MTSH sees heavy trading on higher Japanese investments

Despite high trading volume on the Yangon Stock Exchange (YSX) last week, the Myanmar Stock Price Index closed Friday at 452.80, languishing near its lowest levels since the bourse went live in 2016. More than 78,000 shares exchanged hands during the week, the most in a single week for months.

Most of the trading involved shares in Myanmar Thilawa SEZ Holdings (MTSH). Interest in MTSH is rising on the back of data showing bullish prospects for Japan released this year. MTSH holds 41pc of Thilawa Special Economic Zone, Myanmar’s first fully functional SEZ, which is run by the Japanese.

On Friday, Prime Minister Shinzo Abe’s government upgraded its assessment of the economy for the first time in seven months in a monthly report thanks to a pickup in private consumption, making it more likely that Mr Abe’s government will confirm the economy is in its second-longest postwar expansion cycle.

The report came days after Bank of Japan (BOJ) Governor Haruhiko Kuroda offered a positive view on the economy and inflation. The BOJ offered its most optimistic view on regional areas of Japan in nearly a decade in a quarterly report, suggesting that the broadening recovery will help accelerate inflation to its ambitious 2pc target. That has fuelled speculation that the central bank may exit its ultra-loose monetary policy earlier than expected, driving the Japanese yen to higher levels.

Earlier in the year, Japan’s top business leaders had voiced optimism about the prospects for the nation’s economy, with 28 out of 30 business leaders surveyed predicting things will recover moderately this year.

Rising interest

That may well have spurred more interest in MTSH as investors bet on more expansion this year. Indeed, more than $280 million has already been channeled into nine new projects in Thilawa between April 1, 2017 and January 19, a third of which were backed by the Japanese, an official from the Directorate of Investment and Company Administration (DICA) told local media.

For the six months to September 30, 2017, MTSH announced revenues amounting to K8.1 billion, which is up 36pc compared to the same period in the previous year, owing mainly to an increase in property and infrastructure development activities in Zone A of the SEZ. However, earnings were down 43pc year-on-year, to K6.2 billion, due to a lower share of profits from the company’s other investments.

Investors are looking at more growth potential ahead, though. This will come from the development of Phase 1, Zone B of the Special Economic Zone. MTSH management said it is confident of achieving stronger growth from the sales of industrial plots across the 100 hectare area in the coming quarters.

Shares of MTSH closed last Friday at K2,750 each, down by more than 8pc since the start of the year. At those levels, the stock has a market value of K107 billion.

New listing

Meanwhile, telecommunications services provider TMH Telecom Co is set to commence trading on the YSX this Friday, which will make it the fifth company to list on the exchange since First Private Bank did so in January last year.

According to the YSX, the company has sold 540,000 shares priced at around K3,000 during its Initial Public Offering, raising some K1.6 billion in proceeds. The company will use around 70pc of the funds raised for equipment and labour costs associated with its 126 telecommunications towers in Mandalay and Shan regions.

While TMH Telecom will be listing at a time when liquidity on the local bourse has thinned out substantially, investors can also look forward to potentially deeper capital markets later this year, when officials have promised the new Myanmar Companies Law will be implemented. The new law will foreigners to invest directly in YSX-listed companies, up to a cap of 30pc.

Still, investors should be prepared to stay vest for the long haul. Since listing on the YSX, the share prices of the four existing companies have fallen and trading in the shares has dried up. As there are only a few listed firms, the Myanmar equities market hasn’t yet developed and depth is still substantially lacking, Deputy Minister for Planning and Finance U Maung Maung Win told The Myanmar Times in December.

Source: Myanmar Times

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