The Beginnings of Capital

Markets in Myanmar
Thilawa Special Economic Zone IPO
Oliver Belfitt-Nash, Chief Myanmar Representative, Ronoc

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You can hear Oliver Belfitt-Nash talk about international investors appetite for Myanmar-related
investments at Myanmar Projects & Investment Summit on 14-15 May in Hong Kong.

INTRODUCTION
Many investors have viewed Myanmar as the next high-growth emerging market since the country began
a series of reforms in 2011, but gaining liquid exposure to the country is currently not an easy endeavour.
Singapore-listed Yoma Strategic Holdings (SGX:Z59) is considered the only pure publicly traded Myanmar
play, and as such rose to sky-high P/Es of over 150 in 2012.
The domestic public market is almost non-existent, although a few companies trade OTC for Myanmar
nationals at very low volumes. To offer a new channel for raising funds, the government aims to launch a
stock exchange in 2015 with Daiwa Institute of Research and the Japanese Stock Exchange Group.
The development of a capital market in Myanmar has become one of the key topics for the new
government in proving its reformation resolve to potential voters. Citizens remain sceptical of effective
change given the historical allegations of corruption and crony businessmen benefitting over the past
decades.
In a bid to directly include voters in the new development drive, one of the countrys Special Economic
Zones, Thilawa, will issue shares to the public this year. Demand is expected to be high and the company
is quickly becoming the most widely known publicly traded company. Its future will shed light on the future
of government/voter interaction, as well as the future of Myanmars capital markets.

THILAWA PROSPECTUS
A Prospectus for the Myanmar Thilawa Special Economic Zone Holdings Company Public Limited (MTSH) is
available online here, and from 5 banks currently delegated to distribute the shares Yoma Bank,
Ayeyardwaddy, CB Bank, Apex Bank, and KBZ.
The document gives further details on the issuance of 2.145Mn shares at MMK10,000 each to raise
approximately USD 21Mn from the Myanmar public, in one of the biggest and most widely marketed
issuances in the countrys history. Given the low price per share (approximately USD 10) and the
governments push to prioritise placement to a greater number of smaller shareholders, many citizens are
expected to participate in the sale.
The wide shareholder base will create a visible platform for the Myanmar Government to prove its
reformation drive, and directly connects the government to its voters through an ambitious Public Private
Partnership. Potentially thousands of voters, 9 major Myanmar private groups, a high profile Japanese
consortium and the Myanmar government will cooperate together in bringing the countrys most
promising Special Economic Zone to fruition.

STRUCTURE & OPERATIONS

The structure is outlined below.

New investors are invited to buy shares in the MTSH company labelled Our Company above, which will
generate revenues:

From its 6% fee in marketing and selling properties within the central Class A zone to Myanmar
parties.
From its 3% fee in marketing and selling Class A Properties to non-Japanese, non-Myanmar parties.
From dividends received through its eventual 41% stake in the JV Company. The JV Company will
primarily generate revenues:
o By leasing its 400 hectares of land within the central Class A zone of the Thilawa SEZ to
other investors and operators.
o By building and then leasing ready-made factories to investors.

SHAREHOLDERS
There are 9 Promoter companies that are the current shareholders of MTSH, due to top up their
shareholdings through the upcoming issuance. These companies will most likely remain the largest
shareholders of the MTSH entity, able to sway decisions over minority shareholders votes. Furthermore
they will represent the company with directors on its board. These companies are:

Golden Land East Asia Development Ltd represented by U Win Aung, also Chairman of Dagon
Group and Chairman of the Myanmar Chamber of Commerce (UMFCCI).
First Myanmar Investment Company Limited represented by Serge Pun of Serge Pun Associates
(SPA), whose group also has a listed entity in Singapore, Yoma Strategic Holdings. FMI raised capital
themselves to participate in this consortium.
Myanmar Agribusiness Public Corporation (MAPCO) represented by U Aung Than Oo.
Myanmar Agricultural & General Development Public Limited represented by U Tun Lwin,
Executive Director of Myanmar Citizens Bank and treasurer of the UMFCCI.

Myanmar Edible Oil Industrial Public Corporation Limited (MEICO) represented by Ko Han
Thein, Director of Shwe Taung Group and Vice-Chairman of the UMFCCI.
Myanmar sugar Development Public Company Limited represented by U Nyi Khin who operates
the Shwe Pyi Aung sugar factory group.
Myanmar Technologies and Investment Corporation Limited represented by U Aung Soe Tha,
Chairman of the ComBiz group and executive committee member of the UMFCCI.
National Development Company Group Limited represented by U Zay Thiha
New City Development Public Company Limited U Khin Maung Aye, Chairman of the Kaung
Myanmar Aung group and CB Bank.

LAND
MTSH will have direct exposure to 41% of the JV Company that holds 400 hectares of land, accounting for
164 hectares of land assets. Given the 3,900,000 shares of MTSH that will be in issue after the offering, this
equates to 0.42 square metres of land asset exposure per share.
The prospectus gives rough estimations on revenues from the JV company over the first 5 years of total
land sales of USD 232.57Mn for 319 hectares, or USD 72.9 per square metre.
Given a single share is exposing a buyer to 0.42 square metres of land worth USD 72.9 per square metre, a
single share bought for MMK 10,000 (USD 10) gives exposure to USD 30.65 worth of land according to
projections made in the prospectus, and as such demand is expected to be high.

RISKS
But the prospectus is clear to state that projections for the JV Company are extremely rough and given only
as a guideline. Valuation of the land assets and cashflows generated through other revenues may drastically
alter any predictions made.
Furthermore, MTSHs success will rely on the fair pricing of the JV Companys land when selling to related
parties, and basing all land sales on a competitive market price. With such an interwoven shareholder
structure there is a major risk of sales and leasing to related companies that may benefit from a sub-market
price.
A full list of other risks is given in the prospectus that will and should make any potential investor think
twice before considering investing capital in the project. These include the fact that there is no guarantee
of dividend payments, no operating history, huge reliance on the management who are potentially related
parties, and a host of other concerns spanning Myanmar as a nation and risks unique to the project itself.

FUTURE
However, the scale of operation and reputation of existing shareholders makes the Thilawa project an
exciting development for the country and prospective buyers. The Thilawa SEZ Management Committee is
headed by Winston Set Aung, Vice Governor of the Central Bank who lead the successful Telecoms Tender
process last year and widely respected as a rising star in the new Myanmar political governance structure.
The project is far more than its financial returns and economic prospects. It has taken on a political weight
that could give it serious momentum or weigh down its progress, and the country must focus on preventing
the latter.
Come April 9th, days before the National new years water festival, new citizen shareholders will be buying
into the promises of reform and development as much as dividend returns, looking to the countrys top
business and political names to show a new way forward. Expectations are high.