Yoma, FMI join to launch tourism firm
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
A hot-air balloon sails over Bagan.