SINGAPORE (Nov 20): OCBC says Singapore Myanmar Investco’s long-term growth story is still intact despite its insurgency problem in Rakhine state.
OCBC analyst lead analyst Deborah Ong believes SMI’s positioning in the profitable airport duty-free retail space offers investors a unique opportunity to participate in the country’s growth.
Looking ahead to 2H18, SMI’s management also expects to post a y-o-y increase in revenue, along with reduced operational costs.
Ong has a target price of 66.5 cents for SMI.
Indeed, foreign arrivals at Yangon International Airport reached 0.75 million for the first eight months of 2017, up 14% y-o-y.
And the Asian Development Bank is projecting a 7.7% GDP growth rate for Myanmar in 2017 and 8.0% growth in 2018.
Last Tuesday, SMI reported 1H18 gross profit increased 52.5% y-o-y to US$3.1 million ($4.2 million), supported by an increase in gross profit margin from 21.1% in 1H17 to 26.6%.
But the group still recorded a net loss of US$2.1 million from continuing operations, against a net loss of US$1.6 million in 1H17.
Part of the increase in net loss was due to positive one-off items in the previous half-year including a US$300,000 writeback of over-accrual of bonus and a US$137,000 writeback of over-accrual of corporate secretarial costs in 1H17.
Notably, Duty Free & Fashion Retail and Construction Services made up 59.4% of 1H18 revenue, with profit before unallocated expenses increasing 60% y-o-y to US$2.1 million – though that increase was more than offset by the increase in the group’s head office expenses and finance charges.
Shares in SMI are up 46 cents at 11.41am, or 11.3 times FY19 earnings.
