Shareholder structure could limit Thilawa share price

The share price of Myanmar Thilawa SEZ, one of two companies listed on the Yangon Stock Exchange, may be held back due to its shareholder structure, according to a recent research paper.

MTSH became the second firm to list on the Yangon Stock Exchange last month, pricing its shares at K40,000. The stock closed at K57,000 yesterday, having hit a high of K70,000 on May 24.

Within 12 months of the listing date the share price ought to reach K82,000, said the paper’s author, research analyst Michael Ong, head of research for KBZ Stirling Coleman Securities.

“We like the fundamentals of this company,” he said, in an interview with The Myanmar Times. “It’s a very attractive business.”

MTSH was set up to invest in the Thilawa special economic zone – Myanmar’s first SEZ – and draws a significant chunk of its revenue from subsidiaries that sell industrial, residential and commercial land in the SEZ to other companies.

The subsidiaries receive up-front payment from companies buying an initial 50-year lease, Mr Ong said. Meanwhile, MTSH has little in the way of capital expenditure because much of the surrounding infrastructure that helps make Thilawa attractive – including a power plant, port and roads – is being built by other entities, he added.

“Where else can you find a business like this,” said Mr Ong. “It’s [a] fantastic cash flow.”

MTSH became profitable in 2015-16 with net income after tax of K16.2 billion, according to the firm’s recent disclosure documents.

The short-term concern is its fragmented share holder structure, Mr Ong said. There are nine principal shareholders, each holding around 5 percent of MTSH, who may want to realise value at some point and sell, he said. The risk is that there is an oversupply of stock, which puts a limit on the share price.

Mr Ong thinks MTSH shares should trade at a premium to his K82,000 estimate once this anticipated oversupply of shares takes place.

Financial industry figures have warned, however, that Myanmar’s new stock market need local institutional accounts that can provide more sophisticated analysis and trade in larger amounts. While the market remains dominated by retail accounts it risks being subject to speculation and volatility, they said.

First Myanmar Investment was the first firm to list on the stock market, andenjoyed a brief jump in share price before a steady decline. Mr Ong’s estimate for that stock is K42,000, but FMI shares closed at K26,000 yesterday – the same level at which the firm listed in March.

Still, the outlook for Thilawa is good, said Mr Ong. Demand for plots of land in the first of the industrial zones has been strong, with 76pc of the land that will be leased out already sold as of December 31, the firm said.

The company’s subsidiary Myanmar Japan Thilawa Development, of which it owns 41pc, sold an estimated 143.5 hectares of land at an average price of around US$60 per square metre, and that price is expected to rise further, said Mr Ong. With Zone A filling up fast, attention will soon turn to Zone B, he added.

MTSH and its partners – the Japanese and Myanmar governments and a Japanese private sector consortium – signed an agreement in February todevelop a second Thilawa industrial park. This Zone B project will be 500 to 700 hectares, and begin toward to the end of this year, according to MTSH.

“We understand that MTSH will be involved in the development of all future industrial parks in the Thilawa SEZ,” said Mr Ong in a research report published in May. He expects the development of Zone B to last until 2022.

Assuming a similar cost and pricing structure to the Zone A project, revenue from land sales from the second industrial park alone would provide an estimated $464 million or K533 billion between the 2018 and 2022 financial years, according to Mr Ong’s analysis.

Even after Zone A and Zone B are complete, this leaves over 1000 hectares of Thilawa land for development. The total land in Thilawa SEZ is enough to provide MTSH with a sustainable income for the next 16 years, Mr Ong said.


Source: The Myanmar Times


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