Yoma, FMI join to launch tourism firm

The Myanmar Times - - Front Page - STEVE GIL­MORE s.gil­more@mm­times.com

Sin­ga­pore-listed Yoma Strate­gic, Yan­gon-listed First Myan­mar In­vest­ment and two more firms are look­ing to cre­ate a com­pany fo­cused on the tourism in­dus­try.

IN­TER­NA­TIONAL eq­uity in­vestors ea­ger for Myan­mar ex­po­sure could have a new op­tion next year. Yoma Strate­gic has signed an agree­ment with First Myan­mar In­vest­ment (FMI) and two other firms to cre­ate a listed com­pany fo­cused purely on Myan­mar tourism.

Like the gov­ern­ment, Yoma sees huge op­por­tu­ni­ties in the sec­tor. Myan­mar’s in­ter­na­tional and lo­cal air­ports are be­ing scaled up, states are ex­per­i­ment­ing with com­mu­nity-based tourism projects and, au­thor­i­ties are hop­ing e-li­cences and a lower ad­min fees will help lo­cal tour op­er­a­tors and guides ex­pand ser­vices.

Sin­ga­pore-listed Yoma, which is ac­tive mainly in ar­eas like real es­tate and automotives, an­nounced in Septem­ber it was plan­ning to spin off its tourism busi­nesses into a new sec­tor­spe­cific en­tity, which could then po­ten­tially make its own list­ing on the Sin­ga­pore stock ex­change (SGX).

The firm has now signed an agree­ment with Yan­gon-listed af­fil­i­ate FMI, Ex­em­plary Ven­tures Lim­ited and SHC Cap­i­tal Asia Lim­ited. Un­der this com­plex ar­range­ment – struc­tured as a re­verse takeover (RTO) – Yoma, FMI and Ex­em­plary Ven­tures will trans­fer sev­eral tourism busi­nesses into a new, as-yet-un­named firm, which will be en­tirely owned by SHC.

Yoma and FMI will trans­fer their jointly owned Bal­loons Over Ba­gan busi­ness. Yoma will also move its fives­tar Pun Hlaing Lodge project and a chunk of land in Nyaung-U near Ba­gan, which is ear­marked for a tourism and hos­pi­tal­ity de­vel­op­ment, into the new firm. Ex­em­plary Ven­tures – a Bri­tish Vir­gin Is­lands-in­cor­po­rated in­vest­ment hold­ing com­pany – will con­trib­ute its Hpa-an Lodge busi­ness in Kayin State, and a “tourism and des­ti­na­tion man­age­ment busi­ness” called Asia Hol­i­days.

Ex­em­plary Ven­tures’ sole share­holder Jean-Michel Alain Romon will be­come the chief op­er­at­ing of­fi­cer of SHC, ac­cord­ing to Yoma chief ex­ec­u­tive Melvyn Pun. The SHC chief ex­ec­u­tive po­si­tion has gone to Michel No­vatin, who held se­nior po­si­tions in Kempin­ski Ho­tels and the Danone Group among oth­ers, ac­cord­ing to a Yoma Strate­gic an­nounce­ment.

The SHC man­age­ment team has agreed on a brand un­der which all the tourism busi­nesses will op­er­ate, but the name has yet to be made pub­lic, Mr Pun said. And in ad­di­tion to the tourism as­sets con­trib­uted by Yoma, FMI and Ex­em­plary Ven­tures, the new en­tity will also em­bark on new ac­qui­si­tions and projects.

“The idea is to build a com­bi­na­tion of large ho­tels in key cities and smaller lodges [in towns],” Mr Pun said, adding that other ser­vices, like bal­loon­ing or cruises, will be de­signed around par­tic­u­lar re­gions. “Tourism in Myan­mar is un­der­served in terms of the ex­pe­ri­ences that peo­ple have can have,” he said.

Yoma’s an­nounce­ment comes just weeks af­ter par­lia­ment passed the long-awaited Myan­mar In­vest­ment Law, which cov­ers both lo­cal and in­ter­na­tional in­vestors, re­moves the need to seek a Myan­mar In­vest­ment Com­mis­sion (MIC) per­mit for smaller projects, and will give state and re­gion gov­ern­ments the abil­ity to ap­prove some for­eign in­vest­ment projects.

The frame­work has im­pli­ca­tions for the RTO agree­ment, un­der which the new tourism firm will in­cor­po­rate spe­cial-pur­pose ve­hi­cles in Sin­ga­pore to ac­quire as­sets like the Bal­loons over Ba­gan busi­ness, the Nyaung-U tourism and hos­pi­tal­ity de­vel­op­ment project and Hpa-an Lodge.

The RTO agree­ment re­quires that the par­ties ap­ply to the MIC for for­eign in­vest­ment in these busi­nesses and de­ter­mine just how much for­eign in­vest­ment is al­lowed, Mr Pun said. But the new in­vest­ment law also pro­vides bet­ter pro­tec­tion for in­vestors and should pro­vide more clar­ity around the in­vest­ment process, he added.

“It should make things eas­ier,” he said. “The way we have [struc­tured the RTO agree­ment] is so that we have to sub­mit [ap­pli­ca­tions] to the MIC, but not nec­es­sar­ily have them ap­proved. This is built to recog­nise that some re­quire­ments might change.”

Busi­ness­peo­ple have wel­comed the de­cen­tralised de­ci­sion mak­ing in the new in­vest­ment law, but also raised con­cerns about the ca­pac­ity of state and re­gion gov­ern­ments to re­view ap­pli­ca­tions, ac­cord­ing to a re­cent ar­ti­cle in Fron­tier mag­a­zine.

“I imag­ine when the MIC looks to del­e­gate re­gional ap­proval Yan­gon will eas­ier,” said Mr Pun. “[In] Hpa-an it might be a bit less clear how that del­e­ga­tion will hap­pen, but we’ve reached out to the MIC to get an un­der­stand­ing of how some of the pro­ce­dures [will work].”

When it comes to rais­ing fund­ing for new tourism in­vest­ments, SHC will have the op­tion of is­su­ing more shares on the SGX. SHC shares are al­ready listed and quoted on the SGX Catal­ist board, but its pri­mary as­sets at present are in cash. The com­pany sold an in­sur­ance busi­ness in 2014 and aban­doned a new ini­tial pub­lic of­fer­ing (IPO) based on the ac­qui­si­tion of a med­i­cal de­vice firm the fol­low­ing year. Be­fore join­ing the agree­ment with Yoma it was in the process of wind­ing down, said Mr Pun, be­cause it did meet the cri­te­ria for a new list­ing.

SHC would likely qual­ify for a new list­ing if it suc­cess­fully as­sumes con­trol of the planned tourism en­tity and as­sorted as­sets, but this is un­likely to hap­pen be­fore the SGX dead­line of De­cem­ber 31, said Mr Pun. The plan is for SHC to ap­ply for an ex­ten­sion, and for the RTO and the new list­ing to take place by the mid­dle of next year, he added.

Whether the ex­ten­sion will be granted is un­clear, Mr Pun said. But firms list­ing on the SGX Catal­ist re­quire a spon­sor, and SHC’s spon­sors “wouldn’t be work­ing through this if they didn’t have con­fi­dence it can be done”, he said.

Even if SHC misses the dead­line for a new list­ing, it can sim­ply go through the tra­di­tional IPO process from scratch, he added. The ad­van­tage of avoid­ing this is that it would al­low SHC to be more flex­i­ble in how much new eq­uity it raises once the list­ing is com­plete, said Mr Pun.

The re­verse takeover is be­ing struc­tured so that SHC will in­ject S$70.67 mil­lion into the new tourism firm, which it will fund en­tirely through an is­suance of ad­di­tional SHC shares at S$0.263 per share. Un­der the terms of the RTO, Yoma, FMI and Ex­em­plary Ven­tures will take large stakes in SHC.

Yoma will end up with 54.48 per­cent of to­tal SHC shares, with FMI and Ex­em­plary Ven­tures hold­ing smaller stakes. Once the agree­ment is com­plete, more than 85pc of SHC shares will be held by the par­tic­i­pat­ing firms, their di­rec­tors, sig­nif­i­cant share­hold­ers and sub­sidiaries, ac­cord­ing to Yoma Strate­gic.

Be­cause SGX list­ing re­quires at least 10pc of shares be held by out­side in­vestors – known as the min­i­mum float – SHC is likely to is­sue ad­di­tional eq­uity, Mr Pun said.

“We in­tend to make an eq­uity place­ment in or­der [to com­ply with] the min­i­mum float that will re­sult in Yoma Strate­gic’s stake drop­ping be­low 50pc,” he said.

‘The idea is to build a com­bi­na­tion of large ho­tels in key cities and smaller lodges.’

Melvyn Pun Yoma

Photo: Aung Htay Hlaing

A hot-air bal­loon sails over Ba­gan.

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