Singapore | Industrials Sector Asia Pacific Equity Research

SINGAPORE MYANMAR INVESTCO | BUY

31 May 2017
MARKET CAP: USD 92M AVG DAILY TURNOVER: USD 0.6M Company Update

GROWTH IN PROGRESS BUY (maintain)

 FY17 revenue up 212% Fair value S$0.97
add: 12m dividend forecast S$0.00
 Profitable retail business
versus: Current price S$0.53
 View remains intact 12m total return forecast 85%

Retail business shows profitability Analysts

Singapore Myanmar Investco (SMI) reported its FY17 results yesterday Jodie Foo (Lead) ● +65 6531 9809
evening, which came in largely within expectations. FY17 revenue grew jodiefoo@ocbc.com
211.8% to US$23.3m, due to the commencement of Duty Free, luxury Eugene Chua ● +65 6531 9678
and lifestyle retail businesses in the Yangon International Airport eugene.chua@ocbc.com
(YIA)’s new terminal since Sep-16. The group had also opened two
Coffee Bean and Tea Leaf (CBTL) outlets in the YIA new terminal and Key information
one CBTL in the domestic terminal. In addition, there was an expansion Market cap. (m) S$127 /
of the Europcar car fleet as well as higher sales of Construction USD92
Services products. As a result of healthy retail margins, gross profit Avg daily turnover (m) S$0.8 /
margins also improved to 20.7% vs. 15.8% last year. Given the early USD0.6
stage of growth, the group recorded a net loss of US$4.3m from Avg daily vol. (m) 7.1
continuing operations, vs. a net loss of US$6.8m last year. Notably, the 52-wk range (S$) 0.35 - 0.68
Retail business was profitable, but the overall loss was attributable to Free float (%) 38.4
losses in the Food & Beverage and Serviced Offices businesses; thus Shares o/s. (m) 253.4
we deem this set of results within expectations. Exchange SGX
BBRG ticker SMI SP

Growth in progress Reuters ticker SINO.SI

SGX Code Y45
The group continues to develop and expand its five core businesses.
GICS Sector Industrials
Recall that since Apr-17, the group started the supply of retail Trading Companies &
merchandise and F&B products in Junction City, an integrated GICS Industry Distribution
Top shareholder Wai Ho Kwok - 55.62%
development in Yangon, Myanmar. With a 5-year lease here, SMI
targets to open up to 10 retail brands and F&B concepts. Separately,
Relative total return 1m 3m 12m
the group had earlier announced potential plans to dispose its share in
Company (%) -3 12 162
the Telecom Tower business, but this has been delayed due to certain STI-adjusted (%) -3 10 152
condition precedents that have not been completed. Accordingly, the
group had to continue to fund such operations. Note that the reported Price performance chart
loss of discontinued operations of US$3.1m relates to the interest in its
telecommunication tower business as well as the company’s previous
businesses.

Crown jewel is the dominance in airport duty-free retail

We remain positive on the growth outlook for SMI. Given its dominance
in airport duty-free retail at YIA’s new terminal as well as the
profitability of this business, we continue to believe SMI’s duty-free
business will gain compelling profit traction. As such, we maintain BUY
and S$0.97 fair value estimate (16x FY19F; year ending Mar 2019).
Sources: Bloomberg, OIR estimates

Key financial highlights ST SP

Industry-relative metrics
Year Ended 31 Mar (US$ m) FY16 FY17 FY18F FY19F
Revenue 7.5 23.3 42.7 56.9
Gross profit 1.2 4.8 15.3 22.4
Gross profit margin (%) 15.8 20.7 35.7 39.4
PATMI -0.3 -7.1 5.0 11.1
EPS (US cents) -5.3 -2.8 1.9 4.2
Cons. EPS (US cents) na na na na
PER (x) nm nm 19.2 8.7
NTA per share (US cents) 6.4 9.5 11.0 15.2
P/B (x) 5.7 3.8 3.3 2.4
ROE (%) -3.2 -29.3 17.2 27.5
Note: Industry universe defined as companies under identical GICS classification listed
on the same exchange.
Key financial highlights Sources: Bloomberg, OIR estimates

FY Dec (S$ m) FY09 FY10 FY11F FY12F

Revenue 393.4 469.7 613.5 674.0
Cost of Please
sales refer to important disclosures
-337.1at the -366.7
back of this -514.8
document. -559.4 MCI (P) 041/06/2016
Gross profit 56.3 103.0 98.8 114.6
 OCBC Investment Research
Singapore Equities

Exhibit 1: Financial highlights

Restated
FY16 FY17 % Chg
(USD ‘000) (USD ‘000) (YoY)
Revenue 7,474 23,303 212%
Cost of Sales -6,294 -18,469 193%
Gross profit 1,179 4,834 310%
Distribution Expenses -1,010 -1,235 22%
Administrative Expenses -6,702 -7,450 11%
Operating profit -6,533 -3,851 -41%
Finance cost -314 -915 191%
Interest income/Other gains/other income 93 567 510%
FX gains/losses 0 0 nm
Share of results from JV, net of tax 0 -71 nm
PBT -6,754 -4,270 -37%
Income tax -1 -25 nm
PAT (continuing operations) -6,755 -4,295 -36%
PAT (discontinued operations) -2,831 -3,051 -8%
Gain on disposal of discontinued operations 8,761 0 nm
Total PAT -825 -7,346 nm
MI -506 -266 -47%
PATMI -319 -7,080 nm

Source: Company financials

Exhibit 2: FY17 Revenue mix Exhibit 3: FY17 PBT by segment

Sources: Company, OIR Sources: Company, OIR

2
 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 42.7 56.9

Gross profit 1.2 4.8 15.3 22.4
Distribution costs -1.0 -1.2 -1.8 -2.3
Administrative expenses -6.7 -7.5 -8.1 -8.8
Operating profit -6.5 -3.9 5.3 11.3
Finance costs -0.3 -0.9 -0.9 -0.9
Share of results from JV 0.0 -0.1 0.5 0.9
Profit before tax -6.8 -4.3 4.9 11.4
Income tax expense 0.0 0.0 -0.2 -0.7
PATMI -0.3 -7.1 5.0 11.1

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

Cash and cash equivalents 3.6 3.4 3.9 6.9

Property, plant, and equipment 17.8 14.9 20.2 25.2
Other assets 12.1 41.1 49.8 57.0
Total assets 33.5 59.3 73.9 89.0
Financial liabilties 3.3 14.3 21.0 22.0
Current liabilities ex. debt 11.7 18.9 22.1 25.6
Non-current liabilities ex. debt 8.3 1.9 1.9 1.9
Total liabilities 23.3 35.1 45.1 49.5
Shareholders equity 10.0 24.2 29.2 40.3
Total equity and liabilities 33.5 59.3 73.9 89.0

Cash flow statement

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

PBT -9.6 -7.2 4.9 11.4

Working capital change -0.7 -8.0 -5.5 -3.7
Operating cash flow -8.6 -11.5 1.8 10.0
Purchase of PP&E -16.6 -16.9 -8.0 -8.0
Other investing flows 2.9 -1.0 0.0 0.0
Investing cash flow -13.7 -18.0 -8.0 -8.0
Financing cash flow 15.1 23.9 6.7 1.0
Net cash flow -7.2 -5.6 0.5 3.0
Cash at beginning of year 10.4 3.2 3.4 3.9
Cash at end of year 3.6 3.4 3.9 6.9

Key rates & ratios FY16 FY17 FY18F FY19F

EPS (US cents) -5.3 -2.8 1.9 4.2

NTA per share (US cents) 6.4 9.5 11.0 15.2
Gross profit margin (%) 15.8 20.7 35.7 39.4
Operating profit margin (%) -87.4 -16.5 12.4 19.9
Net profit margin (%) -4.3 -30.4 11.7 19.4
PER (x) nm nm 19.2 8.7
P/B (x) 5.7 3.8 3.3 2.4
ROE (%) -3.2 -29.3 17.2 27.5
ROA (%) -1.0 -11.9 6.8 12.4
Net debt/equity (%) -3.3 46.1 59.5 38.2

Sources: Company, OIR forecasts

Company financial highlights

 OCBC Investment Research
Singapore Equities

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The analyst/analysts who wrote this report holds/hold NIL shares in the above security.

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Published by OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

Important disclosures