Wave of newly awakened interest in the country - Myanmar

Yoma Strategic Holdings Limited announced that the Digicel consortium is disappointed to have been notified that it has not been successful in securing one of the two nationwide telecommunications licences on offer in Myanmar. Digicel remains committed to exploring commercial opportunities in Myanmar and will be evaluating these on an ongoing basis. (Closing price: -, -%)

SingTel's (Accumulate, TP: S$4.07) bid for a Telco Licence in Myanmar was unsuccessful. Myanmar has granted licenses to Norway's Telenor and Ooredoo of Qatar. However, we are of the opinion that while this may reduce potential earnings growth, there are risks involved in entering Myanmar. This includes high capital expenditure requirements but uncertain penetration rates and revenue. With lower capex requirements, this may increase SingTel's ability to offer special dividends in the medium term. We think that SingTel continues to offer higher growth potential relative to its local peers, due to its overseas associates, and investments in Digital initiatives.

Myanmar proceeded with the award of telco license. The winners of the tender are Qatar-based Ooreedo and Norway-based Telenor with France Orange-Telecom as back up should any of the winners be disqualified. SingTel and Yoma have been shut out of these two highly sought mobile licences. The winners are not within our expectations. However, both have notable experience and ownership of telcos in Asia.

On Yoma, we are neutral of their consortium's failure to win the bid because no earnings related to this bid is imputed into our forecast. What's next for Yoma? We look forward to progress of Landmark project and expansion of non-property businesses which are small at the moment but mostly strategic and profitable. Management have also mentioned in their announcement that plans and negotiations are ongoing for their agriculture division. Overall, we remain positive on Yoma's prospect as long as Myanmar's momentum sustains. We believe they are still very well positioned to tap on Myanmar's explosive growth. No change to Yoma's forecast and TP. Expect some degree of share price weakness on account of this news. We see weakness as good opportunity to collect stock for investor with long term horizon. Stock though could still decline in the near term on disappointment given the built up in expectations recently.

The same for the other contender SingTel, whose share price rebound from $3.50 to $3.72 in recent sessions could be in expectation of the license award that didn’t come true.

The failure to win any telco licenses could also taper optimism for Yongnam, who is in the running for Myanmar’s airport projects pending award in July. Investors are likely adopt a ‘wait and see’ rather than ‘buy in anticipation’ given that the stock has already risen 43% YTD.

Overall, for the country, we are encouraged by the authority's will to push ahead with the award of the license, reflecting their eagerness and ability to execute on plan on time. The authority's ability to deliver on promises is an important factor for Myanmar's development going forward.

Keppel is sprucing up its hotels in Myanmar as it looks to ride the wave of newly awakened interest in the country. The group, which owns Sedona Hotel Yangon and Sedona Hotel Mandalay, is pumping in US$80m to add a new 29-storey hotel wing offering 418 rooms to Sedona Hotel Yangon. With the country opening up, the number of travellers has increased and the occupancy has gone up.