SINGAPORE (Feb 7): CIMB says Singapore Myanmar Investco (SMI) could reverse out of the red in FY18 on the back of growing tourism and foreign investments in Myanmar.
SMI in 1H17 improved to a core net loss of US$2.6 million ($3.7 million), from core net loss of US$3.8 million in 2H16. According to SMI, this was due to its new travel retail segment.
SMI has inked a 10-year exclusive supply agreement with DFS Group, and has also won a 10-year duty-free retail concession at Yangon International Airport (YIA) for 90% of commercial space at the new terminal.
“We also note that the company had conducted a few rounds of private placements to raise approximately $27 million for debt repayment and new store expansion,” says CIMB lead analyst Ngoh Yi Sin in an unrated report on Monday.
“SMI targets to turn profitable in FY18, as it capitalises on the increasing number of leisure and business travellers to Myanmar, and is backed by a cash-generative duty-free business with gross margins of 20-22%,” Ngoh adds.
Myanmar’s tourist volume is expected to rise from 5 million in 2016 to 7.5 million in 2020, according to forecasts by the Myanmar Tourism Ministry.
“Apart from dominating the airport duty-free retail with 39 multi-brand, multi-category outlets, SMI is also penetrating into Myanmar’s domestic retail market,” Ngoh says.
The company has secured close to 65% of commercial space at the Level 1 luxury floor of Junction City, Myanmar first luxury retail mall.
Acording to Ngoh, SMI’s management reports plans for adding on more international brands and shopping malls in the pipeline.
SMI is “riding on Myanmar’s growth,” says Ngoh.
The Southeast Asian nation has already seen steady foreign direct investment (FDI) and gross domestic product (GDP) growth over the years. And it could be boosted further after the US lifted economic sanctions against Myanmar in Oct 2016.
As at 4.58pm, Singapore Myanmar Investco is trading flat at 61 cents.
