Singapore | Industrials Sector Asia Pacific Equity Research

SINGAPORE MYANMAR INVESTCO | BUY

16 Nov 2017
MARKET CAP: USD 93M AVG DAILY TURNOVER: USD 0.1M Company Update

WORK IN PROGRESS BUY (maintain)

 FV now at S$0.665 Fair value S$0.665
add: 12m dividend forecast S$0.000
 Proxy to Myanmar’s growth
versus: Current price S$0.450
 Reiterate BUY
12m total return forecast 48%

Gross profit up 53% YoY Analysts
Singapore Myanmar Investco (SMI) reported its 1HFY18 results on Deborah Ong (Lead) ● +65 6531 9810
Tuesday. Gross profit increased 52.5% YoY to US$3.1m, supported by deborahong@ocbc.com
an increase in gross profit margin from 21.1% in 1HFY17 to 26.6%. Eugene Chua ● +65 6531 9678
The group recorded a net loss of US$2.1m from continuing operations, eugene.chua@ocbc.com

vs. a net loss of US$1.6m in 1HFY17. Part of the increase in net loss
Key information
was due to positive one-off items in the previous half-year including a
Market cap. (m) S$126 /
US$300k write-back of over-accrual of bonus and a US$137k write-
USD93
back of over-accrual of corporate secretarial costs in 1HFY17. Notably,
Avg daily turnover (m) S$0.1 /
Duty Free & Fashion Retail and Construction Services made up 59.4% USD0.1
of 1HFY18 revenue, with profit (before unallocated expenses) Avg daily vol. (m) 0.8
increasing 60% YoY to US$2.1m – though that increase was more than 52-wk range (S$) 0.42 - 0.68
offset by the increase in the group’s head office expenses and finance Free float (%) 40.2

charges. Looking ahead to 2HFY18, management expects to post a YoY Shares o/s. (m) 280.7
Exchange SGX
increase in revenue, along with reduced operational costs.
BBRG ticker SMI SP
Reuters ticker SINO.SI
Airport duty-free retail player in a rapidly developing economy
SGX code Y45
Foreign arrivals at Yangon International Airport reached 0.75m for the GICS Sector Industrials
first 8 months of 2017, up 14% YoY. We do note that one key risk to Trading Comp &
GICS Industry Distri
our FY19 forecasts is any continuation of the Rakhine state atrocities, Wai Ho Kwok -
Top shareholder
which may deter visitors from signing on tour packages next year and 53.8%
put a damper on arrivals. Nonetheless, the long-term growth story is
still intact. We believe that SMI’s positioning in the profitable airport Relative total return 1m 3m 12m
Company (%) -4 -13 -19
duty-free retail space in a developing country – that is still at a low
STI-adjusted (%) -6 -16 -44
base in terms of economic indicators relative to neighbouring countries
– offers investors a unique opportunity to participate in the country’s Price performance chart
growth. The Asian Development Bank projects a 7.7% GDP growth rate
for Myanmar in 2017 and 8.0% growth in 2018. We highlight three
factors in SMI’s favor – the current low base that revenue is at, the
high gross profit margins of the Duty Free & Fashion Retail segment,
coupled with the less-than-proportional increase in fixed costs we
project going forward. With a change in analyst, after adjusting for the
placement and tweaking our assumptions for FY19F, our fair value
decreases from S$0.97 to S$0.665 (16x FY19F; year ending Mar
2019), which implies a healthy 48% upside from yesterday’s closing
price of S$0.45. Maintain BUY.
Sources: Bloomberg, OIR estimates

Key financial highlights

Industry-relative metrics
Year ended 31 Mar (US$m) FY16 FY17 FY18F FY19F
Revenue 7.5 23.3 29.8 52.2
Gross profit 1.2 4.8 7.6 19.2
Gross profit margin (%) 15.8 20.7 25.6 36.8
PATMI from continuing operations -0.3 -7.1 -1.6 9.0
EPS (US cents) -5.3 -2.8 -0.5 3.0
Cons. EPS (US cents) na na na na
PER (x) nm -11.5 -59.3 10.9
NTA per share (US cents) 6.4 9.5 7.4 10.4
P/B (x) 5.0 3.4 4.3 3.1
ROE (%) -3.2 -29.3 -7.3 28.5

Note: Industry universe defined as companies under identical GICS classification listed
in the same exchange.
Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document. MCI (P) 003/06/2017
 OCBC Investment Research
Singapore Equities

Exhibit 1: Financial highlights

1H17 1H18 % Chg 2H17 % Chg
(USD '000) (USD '000) (YoY) (USD '000) (HY on HY)
Revenue 9,626 11,639 21% 13,677 -15%
Cost of Sales -7,597 -8,544 12% -10,872 -21%
Gross profit 2,029 3,095 53% 2,805 10%
Distribution Expenses -560 -642 15% -675 -5%
Administrative Expenses -3,236 -3,903 21% -4,214 -7%
Operating profit -1,767 -1,450 -18% -2,084 -30%
Finance cost -273 -729 167% -642 14%
Interest income/Other gains/other income 583 159 -73% -16 n.m
FX gains/losses 0 0 n.m. 0 n.m.
Share of results from JV, net of tax (Senko) -146 -67 -54% 75 n.m
PBT -1,603 -2,087 30% -2,667 -22%
Income tax -8 -9 13% -17 -47%
PAT (continuing operations) -1,611 -2,096 30% -2,684 -22%
PAT (discontinued operations) -970 -2,105 117% -2,081 1%
Total PAT -2,581 -4,201 63% -4,765 -12%
PATMI -2,373 -4,108 73% -4,707 -13%
Source: Company financials

Exhibit 2: Revenue, Gross Profit, Operating Profit, and Profit After Tax from Continuing Operations
(USD m)

Source: Company financials, OIR

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 OCBC Investment Research
Singapore Equities

Exhibit 3: Revenue by segment (USD ‘000)

Source: Company financials, OIR

Exhibit 4: Profit (excluding unallocated expenses) by segment (USD ‘000)

Source: Company financials, OIR

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 OCBC Investment Research
Singapore Equities

Company financial highlights

Income statement
Year ended 31 Mar (US$m) FY16 FY17 FY18F FY19F

Revenue 7.5 23.3 29.8 52.2

Gross profit 1.2 4.8 7.6 19.2
Distribution costs -1.0 -1.2 -1.3 -1.6
Administrative expenses -6.7 -7.5 -7.5 -8.0
Operating profit -6.5 -3.9 -1.1 9.6
Finance costs -0.3 -0.9 -1.1 -1.1
Share of results from JV 0.0 -0.1 0.1 0.2
Profit before tax -6.8 -4.3 -2.1 8.7
Income tax expense 0.0 0.0 0.0 -0.1
PATMI from continuing operations -0.3 -7.1 -1.6 9.0

Balance sheet
As at 31 Mar (US$m) FY16 FY17 FY18F FY19F

Cash and cash equivalents 3.6 3.4 4.6 5.5

Property, plant, and equipment 17.8 14.9 17.4 19.6
Other assets 12.1 41.1 41.9 54.3
Total assets 33.5 59.3 63.9 79.4
Financial liabilties 3.3 14.3 21.0 22.0
Current liabilities ex. debt 11.7 18.9 18.8 24.7
Non-current liabilities ex. debt 8.3 1.9 1.9 1.9
Total liabilities 23.3 35.1 41.8 48.7
Shareholders equity 10.0 24.2 22.5 31.5
Total equity and liabilities 33.5 59.3 63.9 79.4

Cash flow statement

Year ended 31 Mar (US$m) FY16 FY17 FY18F FY19F

PBT from cont. and discont. op. -9.6 -7.2 -2.1 8.7
Working capital change -0.7 -8.0 -0.9 -6.5
Operating cash flow -8.6 -11.5 -0.5 4.9
Purchase of PP&E -16.6 -16.9 -5.0 -5.0
Other investing flows 2.9 -1.0 0.0 0.0
Investing cash flow -13.7 -18.0 -5.0 -5.0
Financing cash flow 15.1 23.9 6.7 1.0
Net cash flow -7.2 -5.6 1.2 0.9
Cash at beginning of year 10.4 3.2 3.4 4.6
Cash at end of year (including overdraft) 3.6 3.4 4.6 5.5

Key rates & ratios FY16 FY17 FY18F FY19F

EPS (US cents) -5.3 -2.8 -0.5 3.0

NTA per share (US cents) 6.4 9.5 7.4 10.4
Gross profit margin (%) 15.8 20.7 25.6 36.8
Operating profit margin (%) -87.4 -16.5 -3.7 18.4
Net profit margin (%) -4.3 -30.4 -5.5 17.2
PER (x) nm -11.5 -59.3 10.9
P/B (x) 5.0 3.4 4.3 3.1
ROE (%) -3.2 -29.3 -7.3 28.5
ROA (%) -1.0 -11.9 -2.6 11.3
Net debt/equity (%) -3.3 46.1 73.7 53.2

Sources: Company, OIR forecasts

Company financial highlights

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Singapore Equities

SHAREHOLDING DECLARATION:

The analyst/analysts who wrote this report holds/hold NIL securities in the above-mentioned Company.

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Important disclosures