Beyond its own businesses, the company has also been leveraging on its experience in Myanmar to partner with prominent multi-national corporations to set up business ventures in the country.

One example is Yoma’s collaboration with US-listed Yum! Brands Inc. The latter runs a number of fast-food chains, including KFC (Kentucky Fried Chicken), and it has appointed the former as a franchise partner for KFC restaurants in Myanmar. In another instance, Yoma had established a new joint venture (JV) earlier this month with Japanese conglomerate Mitsubishi Corp to distribute the latter’s vehicles in the country.

Yoma last closed at S$0.45 last Friday and is valued at 45 times its trailing earnings at that price.

2) Interra Resources Ltd (SGX: 5GI)

Interra Resources is plugged into the petroleum exploration and production (E&P) space in Indonesia and Myanmar. The company’s activities include petroleum production, field development, and exploration.

Interra Resources' oil prduction profile
Source: Interra Resources’ earnings release

The table above shows Interra Resources’ oil production profile in the second- and third-quarters of 2015.

Besides owning the lion’s share of two oil production sites in Indonesia, the company also holds a 60% interest in a huge oil field – with coverage of approximately 1,800 square kilometres – located in Chauk and Yenangyaung in Myanmar.

Interra Resources’s share of production (in terms of oil barrels) in Myanmar amounts to nearly 60% of its total production profile. In 2014, 53% of the company’s revenue actually stemmed from Myanmar.

Interra Resources’ line of business – oil & gas exploration and production – has been badly hit with the brutal drop in the price of oil since mid-2014. In the nine months ended 30 September 2015, the company’s revenue had declined by 43% year-on-year to US$26.1 million. Meanwhile, it had chalked up a loss of US$16.5 million compared to a profit of US$1.7 million a year ago.

Shares of Interra Resources last changed hands on Friday at S$0.089 apiece. The firm has no price-to-earnings (PE) ratio to speak of because of its negative net income.

3) Singapore Myanmar Investco Ltd (SGX: Y45)

Formerly known as Singapore Windsor Holdings Limited, Singapore Myanmar Investco had changed its name back in July 2015 to better portray its new business direction. Along with the name change came shareholders’ approval for the firm to sell its printed circuit board business and thus solely focus on business investments in Myanmar.

In a similar manner to Yoma Strategic, Singapore Myanmar Investco is also a company with a wide array of businesses in Myanmar. Currently, the company has interests in the country’s retail, infrastructure, automotive, construction, telecommunications, hospitality, and automotive sectors.

One important point to note about Singapore Myanmar Investco is that the firm appears to still be in the infancy stage, as it builds up its various businesses in Myanmar to capitalise on the growth trends in the country. In the six months ended 30 September 2015, Singapore Myanmar Investco had revenue of just US$3.1 million and had incurred a loss of US$1.5 million.

The company’s shares last traded at S$0.40 each last Friday. The firm is valued at 5 times its latest book value at that price.

Foolish Summary

Myanmar does appear to have a bright outlook ahead. Singapore-listed companies that operate in the country, such as the three mentioned above, have chances of benefitting from this trend.

But, as my colleague Chong Ser Jing has cautioned previously, investors should not just focus on macroeconomic trends. He wrote:

There are many obstacles that stand between a growing macro-trend and a company’s business growth. These obstacles are things we as investors have to focus on.

So, even if Myanmar’s economy does grow splendidly in the future, our trio above – Yoma, Interra Resources, and Singapore Myanmar Investco – need not necessarily be winning investments. Investors may want to think about how the companies can manoeuver potential roadblocks such as currency and regulatory risks in a developing economy like Myanmar.

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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 contributor James Yeo doesn’t own shares in any companies mentioned.