JT 8.2016This article, written by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange), originally was published in SGX's kopi-C: the Company brew series on 18 December 2015. The article is republished with permission.


MelvynPunYoma Strategic CEO, Melvyn Pun (Photo: Company)

As the saying goes, the apple doesn’t fall far from the tree, and in Melvyn Pun’s case, it’s certainly true.

The Chief Executive Officer of Singapore-listed Myanmar investment firm Yoma Strategic Holdings Ltd credits his indomitable spirit to his father, Serge, who is one of the country’s most successful entrepreneurs.

“We have a ‘can-do’, ‘never say never’ mindset. That’s the work ethic my dad passed on to me, which has distinguished the quality of Yoma’s products and projects all these years,” said Hong Kong-born Pun, the eldest of four sons.

LQM E57322We have a ‘can-do’, ‘never say never’ mindset. That’s the work ethic my dad passed on to me, which has distinguished the quality of Yoma’s products and projects all these years.

- Melvyn Pun
CEO

Yoma Strategic Holdings

Pun’s ethos bodes well for Yoma’s fortunes.

The company, which listed on the Singapore Exchange in 2006, has a portfolio of businesses ranging from real estate to consumer, automotive, agriculture, logistics and tourism in Myanmar.

Its international partners include Japan’s Mitsubishi Corporation across multiple businesses, Sumitomo Corporation in the automotive sector, US-based Yum! Brands in consumer, and Malaysia’s Axiata Group in telecoms infrastructure.

Yoma is affiliated to Serge Pun & Associates Ltd – a real estate firm founded by the senior Pun in 1983 – and First Myanmar Investment Co. Ltd. FMI will be among six local companies to start trading on the Yangon Stock Exchange in March, following the inauguration of the country’s first modern bourse earlier this month.


Tides of Change

Myanmar stands on the cusp of sweeping political and economic change, after Aung San Suu Kyi’s National League for Democracy won a landslide victory in national polls last month.

The positive sentiment post-elections will boost consumer confidence in the country, benefitting Yoma’s property development, automotive and consumer businesses, Pun noted.

The youthful 37-year-old finds the country and its history riveting. “Myanmar is unique – it’s so isolated, yet many investment opportunities abound.”

 

LQM000066

The country’s growth will be very strong, and a rising tide lifts all boats. For anyone with an entrepreneurial spirit, Myanmar is the place to be.


- Melvyn Pun
CEO

Yoma Strategic Holdings

The Burmese are also a remarkable people. “Many are devout Buddhists, and this comes through in their kindness. They are hardworking and resilient. Things haven’t gone very well for the country in the last 50 or 60 years, yet people still get by,” he added.

Following political reforms and advances in human rights, western nations have gradually lifted economic and diplomatic sanctions on Myanmar, which was ruled directly and indirectly by its military junta for over five decades.

With a population of over 50 million, Myanmar’s US$60 billion economy is rich in jade, gold, teak, oil and natural gas. Buoyed by increasing foreign direct investments, its gross domestic product is forecast to grow above 8% in 2016 for a second straight year, according to data from the Asian Development Bank.

“It’s a no brainer – this is the time for Myanmar,” Pun said. “The country’s growth will be very strong, and a rising tide lifts all boats. For anyone with an entrepreneurial spirit, Myanmar is the place to be.”

Pun was appointed CEO of Yoma in May this year, after three years at the helm of Serge Pun & Associates. Prior to that, he spent 12 years as an investment banker in Goldman Sachs.

♦ Code of Conduct

His father remains Yoma’s Executive Chairman. The 62-year-old Myanmar-born ethnic Chinese, who developed a reputation as “Mr Clean” in a country ranked as one of the world’s most corrupt, consistently impressed upon his sons the importance of integrity.

Serge PunThe senior Pun is the chairman of Serge Pun & Associates Group, a MNC real estate firm, and Yoma Bank, one of Myanmar's largest commercial banks.
(Photo: Company)
“Dad taught us to stick to our principles even when operating in a difficult environment – this was especially relevant during Myanmar’s darker days,” Pun recalled.

“He advocated responsible business practices, and was very vocal about not paying bribes, treating our partners well and doing community work. He made things absolutely black and white.”

The senior Pun returned to Myanmar in the 1990s, after fleeing the country following a military coup in 1962.

Thereafter, he built a sprawling business empire with interests ranging from property to banking and civil aviation. He was ranked 45th on Forbes’ list of Singapore’s 50 Richest in 2015, with a net worth of over US$500 million.

The son also inherited a thirst for learning from his father. “My dad focuses on improving himself through reading and learning new things – he is like a sponge that soaks up knowledge. That has rubbed off on me – I find the learning process totally stimulating.”

Yoma Strategic

Stock Price

59c

Market Cap

S$1.0 bn

52-week High Low

40.5c-63.5c

Dividend Yield

0.42%

PE

23.2x

Source: SGX StockFacts
(data as of 3 Jan 2017)

Pun hopes to inculcate the same moral values in his son and daughter, aged five and three.

“There’s no better experience than going home and having your kids jump into your arms,” he said, with a laugh.

“I want to pass on to them the same principles my dad taught me – be a good person, and go beyond what is required to be fair to your investors, colleagues or partners, because that will pay itself back in the long run.”

The fundamentals of justice and equality are in turn connected to one’s work ethic, Pun noted.

“There’s no successful or happy person who doesn’t possess a good work ethic, who isn’t totally dedicated to whatever he or she does.”


Privileged Position


Pun, who has a Master of Engineering with first-class honours from Cambridge University, is equally passionate about his vision for Yoma.

The company, with a market capitalisation of S$780 million, counts Aberdeen Asset Management and the Capital Group of Companies as its second- and third-largest shareholders, with stakes of 10.05% and 8.09% respectively.

It has averaged annual revenues of S$40.3 million for the financial years ended 31 March 2007 to 2015. Apart from a S$14.7 million net loss in FY2007, it has been profitable. For the latest financial year, Yoma reported earnings of S$28.1 million, up 71% over the previous period.

“We are in a privileged position – we have access to international capital through our listing in Singapore, while many global businesses are keen to partner us in Myanmar,” he said.

Yoma PunHlaingSale of residences and Land Development Rights contributed 39.7% to 2QFY2017 revenue, driven by sale of luxury homes in Pun Hlaing Estate. (Photo: Company)
“We have a large number of options to choose from to shape our future.”

Having opportunities aplenty can also be a challenge, admitted Pun. “So many business proposals land on my desk, and they all have a high return on investment. It’s very easy to get distracted, and we’ve said yes too many times.”

LQM E57322 Having a good ROI is not the only criteria to consider, as almost everything in Myanmar can make money, due to the economy's low base. But every project has different risks, and we need to be mindful of the time frame. We also need to choose projects that will allow us to build for the next generation.

- Melvyn Pun
CEO

Yoma Strategic Holdings

“Individually, each proposal is attractive, but collectively, they may be too much. We are at the stage where if we add any more, we risk spreading ourselves too thin.”

Having a good ROI is not the only criteria to consider, as almost everything in Myanmar can make money, due to the economy's low base, Pun added.

"But every project has different risks, and we need to be mindful of the time frame. We also need to choose projects that will allow us to build for the next generation."

As a result, management has established a few golden rules: the business venture must be scalable, and should allow Yoma to be the leading operator in that market segment.

"If the ROI is great, but it only makes a few million dollars, then it may be too small for us to take on in the long term. The project needs to be worth doing," he added.

 

♦ Coming of Age

On hindsight, Pun's decision to diversify away from real estate was a good one.

"I started the diversification process three to four years ago, and this was achieved without compromising the growth of the core property business," he recalled.

Yoma branched into "sexy" market segments by introducing Western consumer labels like Kentucky Fried Chicken, through a partnership with New York Stock Exchange-listed Yum! Brands.

"There's something about KFC that captures the imagination. It is more than just fried chicken – it's an aspiration. Some Burmese will travel six hours to the KFC store and queue two to three hours to eat there," he said.

Myanmar KFCYoma's consumer segment, comprising of its KFC franchise in Myanmar, alcoholic drinks unit, and food distribution joint venture with Japanese F&B marketeer Kokubu, contributed 10.9% to 2QFY2017 revenue.
(Photo: Company)
Prices on the menu, including the KFC Bucket Meals, are affordable, and the vibrant, energetic mood of the outlet is irresistible. Yoma opened its second KFC outlet in October, and the third in November.

"It's not price, but the status – the Burmese are experiencing a global brand in their own home market, and this reflects the coming of age of Myanmar," Pun added.

Yoma expects to open 50 KFC outlets in Myanmar "within a number of years". “There are 500 KFC restaurants in Thailand alone – that gives you an idea of the potential scope of the business in Myanmar,” he added.

Yoma also ventured into other industries, such as the tractor and vehicle leasing businesses, to broaden its revenue base.

"Our automotive revenues increased multiple times last year versus the previous year, and is increasing this year as well. This growth speaks volumes about our ability to execute in new areas," he added.


Balance and Convergence

Ultimately, the key is achieving balance, Pun said. "We have to be mindful of not growing too fast or too slow. The temptation is to throw money at a problem to remove it, or to expand very quickly."

It's also critical to remain focused, he added. "This is a marathon, not a sprint. For the first few years, we were sprinting fast, and now we need to pace ourselves."

Looking ahead, Yoma still expects significant expansion in its real estate business, while its automotive and consumer segments will provide a platform for more balanced growth.

LQM E57322Dad taught us to stick to our principles even when operating in a difficult environment – this was especially relevant during Myanmar’s darker days. He advocated responsible business practices, and was very vocal about not paying bribes, treating our partners well and doing community work. He made things absolutely black and white.

- Melvyn Pun
CEO

Yoma Strategic Holdings

It aims to derive 50% of group revenues from non-real estate businesses by 2020. Currently, property accounts for more than 80% of total sales.

"Over the next five years, we plan to strengthen our existing business, be more disciplined about exiting non-core operations, and increase the localisation of our talent pool," Pun said.

The company has relied heavily on expatriates due to a shortage of locals with relevant skills. It has now set up a program to groom future leaders among its Burmese staff.

In terms of competitive strengths, Yoma's branding is a big plus, he added.

Apart from a robust system of corporate governance, the company has a strong reputation for protecting minority shareholders and selecting responsible business partners with a global mindset.

"We are as Burmese as it gets, yet very international. The convergence of the local and international is what gives us the edge."

Financial results

Year ended 31 Mar
(S$ 000)
FY2016 FY2015 FY2014 FY2013
Revenue 111,868 110,927 100,493 60,467
Profit before tax 47,512 43,224 25,540 16,042
Net profit attributable to equity holders 37,188 28,051 16,392 14,444

 

Quarter ended 30 Sep
(S$ m)
2QFY2017 2QFY2016 yoy chg
Revenue 24.9 19.9 25.2%
Profit before tax 7.7 -0.036 -
Net profit attributable to equity holders 8.5 0.3 2757%


Source: Company data




Outlook & Risks
    • As Myanmar’s new government may not be formed until April 2016, near-term political uncertainty may continue to weigh on business sentiment. The Group is optimistic that formation of the next administration could provide the catalyst for the next phase of economic development and investment in the country.
    • The property market has been significantly impacted in recent months, as buyers delay their purchases ahead of the election. The outlook for the property market will likely remain slow until the new government is formed.
    • The automotive businesses recorded strong growth, in particular in the New Holland tractor and Yoma Fleet businesses. The growth is expected to continue as the agriculture industry develops, and companies further expand in the country.
    • The KFC business is expected to grow in the near to medium term, driven primarily by additional store counts. The Group plans to open additional KFC outlets in 2016.


Yoma Strategic Holdings Ltd

Yoma Strategic Holdings manages real estate, agriculture, automotive, and luxury tourism businesses in Myanmar. The company is involved in gated community, residential, retail mall, serviced apartments, office towers, and landmark development projects. It also offers property rental, property development and management, design and architectural services, advertising services, as well as operates quick-service restaurants. In addition, Yoma is engaged in vehicle leases and rentals, as well as tourism, through the operation of hot air balloons and adventure travel services in Myanmar and Bhutan.

The company website is: www.yomastrategic.com

Click here for the company's StockFacts page.

For its results for the quarter ended 30 Sep 2016, click here.


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