In 2015, Melvyn Pun was appointed CEO of Myanmar-based Yoma Strategic Holdings Z59 . At that time, the country’s outlook was promising, with economic growth averaging 6% annually, supported by economic reforms and the lifting of sanctions.
Pun recalls the excitement in the country, with hopes of becoming one of Asean’s “darlings”. Yoma hosted many leaders from Fortune 500 companies who sought to uncover opportunities in Myanmar. The Singapore-listed company also attracted eager investors wanting to capitalise on the growth of this frontier market, just a three-hour flight away from the city-state.
However, the initial excitement faded as Myanmar encountered challenges with its fragile political economy. The country grappled with issues like insufficient infrastructure and regulatory uncertainty, even after Nobel Prize winner Aung San Suu Kyi assumed office following a landslide election victory. Ongoing political tensions and the 2017 conflict in Rakhine further deterred foreign investors, causing Myanmar to fall out of favour.
“It was clear that the sentiment had turned. Myanmar is not such a ‘darling’ anymore,” Pun tells The Edge Singapore.
As the country struggles with the pandemic, a military coup occurred in February 2021, halting Myanmar’s democratic transition and development efforts. A state of emergency was declared, initially intended to last one year, but it has been extended until July 31 this year.
Yoma, of course, was not spared from these developments. For its FY2021 ended September, the company saw a net loss of US$15.7 million. Losses nearly doubled to US$29.3 million in FY2022 and widened to US$63.3 million ($85.2 million) in FY2023.
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However, Yoma boasts a successful turnaround story today. For the most recent FY2024 ended March, it posted earnings of US$21.2 million. Yoma’s shares, hammered down following the coup to as low as four cents in April, have more than doubled to change hands at 8.7 cents on June 5 — although they are still a long way to go from the pre-coup 30 cents thereabouts. Nonetheless, Pun is of course happy to see the turnaround. “It is quite rewarding to go from that to this strong set of results.”
Not an overnight success
Pun stresses that the robust results for FY2024 were not the result of a short-term effort. During the pre-Covid days, amid the economic growth euphoria, many companies including Yoma were heavily investing in different businesses for future-proofing purposes. This “over-investment” has unfortunately resulted in an environment where it is impossible to see returns.
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When the pandemic struck, Yoma had to take decisive cost-cutting measures. Salaries were reduced by 70%, and the workforce was trimmed by about 10%. For around two years, most executives, including Pun himself and his father, executive chairman Serge Pun, either did not receive salaries or had their salaries significantly reduced.
Aside from lowering manpower costs, the company had also undergone a major deleveraging exercise via debt restructuring and trimming operations. It managed to shrink its net debt to US$36 million in FY2024 compared to US$73 million in FY2023. Two years ago, its net debt was US$284 million.
Pun acknowledges that the operational environment will continue to be challenging, especially on the back of the decline in kyat, which impacted its FY2024 results at multiple levels. Reflecting the ongoing economic challenges in Myanmar, the kyat hit a record low against the US dollar on May 30, falling to 5,020 to the greenback, The Irrawaddy reported. Prior to the coup, the kyat was relatively stable, hovering at around 1,300 to 1,350 to the greenback, Yoma’s reporting currency, between January 2020 and February 2021.
Despite lingering concerns over the economy, Pun observes a growing sense of hope among Myanmese citizens. They are eager to move forward with their lives, and are increasingly venturing out to shop and dine. This is evident from the sales at Yoma F&B’s KFC brand, which have gone “off the charts” despite higher pricing due to the business’s counter-inflationary response. “People want stability and are awaiting a political resolution. Meanwhile, life goes on,” says Pun.
Although there is an increase in Myanmese youth leaving the country for studies or work especially with the conscription law in place, Yoma sees this as an opportunity for an untapped market segment. “With this, we have a huge market to address now,” he adds.
To capture this market, Yoma is looking at launching YKKO, its F&B brand selling a Myanmese soup noodle dish “kyay oh”, in Thailand sometime this year. Pun maintains that he is not trying to compete with Thai restaurants, but is instead targeting the lowest-hanging fruit — Myanmese migrants overseas missing their nostalgic dish. This is similar to how the Philippines’s renowned fast food brand Jollibee gains success out of its home market.
Strong performers
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When it comes to Yoma Land — the company’s outperformer throughout the past few years — a similar strategy is applied, whereby the Yoma Land team had recently hosted sales events targeting Myanmese nationals overseas who were looking to acquire property assets in their home country.
In FY2024, Yoma’s property sales jumped over 100% to US$94 million, resulting in Yoma Land’s profitability spiking 10-fold to US$22.9 million. Pun attributes this to the diverse options at its StarCity development, which includes more affordable units.
Yoma Land used to sell “fairly expensive” apartments ranging from US$150,000 to US$400,000 per unit. Today, however, the company is offering various options under US$100,000, with its lowest-priced studio unit selling at around US$30,000. The strong sales are also underpinned by local banks now providing up to 25-year mortgages, lowering the barrier to property acquisition.
“It is exciting to see how StarCity has developed. Before Covid-19, we had around 2,000 to 3,000 residents. Today, we are pushing towards 10,000 residents,” Pun says.
He adds: “We started StarCity back in 2010, but it wasn’t until the last three years that it has really grown. StarCity was the only project that continued to sell and develop throughout the pandemic, so we managed to build a positive reputation of being able to deliver on our promises.”
As at end-March, many projects launched by Yoma Land were fully sold. All launched units at City Loft, City Villas and The Hills have been sold or booked, while the majority of units at Estella (672 out of 690), Lotus Hills (11 out of 15) and City Loft West (578 out of 715) have been sold or booked. Yoma Land’s ARA units, launched in March 2024, also saw a good take-up with 392 out of 1,002 units booked or sold.
Yoma’s unrecognised revenue from ongoing projects at StarCity, Pun Hlaing Estate and City Loft West stands at US$194.86 million.
Another strong performer for Yoma in FY2024 is its mobile financial services unit, Wave Money. Yoma acquired Norwegian telecoms firm Telenor’s 51% stake in Wave Money for US$53 million in 2022, effectively making it the largest and controlling shareholder with a 65% interest. For its FY2024, Wave Money contributed revenue of US$52.39 million.
As at September 2023, Wave Money has over 55,000 agents with around 90% geographical coverage across Myanmar. About US$4.5 billion, or 14%, of Myanmar’s GDP has been transferred via Wave Money, with 48% of the over-the-counter transfers made to rural areas.
Yoma now provides international remittance services in Thailand to facilitate money transfers back to Myanmar. This comes after Myanmar’s ruling junta announced the requirement for overseas workers to remit at least 25% of their foreign currency income through official channels recognised by the authorities.
Can Yoma report further earnings growth in its FY2025 on the back of a sluggish economic growth forecast of 1.2% in 2024? PhillipCapital’s Paul Chew, for one, believes so. This will be led by property development, Wave Money and F&B segments; supported by sales of new property launches, a rise in digital transactions and stable transfer volumes, and F&B margins recovery, Chew writes in his June 3 note.
As Pun continues to helm Yoma’s not-so-smooth sailing ship, he hopes the company maintains its resilience. “Twelve years ago, I made an unexpected move back to Myanmar. At the time, I was a contented banker in Hong Kong, visiting Myanmar once a year to see my grandmother and extended family, never expecting to work there — let alone for my father.”
He adds: “In 2011, amid the excitement of the elections, I decided to return. The journey since then has been full of ups and downs, an unexpected ride. Despite the challenges, including the coup and its aftermath, I would still make the same choice to go back, even with the benefit of hindsight.”
