• FY17 revenue up 212%
• Profitable retail business
• View remains intact

Retail Business Shows Profitability

Singapore Myanmar Investco (SMI) reported its FY17 results yesterday evening, which came in largely within expectations. FY17 revenue grew 211.8% to US$23.3m, due to the commencement of Duty Free, luxury and lifestyle retail businesses in the Yangon International Airport (YIA)’s new terminal since Sep-16. The group had also opened two Coffee Bean and Tea Leaf (CBTL) outlets in the YIA new terminal and one CBTL in the domestic terminal.

In addition, there was an expansion of the Europcar car fleet as well as higher sales of Construction Services products. As a result of healthy retail margins, gross profit margins also improved to 20.7% vs. 15.8% last year. Given the early stage of growth, the group recorded a net loss of US$4.3m from continuing operations, vs. a net loss of US$6.8m last year.

Notably, the Retail business was profitable, but the overall loss was attributable to losses in the Food & Beverage and Serviced Offices businesses; thus we deem this set of results within expectations.

Growth in Progress

The group continues to develop and expand its five core businesses. Recall that since Apr-17, the group started the supply of retail merchandise and F&B products in Junction City, an integrated development in Yangon, Myanmar. With a 5-year lease here, SMI targets to open up to 10 retail brands and F&B concepts.

Separately, the group had earlier announced potential plans to dispose its share in the Telecom Tower business, but this has been delayed due to certain condition precedents that have not been completed. Accordingly, the group had to continue to fund such operations. Note that the reported loss of discontinued operations of US$3.1m relates to the interest in its telecommunication tower business as well as the company’s previous businesses.

Crown Jewel Is the Dominance in Airport Duty-free Retail

We remain positive on the growth outlook for SMI. Given its dominance in airport duty-free retail at YIA’s new terminal as well as the profitability of this business, we continue to believe SMI’s duty-free business will gain compelling profit traction.

As such, we maintain BUY and S$0.97 fair value estimate (16x FY19F; year ending Mar 2019).

Source: OCBC Research - 31 May 2017