You are on page 1of 29

1

Target Price 9,326


Downside (%) 22.28
Valuation SOP (RNAV/DCF)
Close (June 13) 12,000
Market Cap 144.45 bn
Sector Real Estate
52 Week High/Low 12,000 / 2,400
Avg. Volume (30 Day) 16,681
Shares Outstanding 12,038,197
No. of Shareholders ~ 6,000
Cash Dividend 100
Last Dividend 01 Dec 2012
FY to Mar 31 2011A 2012A 2013F 2014F
Revenue 1,177 1,745 3,142 4,712
EBITDA 839 1,360 2,293 3,440
Reported proft 827 1,200 2,195 3,293
Core proft 836 1,474 2,195 3,293
Core EPS 113 190 182 235
DPS 100 100 150 200
P/E, core 15.4 52.5 56.3 43.7
EPS growth (%) 3.0 40.0 (4.0) 22.5
ROE (%) 5.8 8.9 8.0 6.7
Div. yield (%) 5.7 1.0 1.3 1.5
EV/EBITDA 47.1 29.1 49.0 32.6mates
Analyst
Jeremy Rathjen
Vice President, Research
+95(0) 1-654731 (ext.262)
jeremy.rathjen@thuraswiss.com
(Myanmar Kyats, except share data)
Price Performance (LTM)
Earnings Fundamentals
(Myanmar Kyats, millions except share data)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Equity
Research
HOLD
KS 12,000
COMPANY OVERVIEW
First Myanmar Investment (FMI)
Research Report
JUNE 13, 2013
FMI: Riding Myanmars Tailwinds
Access to foreign capital, an increasingly diversifed
portfolio and high property prices make FMI a solid
investment looking forward, but its current price is a
reason for caution.
The sweeping changes now occur-
ring in Myanmar have been highly
benefcial for FMI. In 2012 its subsid-
iary Yoma Bank regained its banking
license, allowing it to engage in a
full range of banking activities that
had previously been limited.
The incredible rise in the share price
of Yoma Strategic Holdings, FMIs sis-
ter company listed in Singapore, has
given FMI enviable access to foreign
capital, and its carefully marketed
international reputation has made
it an attractive partner for joint ven-
tures.
FMIs property development busi-
ness, which accounted for 87% of its
revenues in 2012, has been bolstered
by a buoyant real estate market and
high interest in its Star City project
in Thanlyin. Yet even with all of these
positives, FMIs share price refects a
steep valuation. We derive a fair val-
ue of KS 9,326 based on a sum-of-
the-parts (SOP) analysis.
Key Points
Initiate with a Hold rating
based on 22% downside to
fair value at KS 9,326
New joint ventures in retail,
tourism and automobiles
expected to contribute to
upside in coming years
Reemergent player in the
banking sector with strong
potential for a foreign JV
Property demand remains
strong and the Star City
development expected to
contribute signifcantly to
future revenues
Potential price upturn if
bid for telecoms operating
license is successful
2
We value FMIs real estate assets using the RNAV (Revalued Net Asset Value) method, and its
other business segments using a Discounted Cash Flow (DCF) analysis. Our DCF valuation
refects an optimistic 2 year average CAGR of 75%, based largely on Yoma Banks potential.
Our Hold rating is based on a wait-and-see approach to FMIs newly inked joint ventures,
which have the potential to push FMIs earnings up to justifable levels. We also see many
opportunities for FMIs automotive businesses, and the fact that the company owns 100,000
acres of agricultural land at a time when foreign agribusinesses are seriously considering
large projects in Myanmar is also a great advantage.
New ventures offer diversifcation and cash fow
During the past 18 months, FMI has entered into some important joint ventures which will
help it to further diversify its asset base and enter high growth industries in Myanmar. The
success of these JVs will determine FMIs attractiveness moving forward.
Parkson Myanmar International Corporation
FMI has taken a 10% stake in a joint venture with Parkson Retail Asia, an operator of department
stores throughout the region. The big box retail sector in Myanmar is still underdeveloped,
and this venture will help put FMI in a good position for future expansion in the sector. FMI
has recently fnished renovating the lower foors of the FMI Centre building to accommodate
Real Estate
87%
Automobiles
11%
Others
2%
Real Estate
31%
Automobiles
20%
Banking
10%
Services
35%
Agriculture
4%
Income contribution by sector (2012) Asset allocation (2012)
Parkson Retail Asia Net Proft 2010-2014E (SGD millions)
Source: DMG Research
0
10
20
30
40
50
60
70
80
2010 2011 2012 2013 2014
3
Parksons frst store. Because FMIs share of this venture is only 10%, it is not expected to
contribute meaningful revenue in the next two years, but if Parkson is successful in growing
its business in Myanmar, the retail industry may become an important source of income for
FMI in FY2015.
A risk to this venture is that under current plans, the FMI Centre building will be demolished
to make room for the Landmark Development project. After establishing a presence at FMI
Centre, Parkson will be forced to move to another building. The substantial costs incurred
while renovating the current store will have to be written off, potentially affecting the
companys short term proftability. If Parksons frst store at FMI Centre is successful, we see
other locations in Mandalay and Naypyidaw as possibilities.
Chindwin Holdings
FMI and Yoma Strategic jointly set up Chindwin Holdings in early 2013 to serve as a subsidiary
for tourism-related ventures in Myanmar. FMI has a 30% stake in the venture with Yoma
owning the remaining 70%. Chindwin has already made some important acquisitions in
unique tourism-related businesses. The most important, and costly, is a 75% stake (22.5% of
which represents FMIs share) in Shwe Lay Ta Gun for $US 10.7 million. Shwe Lay Ta Gun is
Typical Parkson department stores in Malaysia
Tourist Arrivals in Myanmar (Millions)
0
0.2
0.4
0.6
0.8
1
1.2
2008 2009 2010 2011 2012
4
the operator of Balloons Over Bagan, a popular hot air balloon tour company based in Bagan.
The acquisition price for Shwe Lay Ta Gun represents a forward multiple of ~5 times earnings,
which we view as reasonable considering the steady increase in visitors to Bagan, and the
proprietary nature of the business. The deal contains contingencies to ensure that Balloons
Over Bagan hits minimum sales numbers, but we think this shouldnt be a problem for the
company.
Another of Chindwins acquisitions is a 75% stake in a 21.16 acre property in Bagan for $US
3.76 million. The property is likely to serve as the site of a future luxury hotel. Accommodation
shortages remain a problem in Myanmar, and depending on how quickly the hotel is built,
this project could see high occupancy rates and consistent revenue over the next 10 years.
We expect the fnished hotel to be in line with La Residence dAngkor, or similar hotels in the
region.
YSH Finance
YSH Finance is a new entity created by FMI and Yoma for the purpose of competing in the
upcoming telecoms tender in Myanmar. YSH Finance has entered into an agreement with
global telecoms giant Digicel and George Soros Quantum Fund to bid for one of two telecoms
FMI now owns a 30% stake in Balloons Over Bagan
0
20
40
60
80
100
120
140
160
Mobile Penetration in ASEAN (%)
5
licenses to be offered in June of this year. The consortium passed the pre-qualifcation stage
on April 11
th
, and is now in competition with 10 other frms for a license.
YSH Finances exact stake in this consortium is unknown, but a 20% share is possible. If this is
the case, then FMIs share of the telecoms license would amount to 4%, as it has a 20% stake
in YSH Finance. Although this stake is relatively small, the telecoms market in Myanmar has
the potential for exponential growth. Licenses include a charter to set up mobile networks
and ISPs, and with some of the lowest mobile penetration in the world, the Myanmar market
could prove to be immensely proftable.
If YSH Finances consortium is successful, we would expect FMI to issue new shares, most
likely a rights issue, to help fnance the telecoms infrastructure. A successful bid in the
telecoms tender would also likely result in an upturn in FMIs share price. Management
guides that even if the tender is unsuccessful, YSH will continue to partner with Digicel,
perhaps in telecoms infrastructure or technical assistance projects in Myanmar.
Myanmar Motors Pte. Ltd
Yoma Strategic and FMI established this venture in February 2013 to service Mitsubishi
brand vehicles in Myanmar. FMI has taken a 30% stake, with Yoma Strategic taking the
remaining share. FMI has long been involved in similar ventures through subsidiaries like
SPA Motors. FMIs car businesses, including the assembly of Suzuki vehicles in Myanmar, have
been successful in the past, but this has recently changed due to the relaxation of import
regulations on vehicles.
Due to a large volume of imports, car prices in Myanmar have seen a dramatic drop and
domestic assembly or manufacture of vehicles is no longer cost effective. In response, FMI
has largely switched over to a service-based business. Myanmar Motors continues this trend,
and although it is a relatively new company, it has recently made an acquisition of its own a
100% buyout of German Car Industries Company Limited (GCI), a Yangon-based European car
Registered Vehicles in Myanmar (Millions)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6
servicing business. The acquisition of GCI for $US 700,000 (US$210, 000 of which represents
FMIs stake) seems aimed more at acquiring its management than its assets, as Michael
Rudenmark, the founder of GCI, has recently signed on to run Yoma Strategics automotive
businesses. Although the European car market in Yangon is growing, it is still dwarfed by
Japanese-made vehicles, and were unsure about the future of this venture, even factoring in
an acquisition price that represents a small premium over GCIs total assets.
FMI Air Charter
FMI Air Charter began in September 2012 and offers customers scheduled fights between
Yangon and Naypyidaw with other destinations available on a chartered basis. The company
uses small older planes leased from Myanma Airways, namely an ATR-42 and a Beech
1900-D which can carry 40 and 16 passengers respectively. FMI Air Charter aims to cater
to the upper class and also offers car shuttle services to its passengers. With the increasing
frequency of travel to Naypyidaw by investors, diplomats, and companies, this business does
have potential, but at the moment passengers are few, with most people still choosing to
drive the fve hours to the capital from Yangon. Larger airlines like AirAsia are also looking
to move into domestic fights in Myanmar, so FMI Air Charter will be in for stiff competition
in the coming years. In order to compete in this market, FMI may link its air service with its
tourism businesses, offering package tours that includes airfare and hotel accommodation.
For the time being, we expect this business to have a negligible effect on FMIs revenues.
The Riverside Residential Development Project
The Riverside Residential Development Project is a 12 acre site that sits on the bank of
the Hlaing River in Yangons Hlaing Thayar Township, just beside FMI City. While plans
for the site are still being fnalized, we expect to see a condominium development that
is slightly more upmarket than Star City, containing communal green spaces interspersed
with residential blocks. Because Yoma Strategic, who will partner with FMI on the project,
is fush with cash from recent rights issues and a share placement, we expect funding for
the development to proceed quickly. If the project is approved soon, we could see pre-sales
7
of units within 12 months, with a frst phase being completed in 18 months. As Yangon
continues to expand outward, property prices in Hlaing Thayar are on the rise, which bodes
well for the future of the development. Management guides that FMI will take a 47.5%
stake in the venture, which will likely be completed by FMI Garden Development Co. , the
developer of FMI City. A joint venture with a foreign construction frm is also a distinct
possibility.
Business Sector Overview
FMI is an investment holding company whose revenues are the dividends generated by
its subsidiaries. The annual performance of these subsidiaries determines the amount of
dividends paid out to FMI. Although not a majority stake holder in many of these subsidiaries,
FMI holds a considerable amount of managerial discretion. The managing agent of FMI, Serge
Pun and Associates (SPA) takes an annual fee of 1% on paid up capital, and the managers and
directors of FMI are entitled to a 10% share of the net proft.
Real Estate
Real Estate is FMIs main business. Although FMIs real estate assets only accounted for
31% of total assets in 2012, the real estate sector contributed to 87% of revenue. Because
mortgages are not used for property transactions in Myanmar, FMI generates uneven cash
fows from its real estate businesses, but is able to collect full payment in a relatively short

Agriculture
Myanmar
Agritech-
30%
Myanmar
Agritech Carbon
Capital- 30%
Agribusiness &
Rural
Development
Consultants- 55%
Automotive
SPA Motors-
100%
Convenience
Prosperity
Co., Ltd- 40%
SPA
Motorcycle
Ltd- 100%
Myanmar
Motors- 30%
Seven Golden
Gates- 20%
Successful
Goal Trading-
30%
Yoma Yarzar-
90%
Hino Motors -
12%
Financial
Services
Yoma Bank-
35%
FMI Trading
Center- 100%
YSH FInance-
20%
Services
Pun Hlaing
Hospital -
35%
Shine
Laundry -
35%
SPA Elevators
- 20%
FMI Air
Charter - 50%
Retail
Parkson -
10%
Tourism
Chindwin
Holdings -
30%
Real Estate
FMI
Syndication -
70%
FMI Garden
Development
- 47.5%
Pun Hlaing
Landscaping-
42%
Pun Hlaing
Links - 30%
Thanlyin Estate
Development -
30%
First Myanmar Investment
(FMI)
8
time period, freeing up cash for use in other projects. Three properties contribute the bulk of
FMIs real estate revenue currently: FMI City, Star City, and FMI Centre.
FMI City
FMI holds a 47.5% stake in FMI City, which was developed throughout the 1990s and
covers a total of 465 acres in Hlaing Thayar township, across the Hlaing River from Central
Yangon. It is estimated that about 5,000 people live in FMI city, and only a few plots remain
undeveloped. FMI began by selling a mix of LDRs (Land Development Rights, basically blank
land plots) and fully built houses. Recently it has moved away from selling LDRs, as they are
less proftable, and into building more exclusive properties. Sales of properties in FMI City,
mostly from the Fontana Gardens Project, Lake View Villas, and homes along Cherry Avenue
were up 87% Y-o-Y from 2011, and the dividend paid to FMI from FMI city was over 1 billion
kyats in 2012 representing 58.5% of total revenues.
Revenue generated from FMI City, however, will not continue indefnitely as the development
is virtually complete. FMI may fnd creative ways to bring more plots to the market, but these
plots will contribute a negligible amount to FMIs income. Future profts from the real estate
sector will depend on other properties.
Star City
FMI owns a 30% stake in Star City, a 135 acre development across the Bago River, southeast
of downtown Yangon. Unlike FMI City, which has been around for close to 20 years, Star
City is a new development, having been launched in 2011. Star City will eventually house
9,000 apartments aimed at middle class Myanmar, with apartment prices starting at Ks. 70
million. Cash generated from the sale of apartments in Star City is expected to contribute
signifcantly to future revenues.
Star City offers fnancing to prospective home buyers, a rare occurrence in Myanmar. For
pre-construction sales, buyers put 5% down at signing and then pay incrementally over the
next 16 months, with a fnal payment due at handover. This fnancing plan drives demand for
apartments and ensures that FMI receives cash fows during the capital intensive construction
period, but FMI also incurs additional costs, as it had to issue Ks. 227 million in preference
shares to help fnance Star City home buyers. These preference shares carry annual interest
rates of 14%, and are the only long term liabilities held by the company.
Interest in Star City has been boosted by the Thilawa Port Development which lies about 13km
south of Star City, in an area with few housing options. When the port project is fnished it
could drive demand for accommodation in Star City from managers and expatriates working
at Thilawa.
9
In order to continue construction of the next phase of Star City, Yoma Strategic has entered
into a JV agreement with Dragages, an international property developer, to build 1,043
apartments. FMI will not be involved in the construction costs of these new units, but will
continue to enjoy a 30% stake in the proceeds generated by sales of the apartments to the
public.
FMI Centre
Occupying one of the best locations in Yangon, FMI Centre is an 11 story tower that generates
rental revenues for FMI. FMI Centre houses FMIs headquarters as well FMI Trading Centre
and Pun Hlaing Clinic, a branch of Pun Hlaing Hospital.
Prices for Class A offce space in Yangon have exploded over the past two years due to an
acute shortage of supply, and booming demand from foreign companies, with prices reaching
US$60/sqm for offce space in FMI Centre in 2013. Although developers are quickening the
pace of construction, it will still be many years before supply catches up with demand. These
market conditions have boosted rental income at FMI Centre, although many of the offces
within the tower are occupied by FMI-related companies.
The joint venture with Parkson, which occupies the bottom four foors of the Centre will also
help generate steady cash fows, and we expect FMI Centre to continue to pay dividends to
the company during the next few years.
The Landmark Development
The Landmark Development is one of the most important real estate projects in Yangon.
When fnished, it will encompass 10 acres in the middle of downtown. The project will see
the old Burma Railway Company building transformed into a 5-star boutique hotel and the
current Grand Meeyahta building torn down to make way for an offce/residential complex.
The current Landmark Project site, and an artists impression of its future development.
10
The construction of the project will be carried out through a joint venture between Yoma
Strategic and Meeyahta International Hotel Limited (MIHL), a subsidiary of SPA. FMI will take
a 10% stake in the development and also contribute its building, FMI Centre, which is known
as site 2 in the development. The Yoma/MIHL JV will acquire site 2 and then re-lease it to
FMI Syndication, the owner of FMI Centre. Construction on site 2 will take place only after
the frst phase of the project is complete, which means that FMI Centre will continue to
stand for at least another few years. When redevelopment begins on site 2, FMI Centre will
be demolished to make room for another building.
Automotive
FMIs automotive businesses have consistently performed well in the past, but this segment
has run into some diffculties over the past two years with changing market conditions.
Income from the automotive sector represented 11% of total income in 2012, down from
56% in 2008. Yet FMIs manufacturing experience in this sector may bode well for future
joint ventures with foreign car markers, who are currently looking at Myanmar as a potential
manufacturing base if infrastructure is improved.

SPA Motors
SPA Motors is in the business of servicing Nissan, Suzuki and other Japanese made vehicles in
Myanmar. FMI has a 100% stake in the company. With the relaxation of import restrictions on
vehicle imports, a food of used cars has entered the Myanmar market, most of which come
from Japan. This infux has increased the demand for service operations, and SPA Motors
stands to beneft from its history and experience in the market. The company was able to
declare a Ks. 200 million dividend to FMI in FY2012, and expectations for FY2013 remain
high.
0
50
100
150
200
250
2008 2009 2010 2011 2012
Dividends paid to FMI from SPA Motors (Kyat millions)
11
Successful Goal Trading
FMI has a 30% interest in Successful Goal Trading which is the sole distributor of Dongfeng
trucks in Myanmar. Dongfeng is a huge state-owned Chinese car manufacturer, which
produced over 3 million vehicles in 2012. Successful Goal is a relatively new venture, having
begun operations in 2010, but we see this venture as having a lot of potential due to the
increasing need for light trucks in rural areas. As Myanmar becomes more connected to the
global marketplace, vehicles to transport goods for export will be in demand. We also see
customers looking to replace worn-down trucks with newer models which will also beneft
this business. It remains too early to tell if Successful Goal will generate solid dividends for
FMI, but its outlook is positive.
Convenience Prosperity Company
Convenience Prosperity was set up in 2012 to import and distribute New Holland tractors in
Myanmar. FMI holds a 40% stake in the company. In order to further develop the agricultural
sector, Myanmar needs to make the transition from manual to mechanized labor. With this in
mind, we see a sustained demand for tractors and other farming equipment in the coming
years, as long as commodity prices remain high and farmers make enough income to reinvest
in their farms. We see an initial demand for farm equipment from entrepreneurs who will
then rent the equipment out to farmers who cannot afford the equipment themselves. In
countries throughout the region, governments offer payment plans and subsidies for the
purchase of farm equipment. While the Myanmar governments current budget doesnt allow
for this, it remains a possibility in the future, which would drive sales of New Holland if
Convenience Prosperity can establish a solid brand in the meantime.
Yoma Yarzar Manufacturing
FMI owns 90% of Yoma Yarzar which manufactures and distributes Dayang brand motorcycles
in Myanmar. In previous years, Yoma Yarzar was one of the best companies in FMIs portfolio,
delivering solid dividends. FMI decided to increase its interest in Yoma Yarzar in 2008 from
50% to 90% based on its good performance. This situation changed drastically in 2012, when
taxes on Chinese built motorcycles were reduced, leaving Yoma Yarzar unable to compete
with a food of cheap imports. The company was forced to sell off its inventory of 2,000 units
at a discount, and production was suspended. The once bright future of Yoma Yarzar is now
in jeopardy as the company switches from manufacturing motorcycles to simply importing
them, a business with much smaller margins. We feel it is unlikely that Myanmars government
will revert to its old tax regimen, which means that a liquidation of Yoma Yarzar is possible
in the next two years.
Hino Motors
FMI signed an MoU with Japans Hino Motors in August 2012 to open Hino service stations
in Myanmar. FMI will take a 12% stake in the venture. The frst station will be opened in the
12
FMI/SPA dominated area of Hlaing Thayar. Although the initial agreement will only involve
vehicle servicing, we expect to see FMI involved in the sale of Hino vehicles within the next
few years. FMIs strategy seems to be to capture the higher end of the commercial vehicle
market with this venture, while its Dongfeng venture will service the lower end.
The growth of this venture will depend on demand from three key industries: logistics,
tourism and public transportation. A new wave of investment in Myanmar will mean fresh
demand for commercial trucks to transport agricultural produce, construction materials and
fnished goods. Much of this market will gravitate towards lower cost vehicles, but Hino
would stand to beneft if it can establish a reputation for reliability and quality. Demand
for buses to transport incoming tourists will also remain strong, and the Yangon City
Development Committee (YCDC) has announced plans to upgrade the citys buses from their
current dilapidated condition. If Hino can capture a portion of these markets, were optimistic
about its future.
Agriculture
FMI owns a 30% stake in Myanmar Agri-Tech Ltd. (MAGT) which holds the rights to develop
the Maw Tin estate, a 100,000 acre plantation near Pathein in Ayerwaddy Division. MAGT
acquired the plantation in 2006 and started planting Jatropha curcas, but has since diversifed
into black pepper, with a coffee plantation still in the planning stages. MAGT has employed
agricultural experts to conduct feasibility studies for planting other crops in Maw Tin but the
current area under cultivation remains small.
Despite MAGTs team of agriculture
experts, we see greater potential
in leasing tracks of the Maw Tin
Estate to international agribusiness
frms. The fertility of Myanmars soil
is second to none, but a general
lack of technology and research
leaves it with low productivity
per acre. Seeing this situation,
many agricultural companies have
expressed interest in leasing large
tracts of land in Myanmar to set up
plantation operations. Allowing international companies into Myanmars agriculture sector
remains a politically sensitive issue, but should the government permit such ventures, FMI
would certainly stand to beneft, as the Maw Tin estate is one of the largest contiguous land
tracts in the country not directly under government control.
13
FMI also owns a 30% stake in another interesting agriculture venture, Myanmar Agri-Tech
Carbon Capital (MAGT-CC), a company that implements Clean Development Mechanism
(CDM) projects. Under the Kyoto protocol, a country who wishes to reduce its emissions can
implement an emissions-reduction project in another country through a CDM.
MAGT-CC would start an environmentally friendly project in Myanmar, which would then
be certifed and issued a Certifed Emissions Reductions (CER), which is the equivalent of
reducing carbon dioxide emissions by one ton. These CERs would then be sold to countries
who have promised to reduce emissions under the Kyoto Protocol. Because of international
sanctions, MAGT-CC hasnt been able to implement any CDM projects to date, but now that
sanctions have been generally lifted, this is a business segment to keep an eye on.
Banking
FMI owns a 35.6% interest in Yoma Bank which was established in 1993. Yoma Bank (not
to be confused with Yoma Strategic Holdings) currently has 49 branches throughout the
country, but it has been restricted to domestic money transfer services for the past 9 years.
In FMIs early years, banking was an important source of revenue, but that revenue has fallen
due to the restrictions placed on the company after the Myanmar banking crisis in 2003.
In a critical development, the companys full banking license was reinstated in 2012, allowing
it to accept deposits and issue loans. What Yoma Bank does in the next two years will determine
its future, as competition in the banking sector is set to increase. Many international banks
have opened representative offces in Myanmar and are awaiting a green light from the
Central Bank to begin banking services. This competition poses a threat to Yoma Bank, as it
must ramp up its operations before these international banks enter the market. Currently
foreign banks cannot engage in banking activities and only serve a ceremonial purpose,
but a revised version of the Central Bank Law will likely open up the banking sector to
international banks in stages.
0
500
1000
1500
2000
2500
3000
1994 1995 1996 1997 1998 1999 2000 2001 2002
Yoma Banks capital before the banking crisis 1994-2002 (Kyat Millions)
14
We see Yoma Bank as having two options here: use its connection to capital markets to raise
money for its banking activities, or form a joint venture with a reputable international bank.
The former option would allow Yoma to retain its independence, but could put a burden on
FMIs shareholders, who would likely be asked to purchase rights issues to fund the banks
expansion. The latter option is a reasonable choice, although Yoma Bank runs the risk of
being sidestepped by its partner if legislation allowing 100% foreign owned banks is passed.
We also expect Yoma Bank to be a player in the Yangon Stock Exchange, which is scheduled
to open in October 2015. Because FMIs management team has more experience in capital
markets and securities than most other local frms, we see Yoma Bank as being well positioned
to run a securities company in Myanmar. Along with its retail banking operations, Yoma Banks
securities arm could signifcantly contribute to future revenues if there is enough volume on
the new exchange.
Although the bank hasnt been able to declare large dividends to FMI during the past decade,
we expect it to be a major provider of income over the next three years. Depending on
what happens with Myanmars legal framework, banking could even surpass real estate as
FMIs top earner, with an enormous pent-up demand for mortgages, business loans, payment
processing and other fnancial services driving growth.
Services
Looking at FMIs investments, one would expect to see solid revenues from its services
sector, as it represents 35% of the companys total book assets. Yet none of the businesses
in this sector paid dividends to FMI in FY2012. Indeed, the services sector has been a major
disappointment for FMI over the last 5 years, consistently underperforming.
Pun Hlaing International Hospital
15
Pun Hlaing International Hospital
FMI holds a 35% interest in Pun Hlaing Hospital, which opened in 2005 on the Pun Hlaing
Golf Estate in Hlaing Thayar Township. The hospital was built with the idea that upper-
class Myanmar would visit an international standard hospital inside the country instead
of travelling abroad to Singapore or Thailand to seek treatment. Unfortunately, this thesis
has not panned out the way FMI had hoped. After years of cutting costs and shutting down
unused wings of the hospital, it is now cash positive, but still has yet to turn a proft, 7 years
after its inauguration.
We see the hospital as occupying a diffcult position its too expensive for ordinary
Myanmar citizens who prefer to visit local clinics in their neighborhoods, and its not trusted
by the wealthy class who continue to travel to other countries in the region for medical care.
Realizing the potential of Myanmar medical tourism, international hospitals have stepped up
their marketing campaigns, enticing customers with package deals with similar prices to Pun
Hlaings offerings. As more international airlines move into Myanmar, the cost of travelling
abroad is likely to decrease, creating an even more precarious position for the hospital.
FMIs Advantages
Access to foreign capital
There is no other frm in Myanmar that can rival FMIs access to foreign capital markets.
Because FMI and Singapore-listed Yoma Strategic Holdings are both nominally controlled by
Serge Pun, FMI has benefted directly from the rise in Yomas share price over the past year.
Yoma enters into joint ventures with FMI for virtually all of its projects, and this cooperation
is only expected to increase in coming years.
FMIs access to foreign capital gives it a competitive advantage over other companies in
Myanmar who are still struggling with the remnants of fnancial sanctions. FMI is able to
Yoma Strategics share price over the last year
1.0
0.9
0.8
0.7
0.6
0.5
0.4
Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13
16
raise money for large development projects with far greater ease than other local companies.
Because of the success of the FMI/Yoma model, more Myanmar companies are expected
to list on the SGX in Singapore or other exchanges through reverse takeovers, but this is
a lengthy process that will probably take years to come to fruition. A recent bid by Max
Myanmar to take over SGX-listed Aussino was rejected by Singaporean regulators, proving
the diffculty of the process.
FMIs real estate business will be well served by this access to capital, and it could also prove
crucial if FMI moves into infrastructure projects. The company is already involved in building
a bridge in western Yangon, and with increased capital infows it could possibly move into
larger infrastructure projects such as roads and ports. With the assistance of Yomas capital,
FMI has also shown its entrepreneurial fair, moving aggressively into new business sectors,
a trend that we expect to continue as more capital is raised by both FMI and Yoma.
Competent management
There are no other public companies in Myanmar that can match FMI in terms of the
experience and skill of its management team. FMIs Chairman Serge Pun is highly capable
and serves an important role as a bridge between Myanmar and international capital markets
and companies.
While Mr. Pun is certainly the driving force behind the
company, he has surrounded himself with other competent
managers who have shown their ability to steer FMI through
diffcult times. Starting around 2003, FMI fell out of favor
with the previous government, which stripped Yoma Bank
of its banking license and generally made operating in
Myanmar diffcult for the company. Yet FMIs management
proved it resourcefulness by keeping the company proftable
and adapting to the challenges, mostly by diversifying into
industries with friendlier business climates. As FMI has
continued to grow, it has increasingly attracted international
talent to its management teams. This bodes well for its future, as rising competition in
Myanmar means that frms must look for the most competent managers and staff, regardless
of nationality. We also see FMI moving towards more transparency and better corporate
governance, and in this regard it is very much ahead of the curve in Myanmar.
Solid reputation attracts big players
Multinational companies and large investors looking to enter the Myanmar market have
a problem: they cant fnd many local companies with a reputation for ethical business
practices. FMI has its detractors, but overall it enjoys a solid reputation in Myanmar, which
FMI Chairman Serge Pun
17
has helped it to attract foreign companies looking for partnerships. FMIs Chairman Serge
Pun has shrewdly embarked on a PR and marketing campaign to position himself as Mr.
Clean which has further bolstered FMIs name.

As political and economic reforms have continued to advance, global conglomerates have
dropped their skepticism and started to look for opportunities in Myanmar. This means an
increasing demand for local partners, a demand that leaves FMI in a strong position. After
years of diffculty, FMI can now afford to be selective in its choice of JV partners, negotiating
favorable terms with the companies lining up at its doorstep.
Risks
Political Risks
Talk of political risk in Myanmar has shifted from concerns about President Thein Seins
government to concerns about what will happen after he retires. The President, widely
respected in business circles, has announced that he will not stand for re-election in 2015
because of his age (currently 68). If he doesnt contest the election, many are unsure if his
reforms will last.
There is growing support for an amendment to the constitution which would allow Daw
Aung San Suu Kyi to run for president in 2015. If an amendment is passed, The Lady would
likely be elected, but it is unclear what her policies would be in regards to business. Suu Kyi
was a major champion of the disastrous fnancial sanctions imposed on Myanmar, but has
recently shown a willingness to protect foreign investment even when it is unpopular to do
so.
Suu Kyi chaired a committee that investigated a confrontation at Letpadaung copper mine,
where police had dispersed protesters unhappy with the Chinese-run project. Suu Kyis
committee won compensation for the protesters, but declared that the Chinese frms right
to the project should be respected. If Suu Kyi is unable to run, the feld would be open to
candidates such as Thura U Shwe Mann, a former general and current speaker of the Pyithu
Hluttaw (lower house of Parliament). The result of the 2015 election will determine how
59
(f) shall he himself, one of the parents, the spouse, one of the legitimate
children or their spouses not owe allegiance to a foreign power, not be
subject of a foreign power or citizen of a foreign country. They shall not
be persons entitled to enjoy the rights and privileges of a subject of a
foreign government or citizen of a foreign country;
(Article 59 of Myanmars 2008 Constitution which prohibits the President from hav-
ing a foreign spouse or children, disqualifying Suu Kyi)
18
attractive FMI is as a long term investment. If Thein Sein continues as President, we see a
continuing expansion of the economy and better political institutions. Suu Kyi and other
leaders are largely untested in an executive capacity, and they present more risk to investors.
On top of the political risks surrounding the next election, ethnic conficts in Myanmar also
present a risk for investors. Although FMIs interests primarily lie in and around Yangon,
ethnic conficts on Myanmars borders have the potential to disrupt future business ventures.
For example, tourism-related businesses in Putao, Kachin State were shut down due to the
fghting between the Kachin Independence Army and government troops. Because FMI plans
to expand into tourism, and already has bank branches in far-fung towns, the risk associated
with border conficts should be a considered a distant, but possible risk.
The recent religious fghting between Buddhists and Muslims in Myanmar also serves as an
indirect risk to FMI. Increasing violence in Myanmar could serve to hurt the general air of
optimism in the country, driving investors to other countries in the region. In a worst case
scenario, religious violence could see the military back in power, justifed by the need to quell
the violence. While this is unlikely to happen, and religious violence remains contained to
particular communities, it is a possibility that investors should consider.
Shareholder Dilution
FMI has been issuing new shares at a frantic pace recently, increasing its shares outstanding
by 155% in a single year. In June 2012 the company issued 1,000,000 new shares under a 5-1
rights issue scheme, allowing current shareholders to expand their holdings at a substantial
Estimated No. of Fully Diluted Shares Outstanding
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2009 2010 2011 2012 2013 2014
3 potential candidates for president in 2015 (from L to R) Thura U
Shwe Mann, President U Thein Sein, and Daw Aung San Suu Kyi
19
discount to the prevailing market price (the rights issue shares were offered for Ks. 3,500 per
share). Then in November, FMI issued a further 1,957, 570 bonus shares, followed by an 8-1
rights issue in December which resulted in 1,335,827 shares coming onto the market. Given
that FMI is in the middle of an aggressive acquisition campaign, we expect it to continue to
issue new shares, which presents a very real dilution risk for current shareholders.
Share Liquidity
FMI sells unclaimed rights issues at FMI Trading Centre, but does not repurchase shares,
meaning sell-side transactions can only occur through brokers who arrange meetings where
actual share certifcates are exchanged. If a transaction does occur, FMI charges an additional
1% commission to transfer the shares to the new owner. There is only one broker actively
trading FMIs shares at the moment, and he charges an exorbitant 10% commission on each
share. Thus liquidity is a problem for investors in FMI.
There is much uncertainty about the future of OTC share transactions in Myanmar. A securities
law is expected before the end of 2013, which will contain a regulatory framework for share
transactions, but it is likely that companies of FMIs size will need to list on the Yangon Stock
Exchange when it comes online in 2015. If FMI does list, it would largely negate this liquidity
issue, but in the near term FMI remains unattractive as a short-term play.
Poor Investment Decisions
Despite FMIs record of success in many industries, it also has a history of picking poor
investments. The decision by Myanmar Agri-Tech (MAGT), of which FMI holds a 30% stake,
to plant Jatropha curcas on 1,160 acres in the Maw Tin estate is one such questionable
decision. Once lauded as a revolutionary source of bio-fuel, Jatropha has failed to live up
to expectations and many countries like China, India, and Tanzania have scaled back or
discontinued cultivation. A study by the World Agroforestry Centre for example, found that a
fve year investment in Jatropha plantations in Northern Tanzania resulted in a net loss of US
0
2,000
4,000
6,000
8,000
10,000
12,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Apr May Jun Jul Aug Sep Oct Nov Jan Feb Mar
Volume 35,042 4,330 19,700 11,169 17,039 12,436 30,220 5,576 24,801 6,993 16,190
Minimum Price 2,400 2,800 3,100 3,200 3,300 3,500 4,300 4,500 6,500 5,500 7,000
Maximum Price 2,800 3,600 3,600 3,600 4,000 4,500 4,500 7,000 8,000 8,500 10,000
Price
Volume
FMI Trading Centre Share Price & Volume 2012-2013
20
$65/hectare on low-yielding soil and only a slight proft on fertile soil.
FMIs decision to invest in Jatropha on a large scale was surely infuenced by the former
governments national Jatropha planting campaign which commenced in 2006. MAGT
acquired the rights to the 100,000 acre Maw Tin estate during this period, and it is likely that
an agreement was reached with the government whereby FMI promised to grow the crop.
But the future of the investment remains perilous, as the global market for Jatropha seeds
and oil is still underdeveloped. Because FMI has already invested so many resources into the
Jatropha project, it is likely to continue, despite its bleak prospects.
Other investments have also lost money.
Myanmar Wood Technology Industries,
a loss-making FMI subsidiary involved
in teak wood products was recently
disposed of by the company, which
took a loss of 127 million kyats on the
venture. Pun Hlaing Hospital, too, while
arguably providing an essential public
service, is still not proftable and has
been half closed at times. FMIs 35%
interest in the hospital has cost over 5
billion Kyats.
Tax reforms
Dividends are not subject to taxes in Myanmar, and FMIs only revenues are dividends from
its various investments. Therefore, the only time FMI needs to pay tax is when it sells off an
investment, and is then subject to a 10% capital gains tax. This is a very favorable tax structure
for the company and has allowed to it grow without the use of debt. But there is a prevailing
sentiment in Myanmar that large companies routinely evade taxes. If the Parliament decides
to crack down on companies and impose stricter regulations, FMI would be affected. As the
government is trying to encourage the growth of capital markets in Myanmar, we dont see a
tax on dividends as likely during the next few years, but investors should look to any signal
from the government that it will begin taxing dividends as a bad sign for FMI.
Rows of Jatropha Curcas on the Maw Tin estate
21
Key management personnel
Serge Pun, Chairman
Along with being the Chairman of FMI, Serge Pun is also the Executive Chairman of Yoma
Strategic Holdings, and the Chairman of the SPA group. Mr. Pun was born in Myanmar but
spent many years abroad in Hong Kong as a GP for real estate development. He also has
business experience in Taiwan, Malaysia, Thailand, Singapore, Western Europe, North and
America.
U Kyaw Paing, Managing Director
U Kyaw Paing has been with FMI since its inception and was formerly a lawyer. He also holds
positions as the Managing Director of SPA and Chairman of Yoma Bank. Born in Yangon, U
Kyaw Paing has an in-depth knowledge of Myanmar corporate and fnancial Law. He received
his Bachelor of Arts in Law in 1973 from the University of Yangon and a Bachelor of Law
in 1974. U Kyaw Paing is also a former national golf player who has represented Myanmar
around the region.
Melvyn Pun, CEO of SPA
Prior to joining SPA Myanmar, Melvyn Pun spent 12 years at Goldman Sachs in Hong Kong,
where he was most recently Managing Director, Head of Asia Ex-Japan Corporate Solutions
Group. Melvyn had extensive experience in serving corporations and nonproft organizations
in Asia for fnancial services including fund raising, investments and risk management. Melvyn
holds a First Class Honours degree in Master of Engineering from Cambridge University.
U Tun Tun , CFO
U Tun Tun is an Associate of Chartered Secretaries. He joined SPA/FMI Group in December,
1998. Currently, he is Executive Director of Meeyahta International Hotel Ltd. , Myanmar Agri-
Tech Ltd. , Pun Hlaing Golf Estate, SPA and is the Chief Financial Offcer of FMI.
U Linn Myaing, COO
U Linn Myaing is a retired Director General from the Ministry of Foreign Affairs. Prior to
this assignment he also served as Myanmar Ambassador to the United States, France,
Netherlands, Belgium, Switzerland, EU, UNESCO and Deputy Permanent Representative to
the UN in Geneva. He joined SPA in 2006 as Advisor to the Board and currently heads the
Myanmar Agri-Tech Carbon Capital Ltd. , Group Public Relations and Protocol Department in
addition to his post as Chief Operating Offcer.
22
Financial Valuation and Analysis
FMIs share price has skyrocketed 257% in the LTM on widespread optimism about Myanmars
prospects and FMIs key role in its economic transition. This rise has pushed its share price
to a level that is out of sync with its earnings, but we issue a Hold rating based on the
companys large potential. We derive a 2013 fair value for FMI of 9,326 Kyat based on a sum-
of-the-parts analysis which refects the value of FMIs large land bank in Yangon as well as
the potential of its other business segments.
Investment Thesis
Our investment thesis for FMI has four key tenants:
1. The general growth of the Myanmar economy as investors rush in to capitalize on a
multitude of opportunities
2. The high demand for properties in Star City, FMI City, and new developments partially
driven by the introduction of mortgages and the passage of a Condominium Act in
Parliament.
3. The resumption of Yoma Banks activities
4. FMIs ability to attract key joint venture partners
Sum-Of-The-Parts Valuation
Weve adopted a sum-of-the-parts methodology to value FMI, which allows us to capture
the considerable appreciation of its real estate assets with an RNAV, while also accounting
for other business segments that are expected to contribute substantially to future revenues
using the DCF methodology.
RNAV Valuation of Real Estate Businesses
The Revalued Net Asset Value (RNAV) method takes the net present value of future profts
from real estate developments and adds them to the assets current book value. FMI holds
its real estate assets at cost on its books, which doesnt accurately refect their true value.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
FMI
Yoma
Yomas Share Price Vs. FMIs Share Price (Relative)
23
reasonable given that many large developments run into bureaucratic issues which can slow
them down considerably. Weve used a discount rate of 14% which is deemed suitable for
the Myanmar market, and is also the interest rate that FMI pays on its own preference shares.
We have also included the book value of two new investments, the Landmark Development
and the Riverside Residential Development based on our estimates of surrounding property
values as well as discussions with FMIs management.
DCF Valuation of Other Businesses
Weve valued FMIs automotive, services, banking and other businesses using a discounted
cash fow (DCF) analysis. Our analysis incorporates the fact that some of FMIs subsidiaries
choose to reinvest their profts rather than declaring dividends to the company, which means
that revenue numbers can often be skewed depending on capital needs.
We expect top line earnings in these sectors to expand markedly in FY2013 because Yoma
Bank will likely begin declaring larger dividends based on the resumption of its full banking
activities. We expect to see a top line CAGR of 80% in FY2013 due to these dividends as
well as solid performance from the automotive division. Further upside from Yoma Bank is
expected into FY2015, and we also expect FMIs JVs to show visible earnings in the midterm
starting around the same year.
Our RNAV valuation looks at the future profts of Star City and FMI City based on three
categories: ongoing projects, unsold land, and future projects. FMIs future profts for these
projects are calculated based on average selling prices (ASP), number of unsold units and
projections for future construction which are based on site visits and discussions with
management. Our NPV calculation is based on a 7 year time-schedule which we view as
Development Stake Total Profit FMI's Profits Realized Profit Future Profits NPV of FMI's Profits
FMI City
Current Housing 47.5% 7,752,000,000 3,682,200,000 2,319,786,000 1,362,414,000 834,635,221
Unsold Land Plots 47.5% 4,680,000,000 2,223,000,000 - 2,223,000,000 1,361,843,094
Future Housing 47.5% 2,912,000,000 1,383,200,000 - 1,383,200,000 847,369,036
Star City
Current Housing 30.0% 3,168,000,000 950,400,000 47,520,000 902,880,000 553,117,810
Unsold Land Plots 30.0% 29,023,500,000 8,707,050,000 - 8,707,050,000 5,334,069,236
Future Apartments 30.0% 253,440,000,000 76,032,000,000 - 76,032,000,000 46,578,341,932
Future Housing 30.0% 2,790,000,000 837,000,000 - 837,000,000 512,758,736
Stake FMI's Book Value NPV of Land Assets 56,022,135,065
Property Valued at Cost Book Value of Land Assets 30,831,033,668
Riverside Residential Project (Est) 47.5% 17,860,000,000 Total Land Assets 86,853,168,733
Landmark Development 10.0% 9,400,000,000 DCF derived Equity Value of Other Businesses 25,418,545,658
112,271,714,391
Current Property Assets
FMI Syndication 70.0% 2,749,017,848
FMI Garden Development 47.5% 122,450,000 Shares Outstanding 12,038,197
Thanlyin Estate Development 30.0% 699,565,820
30,831,033,668 Implied Share Price 9,326
RNAV calculation (Myanmar Kyats)
24
WACC has been assigned at 16.9%. Due to a thinly traded OTC-only market, beta calculations
for the Myanmar market are estimates. We have calculated FMIs cost of equity at 16.9%
largely due to a risk free rate assumption of 8.75% which is the current yield for 2-year
Myanmar treasury bonds. With recent changes to monetary policy and a freely foated Kyat, a
risk free rate derived from treasury bonds is deemed appropriate. Although FMI carries a low
amount of debt, its cost of debt is 13.9% due to low tax rates and a 14% interest rate on its
preference shares. The market risk premium is set at 5% with an additional size premium of
3% based on Ibbotson Valuation Yearbook data.
We havent included the value of a telecoms license in our analysis because of the uncertainty
of the bidding process. Should FMIs consortium win the upcoming tender, we would expect
an immediate share price push followed by capital raising activities from both FMI and Yoma
Strategic. The consortium has announced plans to invest US $9 billion if it wins, and we
expect the full network to be functional within 18 months, with larger cities being brought
on frst. Massive up-front spending on infrastructure means that FMI wont see earnings from
its 20% stake in YSH Finance in the near term, but could see revenues in FY2016 depending
on the consortiums ability to gain market share as well as increased purchasing power from
Myanmar consumers.
Dividend yields remain low. FMIs history of paying 10-12.5% dividends on par value has
become an issue because of its rising share price. At the current 12,000 level, FY2012
dividend yields are under 1%. These dividends pale in comparison to other public companies
in Myanmar which currently pay 15-30% dividends. With more rights issues expected in the
future, dividend levels are not expected to increase substantially our FY2014 estimated
DPS is 200, which is double FY2012s dividend, but still just 2% of the current share price.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2009 2010 2011 2012 2013 2014 2015
Net Proft 2009-2015E (Kyat Millions)
25
DCF calculation for non-real estate businesses (Myanmar Kyats)
F
i
r
s
t

M
y
a
n
m
a
r

I
n
v
e
s
t
m
e
n
t

C
o
,

L
t
d
.
D
i
s
c
o
u
n
t
e
d

C
a
s
h

F
l
o
w

A
n
a
l
y
s
i
s
(
M
y
a
n
m
a
r

K
y
a
t
s
,
f
i
s
c
a
l

y
e
a
r

e
n
d
i
n
g

M
a
r
c
h

3
1
)
Operating Scenario
Base
O
p
e
r
a
t
i
n
g
S
c
e
n
a
r
i
o

1
M
i
d
-
Y
e
a
r
C
o
n
v
e
n
t
i
o
n
Y
H
i
s
t
o
r
i
c
a
l
P
e
r
i
o
d
C
A
G
R
C
A
G
R
2
0
0
9
2
0
1
0
2
0
1
1
(
'0
9
-
'1
1
)
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
(
'1
3
-
'1
7
)
D
i
v
i
d
e
n
d
I
n
c
o
m
e
$
1
,1
1
2
,4
4
0
,1
5
4
.0

4
4
5
,7
7
3
,8
8
8
.8

$
4
7
0
,9
6
5
,6
8
9
.2

-
3
4
.9
%
$
6
9
8
,1
2
9
,0
0
0
.0

$
1
,2
5
6
,6
3
2
,2
0
0
.0

$
2
,1
3
6
,2
7
4
,7
4
0
.0

$
3
,4
1
8
,0
3
9
,5
8
4
.0

$
4
,7
8
5
,2
5
5
,4
1
7
.6

$
6
,2
2
0
,8
3
2
,0
4
2
.9

5
4
.9
%



%

g
r
o
w
t
h
N
A
(
5
9
.9
%
)



































5
.7
%




































4
8
.2
%



































8
0
.0
%





































7
0
.0
%




































6
0
.0
%





































4
0
.0
%

































3
0
.0
%



































C
O
G
S

1
5
5
,4
5
0
,3
0
7
.0




































1
6
4
,0
1
9
,5
0
4
.0






















1
6
4
,9
7
7
,9
6
3
.0





















2
0
9
,4
0
2
,5
0
7
.0























1
8
8
,4
9
4
,8
3
0
.0

























3
2
0
,4
4
1
,2
1
1
.0
























5
1
2
,7
0
5
,9
3
7
.6

























7
1
7
,7
8
8
,3
1
2
.6




















9
3
3
,1
2
4
,8
0
6
.4























G
r
o
s
s
P
r
o
f
i
t
$
9
5
6
,9
8
9
,8
4
7
.0

2
8
1
7
5
4
3
8
4
.8
$
1
,0
1
2
,4
3
6
,2
6
0
.0

2
.9
%
$
4
8
8
,7
2
6
,4
9
3
.0

$
1
,0
6
8
,1
3
7
,3
7
0
.0

$
1
,8
1
5
,8
3
3
,5
2
9
.0

$
2
,9
0
5
,3
3
3
,6
4
6
.4

$
4
,0
6
7
,4
6
7
,1
0
5
.0

$
5
,2
8
7
,7
0
7
,2
3
6
.4

6
1
.0
%



%

m
a
r
g
i
n
8
6
.0
%
















































6
3
.2
%



































2
1
5
.0
%
































7
0
.0
%



































8
5
.0
%





































8
5
.0
%




































8
5
.0
%





































8
5
.0
%

































8
5
.0
%



































S
G
&
A
1
4
7
,9
6
5
,4
5
7
.0




































1
3
7
,3
1
5
,6
5
0
.0






















1
7
3
,8
4
6
,0
7
1
.0





















1
7
6
,2
2
9
,3
5
4
.0























1
5
0
,7
9
5
,8
6
4
.0

























2
5
6
,3
5
2
,9
6
8
.8
























4
1
0
,1
6
4
,7
5
0
.1

























5
7
4
,2
3
0
,6
5
0
.1




















7
4
6
,4
9
9
,8
4
5
.1























E
B
I
T
D
A
$
8
0
9
,0
2
4
,3
9
0
.0

$
1
4
4
,4
3
8
,7
3
4
.8

$
8
3
8
,5
9
0
,1
8
9
.0

1
.8
%
$
3
1
2
,4
9
7
,1
3
9
.0

$
9
1
7
,3
4
1
,5
0
6
.0

$
1
,5
5
9
,4
8
0
,5
6
0
.2

$
2
,4
9
5
,1
6
8
,8
9
6
.3

$
3
,4
9
3
,2
3
6
,4
5
4
.8

$
4
,5
4
1
,2
0
7
,3
9
1
.3

7
0
.8
%



%

m
a
r
g
i
n
7
2
.7
%
















































3
2
.4
%



































1
7
8
.1
%
































4
4
.8
%



































7
3
.0
%





































7
3
.0
%




































7
3
.0
%





































7
3
.0
%

































7
3
.0
%



































D
e
p
r
e
c
i
a
t
i
o
n

&

A
m
o
r
t
i
z
a
t
i
o
n
1
,5
5
1
,4
7
4
.0








































1
,5
5
1
,4
7
4
.0


























2
,4
1
5
,5
6
5
.0

























4
,0
3
0
,9
6
3
.0



























2
,5
1
3
,2
6
4
.4





























4
,2
7
2
,5
4
9
.5




























6
,8
3
6
,0
7
9
.2





























9
,5
7
0
,5
1
0
.8
























1
2
,4
4
1
,6
6
4
.1

























E
B
I
T
$
8
0
7
,4
7
2
,9
1
6
.0

$
1
4
2
,8
8
7
,2
6
0
.8

$
8
3
6
,1
7
4
,6
2
4
.0

1
.8
%
3
0
8
,4
6
6
,1
7
6
.0

$
9
1
4
,8
2
8
,2
4
1
.6

$
1
,5
5
5
,2
0
8
,0
1
0
.7

$
2
,4
8
8
,3
3
2
,8
1
7
.2

$
3
,4
8
3
,6
6
5
,9
4
4
.0

$
4
,5
2
8
,7
6
5
,7
2
7
.2

7
1
.1
%



%

m
a
r
g
i
n
7
2
.6
%
















































3
2
.1
%



































1
7
7
.5
%
































4
4
.2
%



































7
2
.8
%





































7
2
.8
%




































7
2
.8
%





































7
2
.8
%

































7
2
.8
%



































T
a
x
e
s
3
6
,6
1
3
,3
4
7
.0






































5
2
,7
8
2
,7
8
9
.0
























-








































-










































3
6
,5
9
3
,1
2
9
.7



























6
2
,2
0
8
,3
2
0
.4


























9
9
,5
3
3
,3
1
2
.7



























1
3
9
,3
4
6
,6
3
7
.8




















1
8
1
,1
5
0
,6
2
9
.1























N
O
P
A
T
$
7
7
0
,8
5
9
,5
6
9
.0

$
9
0
,1
0
4
,4
7
1
.8

$
8
3
6
,1
7
4
,6
2
4
.0

4
.2
%
$
3
0
8
,4
6
6
,1
7
6
.0

$
8
7
8
,2
3
5
,1
1
1
.9

$
1
,4
9
2
,9
9
9
,6
9
0
.3

$
2
,3
8
8
,7
9
9
,5
0
4
.5

$
3
,3
4
4
,3
1
9
,3
0
6
.3

$
4
,3
4
7
,6
1
5
,0
9
8
.1

6
9
.7
%
P
l
u
s
:
D
e
p
r
e
c
i
a
t
i
o
n

&

A
m
o
r
t
i
z
a
t
i
o
n
1
,5
5
1
,4
7
4
.0








































1
,5
5
1
,4
7
4
.0


























2
,4
1
5
,5
6
5
.0

























4
,0
3
0
,9
6
3
.0



























2
,5
1
3
,2
6
4
.4





























4
,2
7
2
,5
4
9
.5




























6
,8
3
6
,0
7
9
.2





























9
,5
7
0
,5
1
0
.8
























1
2
,4
4
1
,6
6
4
.1

























L
e
s
s
:
C
a
p
i
t
a
l

E
x
p
e
n
d
i
t
u
r
e
s
3
9
7
,9
6
2
.0










































5
,1
2
4
,9
9
8
.0


























4
,3
1
7
,0
8
1
.0

























4
1
,8
3
9
,9
9
2
.0

























2
5
,1
3
2
,6
4
4
.0



























4
2
,7
2
5
,4
9
4
.8


























6
8
,3
6
0
,7
9
1
.7



























9
5
,7
0
5
,1
0
8
.4






















1
2
4
,4
1
6
,6
4
0
.9























L
e
s
s
:
I
n
c
r
e
a
s
e

i
n

N
e
t

W
o
r
k
i
n
g

C
a
p
i
t
a
l
5
9
0
,4
0
3
,8
4
4
.6

























7
,2
2
9
,9
3
8
.7




























1
0
,5
3
5
,0
5
3
.5



























1
1
,2
3
7
,3
9
0
.4






















1
1
,7
9
9
,2
5
9
.9

























U
n
l
e
v
e
r
e
d
F
r
e
e
C
a
s
h
F
l
o
w
$
1
,4
9
6
,2
8
4
,8
6
4
.9

$
1
,5
4
7
,2
2
7
,6
7
3
.3

$
2
,4
7
4
,5
3
1
,4
2
8
.8

$
3
,4
6
0
,8
3
2
,3
1
5
.9

$
4
,4
9
6
,2
7
2
,6
6
3
.0




W
A
C
C

















































1
6
.9
%



D
i
s
c
o
u
n
t

P
e
r
i
o
d
0
.5










































1
.5









































2
.5










































3
.5






































4
.5











































D
i
s
c
o
u
n
t

F
a
c
t
o
r
0
.9
2








































0
.7
9







































0
.6
8








































0
.5
8




































0
.5
0






































P
r
e
s
e
n
t
V
a
l
u
e
o
f
F
r
e
e
C
a
s
h
F
l
o
w
$
1
,3
8
3
,8
9
7
,4
4
2
.7

$
1
,2
2
4
,1
1
7
,4
6
9
.3

$
1
,6
7
4
,7
1
5
,7
0
4
.6

$
2
,0
0
3
,5
8
5
,7
0
1
.6

$
2
,2
2
6
,6
8
7
,4
1
0
.7

E
n
t
e
r
p
r
i
s
e
V
a
l
u
e
I
m
p
l
i
e
d
P
e
r
p
e
t
u
i
t
y
G
r
o
w
t
h
R
a
t
e
C
u
m
u
l
a
t
i
v
e
P
r
e
s
e
n
t
V
a
l
u
e
o
f
F
C
F
$
8
,5
1
3
,0
0
3
,7
2
8
.9

E
n
t
e
r
p
r
i
s
e

V
a
l
u
e
$
2
5
,1
5
3
,1
6
6
,1
3
5
.8


















T
e
r
m
i
n
a
l

Y
e
a
r

F
r
e
e

C
a
s
h

F
l
o
w

(
2
0
1
7
E
)
$
4
,4
9
6
,2
7
2
,6
6
3
.0

























L
e
s
s
:
T
o
t
a
l

D
e
b
t
3
1
,8
6
8
,1
1
6
.0



























W
A
C
C
1
6
.9
%











































L
e
s
s
:
P
r
e
f
e
r
r
e
d

S
e
c
u
r
i
t
i
e
s
2
2
7
,0
0
0
,0
0
0
.0

























T
e
r
m
i
n
a
l

V
a
l
u
e
$
3
6
,3
2
9
,6
5
9
,1
3
0
.4























T
e
r
m
i
n
a
l

Y
e
a
r

E
B
I
T
D
A

(
2
0
1
7
E
)
$
4
,5
4
1
,2
0
7
,3
9
1
.3































L
e
s
s
:
N
o
n
c
o
n
t
r
o
l
l
i
n
g

I
n
t
e
r
e
s
t
-











































E
x
i
t

M
u
l
t
i
p
l
e




















































8
.0
x
P
l
u
s
:
C
a
s
h

a
n
d

C
a
s
h

E
q
u
i
v
a
l
e
n
t
s
6
,5
1
1
,4
0
6
.0





























I
m
p
l
i
e
d
P
e
r
p
e
t
u
i
t
y
G
r
o
w
t
h
R
a
t
e
3
.1
%
T
e
r
m
i
n
a
l
V
a
l
u
e
$
3
6
,3
2
9
,6
5
9
,1
3
0
.4


D
i
s
c
o
u
n
t

F
a
c
t
o
r
0
.4
6



















































I
m
p
l
i
e
d
E
q
u
i
t
y
V
a
l
u
e
$
2
5
,4
1
8
,5
4
5
,6
5
7
.8

I
m
p
l
i
e
d
E
V
/
E
B
I
T
D
A
P
r
e
s
e
n
t
V
a
l
u
e
o
f
T
e
r
m
i
n
a
l
V
a
l
u
e
$
1
6
,6
4
0
,1
6
2
,4
0
6
.9

E
n
t
e
r
p
r
i
s
e

V
a
l
u
e
$
2
5
,1
5
3
,1
6
6
,1
3
5
.8


























%

o
f

E
n
t
e
r
p
r
i
s
e

V
a
l
u
e
6
6
.2
%



















































S
h
a
r
e
s

O
u
t
s
t
a
n
d
i
n
g
1
2
,0
3
8
,1
9
7
.0



























L
T
M

3
/
3
1
/
2
0
1
2

E
B
I
T
D
A
1
,3
5
9
,6
9
0
,6
3
9
.0



























E
n
t
e
r
p
r
i
s
e
V
a
l
u
e
$
2
5
,1
5
3
,1
6
6
,1
3
5
.8

I
m
p
l
i
e
d
S
h
a
r
e
P
r
i
c
e
$
2
,1
1
1
.4
9

I
m
p
l
i
e
d
E
V
/
E
B
I
T
D
A
1
8
.5
x
P
r
o
j
e
c
t
i
o
n
P
e
r
i
o
d
I
m
p
l
i
e
d
E
q
u
i
t
y
V
a
l
u
e
a
n
d
S
h
a
r
e
P
r
i
c
e
T
e
r
m
i
n
a
l
V
a
l
u
e
26
Income Statements
Myanmar Kyats, millions
Actual Estimated Projected
Fiscal 2011 2012 2013 2014 2015
Revenue
Dividend Income 1,005.3 1,711.3 3,080.3 4,620.4 6,468.6
Net Income from Sale of Investments 161.1 0.0 0.0 0.0 0.0
Interest Income 11.0 34.1 36.0 38.1 40.1
Total Revenue 1,177.4 1,745.3 3,116.3 4,658.5 6,508.7
COGS (165.0) (209.4) (471.2) (706.9) (989.6)
Gross Profit 1,012.4 1,535.9 2,645.1 3,951.6 5,519.1
Operating, SG&A Expenses (185.8) (208.1) (377.0) (565.5) (791.7)
Pre-tax Income 826.7 1,327.8 2,268.1 3,386.1 4,727.4
Gain/(Loss) on Asset Disposal (0.1) 0.0 (90.7) 0 (192.1)
Loss on Sales of Investments 0.0 (127.4) 0.0 (137.2) 0.0
Net Income 826.6 1,200.4 2,177.3 3,248.9 4,535.3
Diluted Shares Outstanding (Millions) 7.4 7.7 10.3 12.0 12.0
Diluted Earnings per Share 112 155 212 271 378
EBITDA 829.1 1,331.8 2,274.3 3,395.6 4,740.6
27
Balance Sheets
Myanmar Kyats, millions
Actual Estimated Projected
Fiscal 2011 2012 2013 2014 2015
ASSETS
Current Assets
Cash & Equivalents 1.9 6.5 788.3 625.8 776.7
Receivables 227.0 827.6 853.8 1,276.3 1,783.2
Prepaid Expenses and Other 0.8 4.8 8.6 12.8 17.9
Total Current Assets 229.7 838.9 1,650.7 1,914.9 2,577.7
Net PPE 8.6 47.5 41.2 31.8 18.6
Investments 16,596.8 16,258.8 18,697.7 27,950.9 39,052.1
TOTAL ASSETS 16,835.2 17,145.2 20,389.6 29,897.6 41,648.4
LIABILITIES
Current Liabilities
Unclaimed Dividends 84.7 96.8 130.8 156.0 96.0
Dividend Provision 995.8 0.0 1,544.1 2,400.0 2,400.0
Interest Payable 11.9 12.5 13.0 13.6 14.2
Accounts Payable 922.2 101.9 207.0 310.5 434.6
Accrued Expenses 36.9 47.7 85.3 127.4 178.1
Provision for Tax 17.9 0.0 10.0 10.0 10.0
Total Current Liabilities 2,069.4 258.9 1,990.1 3,017.5 3,132.9
Long-Term Debt 227.0 227.0 227.0 227.0 227.0
TOTAL LIABILITIES 2,296.4 485.9 2,217.1 3,244.5 3,359.9
EQUITY
Paid Up Captial 7,376.0 7,744.8 10,466.2 12,489.7 12,489.7
Share Premium 7,136.9 7,690.1 5,848.6 11,456.7 20,956.9
Retained Earnings 25.8 1,224.5 1,857.7 2,706.7 4,841.9
TOTAL EQUITY 14,538.7 16,659.4 18,172.5 26,653.0 38,288.5
TOTAL LIABILITIES & EQUITY 16,835.2 17,145.2 20,389.6 29,897.6 41,648.4
28
Cash Flow Statements
Myanmar Kyats, millions
Estimated Projected
Fiscal 2011 2012 2013 2014 2015
Cash From Operating Activities:
Net Income 844.5 1,200.4 2,177.3 3,248.9 4,535.3
Depreciation & Amortization 2.4 4.0 6.3 9.4 13.2
Loss /(Gain) on Asset Disposal 0.1 (0.0) 90.7 0.0 192.1
Interest Income (11.0) (34.1) (0.3) (34.1) (34.1)
Loss/(Gain) on sale of investments (179.0) 127.4 0.0 150.0 0.0
Dividend Income (1,005.3) (1,711.3) (2,591.8) (3,867.4) (5,398.6)
Operating Profit Before Working Capital Changes (348.3) (413.5) (317.8) (493.1) (692.1)
Changes in Working Capital:
(Increase)/Decrease in Receivables (123.8) (0.6) (26.1) (422.5) (506.9)
(Increase)/Decrease in Prepaid Expenses and Other 31.9 (4.0) (3.8) (4.2) (5.1)
Increase/(Decrease) in Accrued Expenses 16.8 11.4 (37.5) (42.2) (50.6)
Increase/(Decrease) in Accounts Payable 919.8 (820.3) (105.1) (103.5) (124.2)
Total Change in Working Capital 844.8 (813.5) (172.5) (572.4) (686.8)
Total Cash From Operating Activities 496.4 (1,227.0) (490.3) (1,065.5) (1,378.8)
Income Taxes (42.3) (19.7) (20.0) (25.0) (20.0)
Net Operating Cash 454.1 (1,246.7) (510.3) (1,090.5) (1,398.8)
Cash From Investing Activities:
Net Investments (1,736.2) 210.7 (2,438.9) (9,253.2) (11,101.2)
Change in PPE (5.3) 43.2 (6.3) (9.4) (13.2)
Interest Recieved 11.0 34.1 40.1 42.0 44.1
Dividends Recieved 1,974.0 1,111.3 2,500.0 10,500.0 15,000.0
Total Cash From Investing Activities 243.6 1,313.0 94.8 1,279.4 3,929.7
Net D in PPE
Cash From Financing Activities:
Issuance of Stock 227.0 922.0 2,721.4 2,023.6 0.0
Dividends Paid (925.4) (983.7) (1,544.1) (2,400.0) (2,400.0)
Total Cash From Financing Activities (698.4) (61.7) 1,177.3 (376.4) (2,400.0)
Cash Available / (Required) Before Debt 41.7 24.2 781.8 (162.5) 150.9
Debt Borrowing / (Repayment) (11.9) (31.8) (31.8) (31.8) (31.8)
Beginning Cash Balance 2.6 1.9 6.5 788.3 625.8
Change in Cash (0.7) 4.5 781.8 (162.5) 150.9
Ending Cash Balance 1.9 6.4 788.3 625.8 776.7
Average Cash Balance 2.2 4.1 397.4 707.1 701.2
Actual
Myanmar Research | Consulting | Capital Markets
307 Shwe Hinthar Tower B
6 1/2 Miles, Pyay Rd.
Yangon, Myanmar
+95 (0) 1654731
info@thuraswiss.com
www.thuraswiss.com
General Disclaimer
The analysts involved in writing this report do not hold any interest in First Myanmar Investment (FMI) Co. , Ltd. This report is prepared by Thura Swiss Company Limited. This
report, including information, data, statements, forecasts, analysis and projections contained herein, including any expression of opinion, is based on publicly available information
or information obtained from sources believed to be reliable, but Thura Swiss does not make any representation or warranty on, assumes no responsibilities for, nor guarantees
the accuracy, completeness, correctness or timeliness of such information. Thura Swiss accepts no obligation to correct or update the information or opinions stated herein. The
statements or expressions of opinion herein were arrived at after due and careful consideration and they were based upon such information or sources then, and in our opinion are fair
and reasonable in the circumstances prevailing at the time. The information or expressions of opinion contained herein are subject to change without notice.
Nothing in this report shall be construed as an offer or a solicitation of an offer to buy or sell any securities or products, or to engage in or refrain from engaging in any transaction. In
preparing this report, Thura Swiss did not take into account your specifc investment objectives, fnancial situation or particular needs. This report is for your information only and is
not to be taken in substitution for the exercise of your judgment. Thura Swiss salespeople, traders and other professionals may provide oral or written market commentary or trading
strategies to our clients that refect opinions which are contrary to the opinions expressed in this report. Before making an investment decision on the basis of this report, you should
obtain independent fnancial, legal or other advice and consider the appropriateness of investment in light of your particular investment needs, objectives and fnancial circumstances.
There are risks involved in making an investment in securities.
Thura Swiss accepts no liability whatsoever for any direct, indirect, consequential or other loss (including claim for loss of proft) arising from any use of or reliance upon this report
and/or further communication given in relation to this report. Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments herein constitute a judgment as of
the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, projections, ratings or risk
assessments. Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described in this report were based upon a number of estimates and assumptions
and are inherently subject to signifcant uncertainties or contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts,
projections, ratings or risk assessments were based will not materialize or will vary signifcantly from actual results.
Therefore, the inclusion of the valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described herein is not to be relied upon as a representation and/
or warranty by Thura Swiss (i) that such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments or their underlying assumptions will be achieved, or (ii) that
there is an assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments stated therein.
Thura Swiss along with its affliates and/or persons associated with it may from time to time have interests in the securities mentioned in this report. Thura Swiss and its associates,
their directors and/or employees may have positions in, and may affect transactions in securities mentioned herein and may also perform or seek to perform brokering, investment
banking, advisory and other securities services for companies mentioned in this report.