Yoma Strategic Holdings Ltd., (YOMA) a developer of properties in Myanmar, said its new real estate projects will benefit from increased interest in the country after U.S. President Barack Obama’s visit this week.
Obama hailed Myanmar’s shift to democracy and urged more steps to increase freedom after a Nov. 19 meeting with opposition leader Aung San Suu Kyi during the first visit to the former military-ruled country by a U.S. president.
“It will encourage some people sitting on the fence, particularly the Europeans and Americans, to invest, and will encourage them to think that now is the time to start engaging with this country,” Andrew Rickards, chief executive officer of Yoma, said in a phone interview from Singapore on Nov. 20. ‘That was a landmark visit, a truly historical moment.’’
The Singapore-based company, which gets almost all of its sales from Myanmar, is positioning itself to take advantage as the natural gas-rich Southeast Asian nation the size of Texas reconnects with the global economy after five decades of isolation during military rule.
Yoma said earlier this week it plans to spend $81.3 million on a controlling stake in a land project in Yangon, the commercial center and former capital. The proposed $350 million, 2 million-square-foot development will consist of residential, retail, hotel and commercial space on about 10 acres of land in the country’s business center, the company said.
Yoma’s shares almost quadrupled this year, the second-best performing stock on Singapore’s broader FTSE Strait Times All Share Index. (FSTAS)
The U.S. relaxed sanctions on Myanmar this year after President Thein Sein engaged with political opponents and eased media restrictions following his party’s victory in a 2010 election that ended five decades of direct military rule.
U.S. Secretary of State Hillary Clinton, who accompanied Obama during his Myanmar trip, said in a Nov. 17 speech that the Southeast Asian country could be a “commercial hub” connecting India and Bangladesh with the rest of the region.
It’s “striking how quickly the American attitude towards Myanmar has changed,” Rickards said. It “resulted in a visit that was unthinkable a year ago, unthinkable perhaps even six months ago, so it’s hugely significant,” he said.
Yoma expects to generate an internal rate of return of as much as 20 percent on its latest Yangon project, Rickards said. The construction will start next year and will take four to five years to complete, he said. The developer is also planning a private placement of shares and rights offer to help fund the project in the country formerly known as Burma.
“There are opportunities in Myanmar, there is political will and willingness to open up Myanmar,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. who called Obama’s visit one of the “encouraging signs” for the country. “One needs to recognize that Myanmar is an emerging market and so it comes with the appropriate warning labels and risk premiums.”
The internal rates of return for emerging-market development deals are from about 20 percent to 25 percent, said Priyaranjan Kumar, Singapore-based regional director of capital markets at Cushman & Wakefield, a property consulting company and brokerage.
Situated next to the Indian Ocean between China and India, Myanmar, with 64 million people, represents one of Asia’s last untapped frontier markets. The International Monetary Fund said in September that direct foreign investment will rise 40 percent to a record $3.99 billion this year, and said last month the economy may expand 6.2 percent. That compares with 5.1 percent growth in Vietnam, 4.8 percent in the Philippines and 6 percent in Indonesia.
The outlook for economic growth is helping Yoma draw new partners in a country where its projects include Star City, which will comprise of 9,000 residential units as well as shopping and commercial developments in Yangon.
“We are talking to a number of upmarket hotel operators,” Rickards said. “Some are coming to the country for the first time, some maybe coming back after a 20-, 25-year absence. This country was a rich country up until the ’60s and some people that remember the old grandeur might be looking to come back.”
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