First Myanmar Investment (FMI)

Company Report Non‐rated (03/17E TP Kyat 22,300) Close Kyat 35,000 (OTC) Diversified Conglomerate (Financial Services, Real Estate and Healthcare) March 25, 2016 A lot of low‐cost land, a good and much more

First veteran to debut on the YSX FMI will be the first stock to debut in the YSX on March 25. Its core businesses have high growth potential, although real estate associates should take a few more quarters to boost profit; meanwhile, the bank and hospital are in the early stage of profit ramp up/turnaround. We project core profit CAGR of 239% in 03/17E‐03/18E and have a 03/17E TP of 22,300 Kyat from sum of the parts, with more than half embedded in real estate associates. Our TP implies forward PE descending to a justified level at 15x in 03/18E. We think that the OTC price shooting up one fold in recent months Share data looks unjustified and hence put non‐rated on the counter, believing that the Paid‐up Shares (mn) 23.48 price calibration after listing will reflect a more efficient market mechanism.

Par (USD/Kyat) 0.8333 / 1,000 Real estate should bring a good return in the long term Market cap (US$ mn /Kyat bn) 684.8 /821,800 Real estate projects that FMI jointly develops with its sister companies are in URL www.fmi.com.mm prime locations. Many have low land costs and we believe they will bring a good return in the future. Although profit from this business will slow down in 03/16E due to concern during the political transition, we believe the recent enactment of a law allowing foreigners to buy condos and improving political sentiment will be catalysts for this business beginning in 03/17E.

Strong growth in banking business Major Shareholders (30Sep’15 ) Holding Yoma Bank, the biggest investment in terms of asset size, is a high‐ U Theim Wai @ Serge Pun 33.8% potential business that should significantly increase its weighting with Yangon Land 31.0% respect to the FMI’s net profit in the next few years. It ranks sixth in terms U Phyo Phyu Noep 4.7% of asset size among private in Myanmar despite just resuming its lending for the first full year in FY03/15. SPA Assets Management 4.6% Yoma Myittar Development 4.3% Healthcare: revitalizing business to capture the growing demand The core operation of PHSH should turn profitable at the EBITDA level in 03/16E. Based on management’s guidance, we expect the hospital’s revitalized operation and network expansion to enable PHSH to deliver net profit CAGR of 41% during 03/18E‐03/21E.

Risks & Concerns Improving sentiment after the establishment of the new government

should ease concern over political risk that might affect the real estate and

tourism businesses. Regarding banks, concerns relate to capital adequacy

due to rapid lending expansion and success in obtaining approvals for the full launch of service.

Financials and Valuation FY Ended 31 Dec 03/14 03/15 03/16E 03/17E 03/18E Revenues (Kyat mn) 11,128 33,319 112,334 157,543 213,906 Net profit (Kyat mn) 12,499 74,655 10,103 16,619 35,735

Core profit (Kyat mn) 12,499 14,165 3,103 16,619 35,735 EPS (Kyat) 678.64 3,320.97 430.27 707.78 1,521.94 EPS growth (%) n.a. 389.4% ‐87.0% 64.5% 115.0% Dividend (Kyat) 200 120 120 210 450 BV (Kyat) 4,432 7,808 7,791 8,379 9,691

FY Ended 31 Dec 03/14 03/15 03/16E 03/17E 03/18E PER (x) 16.21 3.91 81.34 49.45 23.00 Pornsawat Jirajarus EV/EBITDA (x) 112.01 1,583.96 178.83 105.81 79.98 Analyst no. 18228 PBV (x) 2.48 1.66 4.49 4.18 3.61 [email protected] Dividend yield (%) 1.82 0.92 0.34 0.60 1.29 ROE (%) 17.8% 48.6% 4.5% 7.0% 13.4% 66 (0) 2624 6257 Net gearing (%) Cash 327.1% 483.9% 598.1% 659.3% REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 29

Investment Highlights

First veteran to debut on the YSX FMI is the only stock to be listed on the Yangon Stock Exchange on March 25. We believe the core businesses of FMI have high growth potential, although real estate associates should begin recovering in 03/17E; meanwhile, the bank and hospital are in the early stage of profit ramp up/turnaround. We project core net profit CAGR of 239% in 03/17E‐03/18E and have a 03/17E TP of 22,300 Kyat from sum of the parts (figure 22), with around half embedded in real estate associates. We think that the OTC price shooting up one fold in recent months (to 35,000 Kyat on 15 February 2016, +184% YoY (source: http://fmi.com.mm/share‐information) looks unjustified as limited access to the company’s information and FMI’s restructuring (without segment information in the pro‐forma financial statement) have resulted in the FY03/15 performance being difficult to compare to 03/16E. We hence put non‐rated on the counter, believing that the price calibration after listing will reflect a more efficient market mechanism.

Figure 1: FMI’s historical share price

(MM Kyat) (Shares) Vol. (shrs) Price (KYT) 40,000 250,000

35,000 200,000 30,000

25,000 150,000 20,000

15,000 100,000

10,000 50,000 5,000

‐ ‐

15 15 15 16 15 15 14 15 15 16 14 15 15 14 15 15 16 15 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Jul Jan Jan Jun Oct Oct Apr Sep Feb Feb Dec Dec Aug Nov Nov Mar Mar May

Source: http://fmi.com.mm/share‐information

No new shares and law still prohibits foreigners from buying shares The company does not yet plan to sell any new shares in the early stage of listing, but we believe FMI is highly likely to issue new shares to support its investments in the coming years. Note that at this point, Myanmar law does not yet allow foreign investors to trade shares of Myanmar companies (but it does allow foreign investors to jointly invest in the start‐up of projects upon the government’s approval). However, we expect the law to be amended to allow foreign investors to participate in stock trading.

Streamlining its focus toward investments with good potential First Myanmar Investment Co., Ltd. (FMI) is a diversified conglomerate that has been investing in various key sectors in Myanmar for over 20 years. It is one of a few public companies in Myanmar that is involved in joint ventures with leading international firms such as Mitsubishi, the International Finance Corporation, the Asian Development Bank, , the Lippo Group of Indonesia and Parkson Retail Asia. The company has streamlined its businesses in FY03/15 and now has strategic investments in three key sectors, i.e., financial services, real estate and healthcare.

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Yoma Bank: to continue a strong growth Yoma Bank, the biggest investment in terms of asset size, is a high potential business that should significantly increase its weighting with respect to FMI’s net profit in the next few years. FMI consolidated Yoma Bank in 4Q03/15 and 03/16E will be the first full year that the company will recognize the bank’s full‐year performance. Yoma Bank’s strengths are: 1) experienced management (many from reputable international financial institutions), 2) strong and diverse loan book, 3) a stringent credit approval process, with support in the form of training and advice from the International Finance Corporation (IFC) and the German Government’s International Development Organization (GIZ), enabling it to maintain good asset quality (NPLs are far below the industry average), 4) emphasis on technology as a driver of growth and 5) long‐standing brand name in the local market. We expect continued loan growth at 30%‐40% p.a. and better balance sheet leverage with an increasing loan‐to‐deposit ratio to be the key profit drivers in the next 3‐4 years.

Real estate associates: Embedded with a lot of low‐cost land The real estate business has been a key profit contributor for many years, despite the fact that the company holds only minority stakes in associated companies (majority owned by its sister companies) due to the highly capital intensive nature of the business. All projects are in prime locations and many have low land costs, and we thus believe these projects will bring a good return in the future. We expect profit from this business to slow down in 03/16E due to concern during the political transition, but believe the recent enactment of a law allowing foreigners to buy condos and improving political sentiment will be catalysts for this business going forward.

Hospital: Revitalizing business to capture the growing demand We expect Pun Hlaing Siloam Hospital’s core operation to turn profitable at the EBITDA level in FY03/16 (from negative EBITDA of Kyat906mn in 2H03/15) due to strong growth in both patient volume and revenue per patient. Based on PHSH’s management guidance, we expect the hospital’s revitalized operation and network expansion to result in revenue CAGR of around 40% p.a. during FY03/16‐FY03/21, turning PHSH into net profit from FY 03/18 onward and delivering net profit CAGR of 41% during FY03/18‐03/21.

Company background

A diversified conglomerate

First Myanmar Investment Co., Ltd. (FMI), established in 1992, is the flagship company of the SPA Group (Serge Pun & Associates Ltd. and Mr. U Theim Wai, also known as Serge Pun). It has joint investments in many projects with its sister company Yoma Strategic Holdings (Bloomberg code YSH:SP, SGD 0.53) – a listed conglomerate with market capitalization of around USD672mn in the Singapore Stock Exchange.

During FY03/15, FMI restructured its investments by divesting a number of businesses. The net result of these divestments provided proceeds of 13.9bn Kyat for reinvesting in selected core businesses. The company now has strategic investments in three key sectors, i.e., financial services, real estate and healthcare, and minority investments in tourism (air charter and balloons), retail (department store), agriculture (coffee plantation) and industrial estates.

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The company has over 6,800 shareholders currently. About 25% of FMI’s shares are free floated. In general, shares of public companies in Myanmar have been traded over‐the‐counter (OTC) at the company offices. FMI has paid dividends every year since inception and it declared a cash dividend of 120 Kyat per share for the FY03/15performance (a payout ratio of 19% from basic EPS at end FY03/15).

Figure 2: FMI’s core businesses and investments

Note: Yoma Thitsar will be dissolved within the next few weeks.

Source: FMI

Financial services

Net profit from financial services was 2.37bn Kyat in FY03/15, up 474% YoY and accounting for 16% of FMI’s net profit from operating activities in FY03/15.

Yoma Bank Ltd. Yoma Bank Ltd., established in 1993, is one of Myanmar’s most reputable private banks (Figure 3: ranked #6 in terms of asset size and #5 in terms of branches as of January 2016). The bank regained a full banking license in 2013 after being restricted to domestic remittance services since the Myanmar banking crisis in 2003. The bank has undergone a transition over the past two years by upgrading management, facilities, IT, and the banking management system. At present, Yoma Bank has 57 branches covering 25 major cities nationwide.

Figure 3: Ten largest private banks in Myanmar as of August 2014

Assets # of # of ATM (Ks bn) branches 1. Kanbawza Bank 4,145 180 259 2. Ayayarwaddy Bank 1,200 76 156 3. Co‐operative Bank 1,181 100 223 4. Myawaddy Bank 1,028 37 26 5. Myanmar Apex Bank 721 45 56 6. Global Treasure Bank 589 81 ‐ 7. Yoma Bank 506 51 ‐ 8. United Amara Bank 505 32 70 9. Asia Green Development Bank 463 50 116 10. Myanmar Oriental Bank 239 26 22

10,577 678 928

Source: Myanmar’s Financial Sector, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH report dated February 2015

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FMI consolidated Yoma Bank into its financial statements in the last quarter of FY03/15 (ended 31 March) after raising its stake in the bank from 35.4% to 51% on 30 December 2014. The bank’s loan portfolio has expanded rapidly by nearly 4x YoY to 415bn Kyat, against deposits of 689bn Kyat, at the end of FY03/15. By the end of February 2016, total assets had reached over 1.1 Trillion Kyat. FY03/15’s net profit after tax rose 363% YoY, contributing shared profit of 2bn Kyat to FMI in FY03/15 (accounting for 14% of FMI’s net profit from operating activities).

The International Finance Corporation (IFC) has provided convertible (with the option to convert into equity if the allows) and advice in regard to improving since 2014. Its database infrastructure has been revitalized with the implementation of the London‐based MISYS banking system in FY03/15.

Yoma Bank has 49% equity interest in Digital Money Myanmar (the remainder is a partnership with Telenor), which is developing a mobile banking service called “Wave Money”. The service, soft‐launched in November 2015, is a non‐bank‐led mobile banking model (a bank‐led model has already been operated by other banks since 2014) focusing on delivering low‐cost electronic payments to virtually all citizens, including customers of every mobile network operator. Regulatory approval for a full launch from the central bank is expected in 2016. This project should help Yoma Bank expand its client base at lower CAPEX when compared with opening a new branch.

Yoma Bank focuses mainly on small and medium‐sized enterprises (SMEs), with about 50% of loans being made to SMEs at an average loan size of 175mn Kyat or USD 0.135mn. Given that Myanmar’s banking industry is expected to grow exponentially with catalysts from the country’s favorable economic growth and the low penetration rate of banking services, we expect profit from Yoma Bank to continue increasing its weight in FMI’s earnings in the coming years.

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Figure 4: Yoma Bank

Atmosphere at the bank’s counter services

Promotional campaign of “Wave Money” mobile banking service that Yoma Bank has jointly developed with Telenor

- Wave Account allows the customer to securely store and transfer money, anywhere, anytime. - The customer has to go to a Wave Shop to deposit or withdraw cash from a Wave Account. All other services can be accessed from mobile phones. - All transactions are secured by the customer’s secret PIN. - The customer can send and receive money through a Wave Shop, even if the recipient does not possess a Wave Account.

Source: FMI, http://www.wavemoney.com.mm

Yoma Thitsar Commercial Yoma Thitsar Commercial Co., Ltd. has operated the FMI Trading Centre since March 2006. The centre provides an electronic trading system for shareholders to trade FMI shares over‐the‐ counter at its office in the FMI Centre building. This unit has already ceased operations and will be dissolved after FMI’s listing in the YSX.

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Real Estate

Real estate has been the key profit driver for FMI in recent years. Due to the highly capital intensive nature of the business, FMI holds minority stakes in joint investments with its sister companies in the development of many projects; meanwhile, YSH normally holds majority stakes as the firm can raise funding from international investors in the SGX. The contribution from this business to FMI has been in the form of shared profits from associates. Net profit from the real estate business was 12.6bn Kyat in FY03/15, up 6% YoY and accounting for 87% of FMI’s net profit from operating activities in FY03/15.

Thanlyin Estate Development Thanlyin Estate Development, a 30%/70% joint venture between FMI and its sister company (SGX‐listed Yoma Strategic), is the developer of the Star City project on riverside land area of 135 acres in Thanlyin, across the Bago River, southeast of downtown Yangon. The project, targeting the middle‐ to upper‐income market segment, was launched in 2010, and is separated into five phases. When all the phases are completed, it will consist of a total of about 9,000 residential units.

Sales of the first two phases, Zone A and B, were the main profit engine for FMI in recent years. Thanlyin Estate has launched a new phase (Zone C, called Galaxy Towers, comprised of six towers totaling 954 units) in 1H15. Star City is aimed at serving increasing residential demand from the Thilawa Special Economic Zone, which is located about 14 km south of the project.

Figure 5: The Star City project

\

Thilawa SEZ Galaxy Tower

Source: FMI

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KrisPlaza Nay Pyitaw Condominium LSC‐FMI (KrisPlaza Nay Pyitaw Condominium) is a 50/50 joint venture between FMI and Lighting Specialist Co., Ltd (LSC ‐ who has a partnership with Singapore’s Krislite Pte. in lighting systems for projects in Myanmar). KrisPlaza is a modern mixed‐use project in Nay Pyitaw. The project is constructed on 1.25 acres of land, comprised of two 10‐storey towers accommodating 114 luxury condominiums, a commercial retail center and Yoma Bank’s regional headquarters, is expected to be completed in 2017.

Figure 6: KrisPlaza Nay Pyitaw

Source: FMI, krisplazanaypyitaw.com

Meeyahta International Hotel Limited Meeyahta International Hotel Limited (MIHL) is a 20%/80% joint venture between FMI and its sister company Yoma Strategic on the SGX. MIHL is the developer of “The Landmark Development”, a mixed‐use complex on a 10‐acre land plot in Pabedan, downtown Yangon. This project will cost more than USD450mn, comprising luxury hotels, condominiums, serviced apartments, office buildings and a retail podium. As per the original plan, this project is expected to have gross floor area of 2 million sq.ft. when finished.

The project site is comprised of two land plots, including the current locations of 1) a heritage Burma Railways building, which will be redeveloped into a Peninsula hotel 2) the Grand Meeyahta Hotel and 3) an 11‐storey office building, FMI Centre. FMI stopped recording rental revenue from the FMI Centre in 03/16E, as in February 2015 the company exchanged its entire 90% stake in FMI Syndication (owner of FMI Centre) for a 10% stake in MIHL. FMI currently has 20% shareholding in MIHL.

Yangon Peninsula Hotel has started redevelopment by a separate JV: The Hongkong and Shanghai Hotels Limited 70%, YSH 24% and FMI 6%. Meanwhile, for the Landmark Project, FMI and YSH are still in discussions with Mitsubishi Corporation and Mitsubishi Estate to finalize potential equity investments. They are also currently negotiating the terms of financing with IFC and the Asian Development Bank, who have been mandated to provide a debt and equity financing package to the project.

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Figure 7: The Landmark Development

Source: FMI, YSH’s annual report 2015

Figure 8: The Landmark Development (continued)

Project site before the development Redevelopment of the heritage building into the Yangon (FMI Centre is on the left) Peninsula Hotel, picture taken 15/11/2015

picture taken 17/3/2016 picture taken 17/3/2016

Source: FMI, www.skyscrapercity.com, KTZ Ruby Hill

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FMI Garden Development FMI Garden Development Ltd, its 47.5% associate, is the developer of FMI City, a housing project on 465 acres nine miles northwest of downtown Yangon. This project, which has been developed throughout the 1990’s and comprises a total of over 2,000 properties, is in its final phase with a few plots of land still to be sold.

Figure 9: FMI City

Source: FMI

Pun Hlaing Links Services Pun Hlaing Links Services is FMI’s 30% affiliate. This company owns the LDRs for approximately 194.7 acres of land adjacent to Star City, including the land on which the local school will be developed. A total of 125 acres of this land was used to develop the nine‐hole Pun Hlaing Links golf course, which opened in FY03/16E. Subject to the final master plan, the remaining acreage will be used for the expansion of the golf course and residential areas.

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Healthcare

The healthcare business has contributed a loss from the core operation since inception, although it has been cash positive in the past. It turned to a profit of 1.8bn Kyat in FY03/15, accounting for 12% of FMI’s net profit from operating activities, due to extra gain from land sales in 1H 03/15.

Pun Hlaing Siloam Hospital (PHSH) Pun Hlaing Siloam Hospital (PHSH) was originally opened in 2005 under the Pun Hlaing Hospital name, and has been one of the leading hospitals in Myanmar. The hospital is located on three acres of land in Pun Hlaing Golf Estate, Hlaing Thayar (a township 13 miles northwest of downtown Yangon, consisting of industrial parks and wealthy communities). It provides primary to tertiary medical services, targeting to serve patients across the socio‐economic spectrum. Currently, the hospital has 174 inpatient beds, with six operating theatres, 24/7 emergency services, an ICU section and four clinics.

In 3Q14, FMI increased its stake in PHSH from 35% to 75%. Later, in 2Q15, the company reduced its shareholding to 60% upon entering into a partnership with Indonesia’s conglomerate, the Lippo Group (who is also the largest hospital chain operator in Indonesia, operating 20 hospitals with >4,800 beds across Indonesia). The Lippo Group injected USD10mn into PHSH and holds the remaining 40% share stake. It has also sent executives to help manage PHSH. The hospital has revitalized operations, with a number of Myanmar specialists returning home from Hong Kong, Singapore, the USA, Malaysia, the UK and Australia. It has implemented a different pricing model in order to serve a wider range of market segments and invested in modern medical equipment, e.g., Cardiac Catheterization Laboratory, 1.5 Tesla MRI, 128 Slice CT Scanner, Digital X‐ray, 4D Ultrasound Machines and a filmless Tele‐radiology system. Over the next seven years, PHSH plans to establish a nationwide network with two hospital formats to be built: 1) “General Hospitals” with around 300 beds and 2) smaller format “Express Hospitals’” with 40‐80 beds. FMI expects that PHSH will add 2‐3 more hospitals, including in Yangon and Taunggyi, in the next 6‐8 months and sees this subsidiary reaching profit at the EBITDA level this year.

Figure 10: Pun Hlaing Siloam Hospital

Source: FMI

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Other investments

Chindwin Holdings (Balloons Over Bagan) Chindwin Holdings Pte. Ltd. is incorporated in Singapore and invests in Myanmar’s tourism industry. Chindwin is a 30/70 joint venture between FMI and its sister company YSH. Its key investment was the acquisition of a 75% interest in Balloons Over Bagan in June 2013 (hot air balloons that usually operate from October‐April each year). This balloon business has operated in Myanmar with an unblemished safety record for over 15 years. Chindwin will seek to develop further tourism‐related services, including the ongoing development of a boutique resort hotel in Bagan. Chindwin shared a loss of 265mn Kyat to FMI in FY03/15 (vs. shared profit of 1.14bn Kyat in FY03/14), but it is expected to be profitable in the future as an increasing number of tourists visit Myanmar.

Figure 11: Balloons Over Bagan

Source: FMI, http://www.myanmar‐travelagent.com

Myanmar Agri‐Tech Myanmar Agri‐Tech Ltd. (MAGT), FMI’s 30% affiliate, owns the planting rights on 100,000 acres of land at the Maw Tin estate in Ayeyarwaddy Region. MAGT has partnered with ED&F Man Holdings, Switzerland‐based soft commodities traders, to grow 3,700 acres of lowland Robusta coffee at the estate.

Figure 12: Myanmar Agri‐Tech

Source: http://fmi.com.mm/myanmar‐agri‐tech

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FMI Air FMI Air is a leading local airline, operating three Bombardier CRJ‐200 jet aircraft. The airline has a leading position on the Yangon–Naypyitaw route while also currently flying to Sittwe with other destinations being developed. FMI reduced its stake in FMI Air from 50% to 10% in June 2015, citing the reason that the airline is still in the nascent stage. This transaction made a gain of approximately 7bn Kyat in 03/16E. Airline services contributed a loss of 3.1bn Kyat to FMI in FY03/15.

Figure 13: FMI Air

Source: http://fmi.com.mm/fmi‐air

Parkson Myanmar FMI holds a 10% stake in Parkson Myanmar, a subsidiary of Parkson Retail Asia Ltd. ‐ a Malaysian retailer who operates department stores throughout Southeast Asia and China. Parkson’s first branch in Myanmar opened in May 2013 in the bottom three floors of FMI Centre.

Figure 14: Parkson Department Store Yangon

Source: http://fmi.com.mm/fmi‐air

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Myanmar Thilawa Special Economic Zone FMI owns 5% of shares in Myanmar Thilawa SEZ Holdings (MTSH), which is one of the first six public companies selected to be traded in the YSX. MTSH invests 41% in Myanmar Japan Thilawa Development Limited (MJTD), the developer of Thilawa Special Economic Zone. The Thilawa SEZ is an industrial park and port development located 14 miles from downtown Yangon. The first phase of the project, called ‘Zone A’, has been developed in three phases covering 396 hectares. As of Feb‐16, 61 companies had signed reservation agreements for around 255 hectares (79.8% of sellable area); meanwhile, 20 companies have started construction and six companies have started operations in the Thilawa SEZ Zone‐A Phase 1. In 3Q15, MJTD signed an MOU to develop Zone‐B on an additional 500‐700 hectares. Currently, they are in the process of doing land selection and an Environmental Impact Assessment study, with the design having been carried out already. When the SEZ begins full operations it is expected to generate around 50,000 jobs.

Figure 15: Thilawa Special Economic Zone

Source: http://www.japan.go.jp, mmbiztoday.com/articles/myanmar‐s‐manufacturing‐sector‐offers‐promising‐growth‐prospects

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Financial performance

Extra profit boosted net profit FMI changed its financial reporting from a standalone basis to consolidated financial statements in FY03/15. The FY03/15 consolidated net profit was 74.6bn Kyat, up 497% YoY, but this resulted largely from extra profit of 60.5bn Kyat from non‐operating activities (mainly gains from the restructuring of its investment in Yoma Bank).

Profit from operating activities increased 13% YoY in FY03/15 Excluding the aforesaid profit from non‐operating activities, the consolidated profit from operating activities (including share of profit from associates) was 14.2bn Kyat, up 13% YoY in FY03/15, which was driven by: 1) strong growth in financial services, which raised profit from this segment by 474% YoY to 2.4bn Kyat; 2) the turnaround of the healthcare business from contributing a shared loss of 236mn Kyat in FY03/14 to a profit of 1.8bn Kyat in FY03/15 (combining a shared profit of 3.3bn Kyat from its 35% stake before consolidation and a loss of 1.5bn Kyat from its 60% stake after consolidation). However, this resulted largely from extra gain from the sale of unused land before the consolidation (amount not disclosed), while the core operation made a loss. 3) an increase in shared profit from the real estate business (+6% YoY to 12.6bn Kyat). This was the key profit maker for FMI as shared profit from real estate made up around 80% of core profit from operating activities. Two key revenue sources were sales of property in Thanlyin Estate (FMI holds 30%) and rental income from FMI Centre (FMI held 90% in FY03/15 but later exchanged this investment for MIHL’s shares).

Figure 16: Breakdown of profits from operating activities

Kyats bn 14.0 Net profits from operating activities, excluding Kyats bn 12.0 sharing profits from associates 14.00 10.0 Rental income 8.0 After consolidations 12.00 from FMI Center 6.0 10.00 FY13/14 4.0 8.00 FY14/15 2.0 6.00 0.0 FY13/14 ‐2.0 4.00 FY14/15 ‐4.0 2.00 ‐ ‐2.00 Kyats bn ‐4.00 14.0 Sharing profits from associates 12.0 10.0 Before taking controlling stakes Note: including shared profits from associates 8.0 6.0 FY13/14 4.0 FY14/15 2.0 ‐ ‐2.0

Source: http://fmi.com.mm

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Revenue jumped from business consolidation Consolidated revenue rose 199% YoY in FY03/15, resulting mainly from the consolidations of Yoma Bank and Pun Hlaing International Hospital after taking controlling stakes in these two subsidiaries.

Figure 17: Consolidated revenue breakdown

Kyats bn

20,000

15,000

10,000 FY13/14 5,000 FY14/15 ‐

‐ ‐ ‐ Air ‐ Agri ‐

‐ income

Sales Financial Services Services charter Healthcare Services

Automobile consulting Automotive Services Services Rental

Source: http://fmi.com.mm

Lofty D/E due to high weighting of banking business FMI’s D/E ratio at the end of FY03/15 was 4.2x, rather high as deposits from the banking business are highly weighted in its balance sheet. The loan‐to‐deposit ratio was 60%, better than the approximate 70% average of Myanmar’s private banks, at year‐end 2014, but the ratio returned close to 70% by the end of FY03/15 due to robust loan growth. At the end of 2015, the bank’s capital adequacy ratio was around 11%, with a very low non‐performing loan ratio at 0.04% (far below the 2% average of Myanmar’s private banks). This should largely be the result of the fact that the bank just resumed the lending business and the requirement that bank lending be collateralized in Myanmar. Excluding the bank’s subsidiary, FMI has maintained a reasonable gearing ratio of 12%.

Bank debts in FY03/16 should decline significantly Interest bearing debts in businesses other than banking at the end of FY03/15 totaled 17.7bn Kyat, comprising 12.4bn Kyat for the airline business and convertible loans of 4.8bn Kyat from IFC to Yoma Bank. However, debts in FY03/16 should decline significantly from divestment of the airline business in June 2015.

Cash dividend of 120 Kyat from FY03/15 performance FMI declared a cash dividend of 120 Kyat per share for the FY03/15 performance (a payout ratio of 19% from basic EPS at end FY03/15), implying a dividend yield of 0.9% from the stock’s closing price at the end of FY03/15 (March 2015).

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Outlook for performance in 03/16E

We expect profit to decline significantly in 03/16E Excluding extra gain of 60bn Kyat in FY03/15 and 7bn Kyat gain from divesting the stake in FMI Air in 03/16E, we expect FMI’s core profit to decline significantly by 78% YoY to 3.1bn Kyat in FY03/16E as decreasing profit from the property business will dampen the performance. Meanwhile, Yoma Bank’s profit is likely to grow at a rather slow pace due to increased competition with respect to deposit rates and rising administrative expenses during the expansion stage, with the hospital continuing to show a loss despite turning to profit at the EBITDA level.

Property business While shared profit from real estate has been a key earnings driver for FMI in recent years, profit from this segment should decline significantly due to concerns over political risk during the political transition in 2015. The trend of shared profit from the property business should be indicated by YSH’s performance (Bloomberg stock code YSH:SP, holds 70% in Thanlyin Estate and property sales accounted for >80% of FY03/15revenue), whose 9M 03/16 net profit declined 75% YoY due mainly to slowing property sales. Myanmar’s property market should gradually recover in the coming quarters after months of wait‐and‐see sentiment during the political transition. Revenue of Thanlyin Estate should remain weak in 4Q 03/16E and result in full‐year shared profit from Thanlyin declining 94% YoY from 10.6bn Kyat in FY03/15 to 0.6bn Kyat in 03/16E.

Figure 18: Quarterly performance of Yoma Strategic Holdings

SGD mn YSH's net profit 15

10

5

0 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16E

Source: http://www.yomastrategic.com, Bloomberg : YSH:SP

We expect the outlook to improve, with shared profit from Thanlyin to bounce back to around 9‐10bn Kyat in FY 03/17E, on the increased confidence of potential buyers after establishment of the new government in April’16 and the recent enactment of a law in January 2016 that allows foreigners to buy condos (up to 40% of units above the sixth floor in any condominium building in Yangon, Mandalay or Nay Pyi Taw that is surrounded by at least one acre of land). In addition, the openings of factories in the Thilawa SEZ (six out of 61 companies in the 1st phase had started manufacturing operations in Feb’16; we expect more to gradually begin production in 2016) should gradually raise residential demand for Star City, which is the only large‐scale residential project in the SEZ’s vicinity. Star City has recurring income from building A5, which it has kept as an investment property. Moving forward, FMI will look to diversify its real estate income by adding more rental properties to the income mix. Note that FMI has stopped recording rental income from FMI Centre (around 3bn Kyat per year or 9% of revenue in FY03/15) after swapping this investment for a stake in MIHL. Meanwhile, the Landmark project of MIHL is still in the early stage of development.

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Banking business We expect Yoma Bank’s net profit to rise just 8% YoY in FY03/16E, vs. +363% YoY in FY03/15, due to increased deposit rate competition; rising administrative expenses during the expansion stage; and lower fee income, especially income related to remittance fees, due to higher competition and increasing mobile banking transactions. However, we expect the bank’s net profit CAGR during FY03/17E‐FY03/19E to post stronger growth at 47% backed mainly by continued robust loan growth of 30%‐40% p.a. (in line with 32% CAGR during FY16‐18E for the Myanmar banking system’s lending as projected by the IMF) and the likelihood of easing operating expenses vs. FY03/16E. Moreover, another earnings driver should come from the potential for better balance sheet leverage, with the loan‐to‐deposit ratio (LDR) for the bank expected to improve from 60% in FY03/15 (vs. the industry average of around 55%) to 70‐75% in the next 3‐4 years, which should improve its net interest margin (NIM).

The bank’s financial positions are relatively solid when compared to the industry. Its NPL ratio stood at just 0.46% as of Dec‐15, which is much lower than the 2% industry average for private banks as per Central Bank of Myanmar (CBM) data. This should be attributable to the bank’s strengths as follows: 1) experienced management, 2) strong and diverse loan book, 3) stringent credit approval process, 4) emphasis on technology as a driver of growth and 5) long‐standing brand name in the local market.

The bank’s capital adequacy ratio stood at around 11% as of Dec‐15, which is slightly higher than the minimum requirement of 10% (vs. the average of private banks of c20% at the end of FY03/15). This may become a concern as the rapid expansion of its loan portfolio could lower the ratio. However, we view that the bank’s solid shareholders would promptly support potential further recapitalization given its favorable business growth outlook; moreover, the bank may look to debt financing for some of its capital needs.

Yoma Bank’s focus on expanding its lending to small and medium‐sized enterprises (SMEs) should be supportive for loan growth prospects, as lending to Myanmar’s SME segment is still underserved. Its services offered at an international standard have attracted clients on both the deposit and lending sides; meanwhile, mobile banking, if obtaining approval for a full launch, would also help fuel the growth.

Myanmar’s financial system remains in the early stage of development, with less than 20% of the population having access to banking services and credit to the private sector accounting for merely 16% of the country’s GDP (as of February 2015). Competition from foreign banks is still limited in Myanmar, with just nine players having been granted restricted licenses to do wholesale banking since October 2014. Representative offices of foreign banks cannot conduct any commercial banking business and offer only liaison support to clients whose offshore parent banks provide project financing in Myanmar.

Figure 19: Myanmar’s interest spread vs. regional banks Figure 20: Capital Adequacy of Private Banks

Source: Central Bank of Myanmar, World Bank, IMF Source: Central Bank of Myanmar, IMF

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Healthcare business Pun Hlaing Siloam Hospital (PHSH)’s core operation should turn profit at the EBITDA level in FY03/16 (from negative EBITDA of Kyat906mn in 2H03/15) due to strong growth in both patient volume and revenue per patient. However, core earnings should continue to show a loss when taking depreciation into account. Note that profit in FY03/15 resulted from extra gain from land sales (amount not disclosed). Based on PHSH’s management guidance, we expect the hospital’s revitalized operation (facilities upgrade and a new pricing model) and network expansion to result in revenue CAGR of around 40% p.a. during FY03/16‐FY03/21, turning PHSH into net profit of around 2.0bn Kyat in FY 03/18 and delivering net profit CAGR of 41% during FY03/18‐03/21E.

The long‐term outlook of the hospital business in Myanmar is interesting provided that PHSH is able to gain more popularity from patients in the high‐end market, as a considerable number of people travel abroad each year, e.g., Thailand (>100,000 cases per year), Singapore and India, for medical checkups and treatments. PHSH’s different pricing levels should also attract more patients in the middle class, which is the key segment fueling Myanmar’s economy.

Healthcare services in Myanmar are underserved, especially in rural areas. Although the government has allocated more budget to increase public services, i.e., opening 12 more rural health centers and 33 sub‐centers in 2014‐2015, public hospitals, as well as private ones in downtown Yangon, are mostly overcrowded. This, together with the rising purchasing power of the middle class and the country’s liberalizing economy, has significantly raised outflow of medical travel to neighboring countries in recent years.

The growth potential of healthcare in Myanmar has attracted many international players. Apart from the Lippo Group, hospitals from Thailand and India also have exposure in this market. In Yangon, Bangkok Dusit Medical Services (BDMS:TB) now has a referral office and Bumrungrad Hospital (BH:TB) will open a primary care clinic in 2Q16. Thonburi Hospital Group (Thai non‐listed) has joined with a local investor (GMP group) to develop two hospitals with a combined capacity of 400 beds in Yangon and Mandalay.

Figure 21: Health expenditures per capita

USD Health expenditure per capita 3,000

2,500

2,000

1,500

1,000

500

0

Source: http://data.worldbank.org

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Valuations

Estimate fair value of Kyat 22,300 in FY03/17E We estimate FMI’s fair value at Kyat 22,300 in FY03/17E based on sum‐of‐the‐parts valuation by focusing mainly on core businesses, i.e., bank, healthcare and real estate. We estimate the value of the bank from PBV under the Gordon growth model, which will be comparable to regional listed peers, using DCF valuation for the hospital business and the Revalued Net Asset Value method from the net present value of future profit for the real estate business. For other associated companies, due to limited information provided, we simply put available referenced value (i.e., equity‐adjusted carrying amount from the financial statement or market price) into the valuation.

Figure 22: Sum‐of‐the‐parts valuation

(Kyat mn) % holding FY03/17E % of Comment gross vain Core businesses Yoma Bank 51% 169,620 32% P/BV at 5.9x (Gordon model and being same level when FMI bought additional shares in Dec 2014) Pun Hliang Silom Hospital 60% 43,180 8% DCF

Real Estate 290,930 56% Thanlyin Estate (Star City) 30% 130,080 Current phases 11,630 FY03/17E RNAV Remaining developable area 118,450 FY03/17E RNAV Pun Hling Link Services 30% 63,070 Remaining developable area 54,070 FY03/17E RNAV, excluding golf course and international school Golf course 125 acres 9,000 In case raw land sales @ USD 200,000 /acre, assuming no debt Landmark Development 20% 90,680 FY03/17E RNAV KrisPlaza 50% 7,100 FY03/17E RNAV

Other associated companies Myanmar Thilawa SEZ (MTSH) 5% 13,650 3% FY03/15 ‐ based on latest OTC price @Kyat 70,000 investment cost is Kyat 1,950 mn Luxury tourism 30% 6,188 1% FY03/15 ‐ investment cost (balloon over Bagan) FMI Air 10% ‐ 0% FY03/15 ‐ investment cost Kyat 2.31bn, but loss should outweigh Parkson 10% 259 0% FY03/15 ‐ investment cost

Total segmental value 523,827 100% Number of shares (million) 23.5 Fair value per share (Kyat) 22,300

Source: KT Zmico Research

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Yoma Bank We estimate FMI’s 51% shareholding in Yoma Bank to be worth Kyat 169,624mn based on the PBV multiple at 5.9x under the Gordon growth model, with long‐term ROE of 21% (c25% discount from average ROE during FY03/15‐03/21E) and cost of capital of 15.5%. (This was also the same multiple when FMI bought additional 15% shares in Yoma Bank in December 2014). Although the multiple looks high compared with the 1.2x average of regional peers, Yoma Bank is still in the early stage of resuming its lending business and its net profit CAGR of 47% during FY03/17‐03/19E is much better than the regional benchmark. This makes PE/EPS growth of 0.3x‐0.5x look compelling and would bring down PBV to around 3x in 03/19E‐03/20E.

Figure 23: Yoma Bank’s valuation

Yoma Bank's valuation FY03/17E notes Risk‐free rate (%) 10.0% Central bank rate Market return (%) 15.5% disc 10% from avg. regional market return Beta (x) 1.0 Cost of capital : Using CAPM (%) 15.50% Sustainable ROE (%) 20.7% KTZ's estimate Retention rate (%) 70% KTZ's estimate / for L‐T outlook Fair value P/BV multiple (x) 5.9 Book value (mn Kyat) 55,905 FY03/17E equity value Fair value (mn Kyat) 332,597 Portion to FMI 51% 169,624

FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Firm's FV / equity value (PBV) 5.9 5.9 5.9 4.5 3.4 2.5 PE 26.6 35.1 24.8 18.2 13.6 10.4 PEG 4.7 0.3 0.5 0.4 0.3

Note: FY03/15’s PBV is estimated from investment value when FMI bought 15% stake in Dec’14.

Loan to deposit ratio (RHS) Equity (RHS) Net interest income NPAT Loan growth 80,000 120,000 400% 100% Deposit growth 350% 80% 60,000 300% 80,000 250% 60% 40,000 200% 150% 40% 40,000 20,000 100% 20% 50% - - 0% 0% FY03/15 03/16E 03/17E 03/18E 03/19E FY03/15 03/16E 03/17E 03/18E 03/19E

Source: KTZ estimates

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Pun Hlaing Siloam Hospital (PHSH) We value FMI’s 60% interest in PHSH at Kyat 43,180mn, accounting for 8% of FMI’s fair value, based on the DCF approach (from discounting the estimated EBITDA due to limited information provided). We use a discount rate at 13% (lending rate in Myanmar) and long‐term growth for the firm’s terminal value at 3% in our valuation.

Figure 24: PHSH’s valuation

Kyat mn Kyat mn Hospital revenue EBITDA (RHS) 60,000 30,000 Net profit (RHS) 50,000 25,000 20,000 40,000 15,000 30,000 10,000 20,000 5,000 10,000 - - -5,000

03/16E 03/17E 03/18E 03/19E 03/20E 03/21E

2H 03/15

DCF Valuation 2H 03/15 03/16E 03/17E 03/18E 03/19E 03/20E 03/21E EBITDA ‐ 906 92 1,767 4,964 7,157 8,231 9,465

Discount rate' 13% L‐T growth 3% NPV of EBITDA 20,597

TM Value 94,653 NPV of TMV 51,374

DCF value of enterprise 71,971 Portion of FMI's 60% stake 43,180

Source: KTZ estimates

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Real Estate Business We value FMI’s interest in the real estate business at Kyat 290,930mn, accounting for 56% of FMI’s fair value. Although the company holds just minority stakes in associated companies in the real estate business, these associates develop large‐scale projects and hold a large land bank at very low cost, which should add significant value to FMI in the future. We estimate the net present value of future profit from these properties based on the following assumptions:

Thanlyin Estate: (FMI’s holding 30%) ‐ Star City (current phase of around 1mn sq.ft) ‐ selling price USD 210 psf (latest from Zone C), net margin 20%, discount rate 13%, selling period during 03/16E‐03/19E. ‐ Star City (remaining developable area of 11mn sq.ft.) ‐ selling price USD 250 psf, net margin 20%, discount rate 13%, selling period during 03/18E‐03/22E. Pun Hlaing Link: (FMI’s holding 30%) ‐ Developable area excluding golf course and international school ‐ selling price USD 250 psf., net margin 20%, discount rate 13%. ‐ Golf course – assuming raw land to be sold at USD200,000/acre with no debt. Landmark Development: ‐ Peninsula Hotel (FMI’s holding 6%) – 82‐room luxury hotel, room rate USD470/night, occupancy 60%, net margin 20%, profit growth 10% p.a., commencing 03/19 onward. ‐ Mix‐used buildings (FMI’s holding 20%) Condominium – saleable area 335,000 sq.ft., selling price USD 550 pst., net margin 20%, selling period during 03/19E‐03/21E. Office buildings – leasable area 600,000 sq.ft., rental rate USD 90 psm/month, net margin 30‐35%, profit growth 8% p.a., commencing 03/21‐03/22 onward. Retail podium ‐ leasable area 290,000 sq.ft., rental rate USD 50 psm/month, net margin 30‐ 35%, profit growth 8% p.a., commencing 03/21‐03/22 onward. Serviced apartment ‐ 90‐room, rental rate USD 4,000/month, net margin 30%, profit growth 7% p.a., commencing 03/21‐03/22 onward. Business hotel – 250‐room, room rate USD250/night, occupancy 80%, net margin 20%, profit growth 8% p.a., commencing 03/22 onward. (Funding structure not yet finalized, we assume D/E of 2:1 and a low interest rate at 8% as IFC and ADB have been mandated to support).

LSC‐FMI (KrisPlaza): (FMI’s holding 50%) Serviced apartment – 114 units, selling price USD 380 pst., net margin 17%, discount rate 13%, selling period during 03/18E‐03/20E. Commercial space ‐ leasable area 29,579 sq.ft., rental rate USD 35 psm/month, net margin 25%, profit growth 8% p.a., commencing 03/20 onward.

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Key risks ‐ Reliance on key executive – Mr. Serge Pun is the single largest shareholder with a direct interest and indirect interest of 69.4% in FMI. The company has benefited from business opportunities directly or indirectly brought by Mr. Pun. Losing this benefit may adversely affect the business prospects.

‐ May be required to repurchase 40% share stake of FMI Air – Selling 40% of shares in FMI Air to Yangon Land in June 2015 comes with the condition that the buyer may sell back shares to FMI anytime until June 2025. Exercising this option would adversely affect FMI’s financial resources.

‐ Volatility in interest rates could affect bank’s profit – Decreasing interest rates on the bank’s assets (whether by the CBM or market competition) without corresponding decreases in the interest rates on the bank‘s liabilities would affect the bank’s profitability.

‐ Mismatches of the bank’s assets and liabilities – The bank’s funding is primarily short‐ term deposits. If depositors do not roll over deposited funds on maturity or if the bank is unable to continue to increase deposits sufficiently to support the bank’s lending, the operation would be adversely affected.

Shareholding structure

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FY Ended 31 March Consolidated

PROFIT & LOSS (Ks mn) 03/14 03/15 03/16E 03/17E 03/18E Revenues 11,128 33,319 112,334 157,543 213,906 Cost of sales and service (6,706) (20,401) (74,632) (103,868) (139,717) Gross profit 4,422 12,918 37,702 53,675 74,189 SG&A (2,880) (14,007) (30,154) (37,251) (48,169) EBITDA 1,796 516 9,305 18,421 28,292 Depreciation & amortization (255) (1,605) (1,757) (1,996) (2,272) EBIT 1,542 (1,089) 7,548 16,424 26,020 Interest expense (40) (624) (154) (24) (33) Gain (loss) from affiliates 11,431 15,453 1,236 10,943 26,394 Extra Items 320 60,491 7,000 0 0 EBT 13,252 74,231 15,631 27,343 52,381 Corporate tax (704) (1,107) (2,472) (4,148) (6,868) Net profit 12,499 74,655 10,103 16,619 35,735 Reported EPS 678.64 3,320.97 430.27 707.78 1,521.94

Core net profit 12,499 14,165 3,103 16,619 35,735 Core EPS 678.64 630.10 132.14 707.78 1,521.94 Dividend (Ks) 200.00 120.00 121.00 122.00 123.00 FY Ended 31 March Consolidated BALANCE SHEET (Ks mn) 03/14 03/15 03/16E 03/17E 03/18E Cash and equivalents 1,177 129,014 176,223 199,635 244,671 Accounts receivable 21,728 2,835 2,079 3,426 6,302 Inventories 365 480 2,045 2,846 3,828 PP&E‐net 10,223 107,339 122,371 131,270 137,158 Other assets 39,500 296,265 293,820 315,402 359,439 Total assets 86,547 961,515 1,308,765 1,645,497 2,058,687 ST debt & current portion 0 689,282 1,050,000 1,365,000 1,733,550 Long‐term debt 178 13,917 11,419 11,419 11,419 Total liabilities 4,524 736,558 1,082,907 1,399,261 1,771,869 Paid‐up shares 18,418 22,480 23,480 23,480 23,480 Shareholder equity 81,638 175,534 182,939 196,740 227,544 Total liab. & shareholder equity 86,162 912,091 1,265,846 1,596,001 1,999,413 FY Ended 31 March Consolidated CASH FLOW (Ks mn) 03/14 03/15 03/16E 03/17E 03/18E Net income 12,499 74,655 10,103 16,619 35,735 MI adjustment from Forex and other extraordinary adjustments ‐ ‐ ‐ 9,560 ‐ ‐ deconsolidation of FMI Air

Depreciation & amortization 255 1,605 1,757 1,996 2,272 Change in working capital (20,445) 72,875 (295,395) (281,484) (314,171) Cash flow from operations ‐ 18,722 72,873 ‐ 291,525 ‐ 277,874 ‐ 310,423 Capex (Invest)/Divest (17,607) 19,152 (16,789) (10,896) (8,160) Cash flow from investing (17,607) 19,152 (16,789) (10,896) (8,160) Debt financing (repayment) ‐ 26 13,856 358,220 315,000 368,550 Equity financing 39,246 25,551 ‐ ‐ ‐ Dividend payment ‐ 1,306 ‐ 3,597 ‐ 2,698 ‐ 2,818 ‐ 4,931 Others ‐ ‐ ‐ ‐ ‐ Cash flow from financing 37,915 35,810 355,522 312,182 363,619

Net change in cash 1,586 127,835 47,208 23,412 45,036 Free cash flow (36,329) 92,025 (308,314) (288,770) (318,583) FCF per share (Ks) (1,972) 4,094 (13,131) (12,299) (13,568) FY Ended 31 March Consolidated PROFITABILITY 03/14 03/15 03/16E 03/17E 03/18E Revenue growth (%) n.a. 199.4 237.2 40.2 35.8 EBITDA growth (%) n.a. (71.3) 1,704.1 98.0 53.6 EPS growth (%) n.a. 389.36 (87.04) 64.50 115.03 Gross margin (%) 39.7 38.8 33.6 34.1 34.7 EBITDA margin (%) 16.1 1.5 8.3 11.7 13.2 Operating margin (%) 13.9 (3.3) 6.7 10.4 12.2 Net margin (%) 112.3 224.1 9.0 10.5 16.7 Core profit margin (%) 112.3 42.5 2.8 10.5 16.7 Effective tax rate (%) 5.3 1.5 15.8 15.2 13.1

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Appendices

Profiles of associated companies

Surge Pun & Associates (SPA) SPA is a private investment holding company, fully owned by Mr. Serge Pun. All the investments of SPA were made through its two flagship public investment holding companies: First Myanmar Investment Co., Ltd. and Yoma Strategic Holdings Ltd. (YSH), which was incorporated in Singapore and operates in Myanmar. SPA, FMI and YSH are strategically affiliated through their common shareholder, Mr. Serge Pun, and have investments in eight business sectors in Myanmar as follows:

Figure 25: SPA Group’s structure

Source: FMI’s listing document

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Figure 26: Investments of SPA

Businesses joined with FMI Businesses not joined with FMI

Financial Service Automotive ‐ Yoma Bank ‐ SPA Motor, New Holland (agricultural equipment), Real Estate Volkswagen, Mitsubishi Motor, Hino Motor ‐ FMI City ‐ Pun Hlaing Link Service (Star City Golf Course) Agriculture ‐ Myanmar Agri‐Tech (coffee plantation) Aviation ‐ FMI Air

Source: http://www.spa‐myanmar.com

Yoma Strategic Holdings Ltd. (YSH: SP) Yoma Strategic Holdings, listed on the mainboard of the Singapore Exchange (SGX) since 2006, has been one of the leading real estate developers in Myanmar. The company has diversified its business into the consumer, automotive, agricultural, logistics and tourism businesses. Its revenues in FY03/15 were derived mainly from real estate (81%), automobile services (8%), tourism services (7%), construction‐related services (2.7%) and property rental (1.4%).

Figure 27: YSH’s performance Figure 28: YSH’s share price

(Point) (SGD) 3,600 1.00 STI Index (LHS) YOMA SP (RHS) 0.90 3,400 0.80 0.70 3,200 0.60 3,000 0.50 0.40 2,800 0.30 0.20 2,600 0.10

2,400 0.00 10 11 12 13 14 15 10 10 11 11 12 12 13 13 14 14 15 15 16 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jan Jan Jan Jan Jan Jan Jan

Sep Sep Sep Sep Sep Sep May May May May May May Source: http://www.yomastrategic.com, Bloomberg

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Figure 29: Investments of YSH

Businesses joined with FMI Businesses not joined with FMI

Real Estate Education ‐ Star City ‐ Pun Hliang International School, British College ‐ FMI City Yangon ‐ Landmark project, FMI Centre (office building) Consumer Consumer ‐ KFC Myanmar (quick service restaurant) ‐ Parkson Department Store ‐ Access Myanmar Distribution (distributes Agriculture beverages and FMCG products) ‐ Myanmar Agri‐Tech (coffee plantation) Automotive Tourism ‐ Mitsubishi Motors, Hino Motors, Volkswagen, ‐ Balloons over Bagan New Holland (agricultural equipment), Bridgestone tyres, Yoma Fleet (vehicle operating lease &rental) Agriculture & Logistics ‐ Yoma Agriculture & Logistics Other investments ‐ Telecom tower, Airport operational control, elevator services

Source: http://www.yomastrategic.com

Executive background

Mr. Serge Pun – Executive Chairman Mr. U Theim Wai, also known as Serge Pun, is a founder and the chairman of the SPA Group. He has over 40 years of international business and investment experience. Serge Pun founded Serge Pun & Associates Ltd. Hong Kong in 1983 and SPA Myanmar in 1991 when returning to Myanmar.

Serge Pun has led many real estate investments as a general partner in real estate limited partnerships, including projects such as Stewart Terrace on the Peak in Hong Kong (1987 to 1988) and Village Gardens in Yau Yat Chuen, Kowloon (1988 to 1990). Some of Serge Pun’s notable projects overseas were the Sand River Golf Club in Shenzhen (1991‐1997), Abdulrahim Place office building in Bangkok (1989 to 2000) and The Grand Central mixed‐use development in Dalian PRC. Mr. Pun was Honorary Business Representative of International Enterprise Singapore for Myanmar between 2004 and 2006 and was appointed as a member of Dalian’s CPPCC in 2007. He is also a member of the World Economic Forum Global Agenda Council for Transparency and Anti‐Corruption for the term 2014‐2016.

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Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TPBI.

Anti‐ corruption Progress Indicator  Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws.  Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives  Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes  Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.)  Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases  Insufficient or not clearly defined policy  Data not available / no policy

DISCLAIMER

This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.

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STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the

relevant primary market index by at least 10% over the OUTPERFORM: Expecting total returns between ‐10% next 12 months. to +15%; returns expected to exceed market returns

over a six‐month period due to specific catalysts NEUTRAL: The industry, as defined by the analyst's UNDERPERFORM: Expecting total returns between coverage universe, is expected to perform in line with ‐10% to +15%; returns expected to be below market the relevant primary market index over the next 12 returns over a six‐month period due to specific months. catalysts UNDERWEIGHT: The industry, as defined by the analyst's SELL: Expecting negative total returns of 10% or more coverage universe, is expected to underperform the over the next 12 months relevant primary market index by 10% over the next 12 months.

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A. Muang, Khon Kaen 40000 Hatyai Songkhla 90110 Bankgok 10100 Telephone: (043) 389-171-193 Telephone: (074) 355-530-3 Telephone: (02) 689-3100

Fax. (043) 389-209 Fax: (074) 355-534 Fax. (02) 689-3199

Central World Branch Chiang Mai Branch Phuket Branch 999/9 The Offices at Central World, 422/49 Changklan Road, Changklan 22/61-63, Luang Por Wat Chalong Road, 16th Fl., Rama 1 Rd, Pathumwan, Subdistrict, Amphoe Meuang, Talat Yai, Mueang Phuket,

Bangkok 10330 Chiang Mai 50100 Phuket 83000 Telephone: (66-2) 673-5000, Telephone: (053) 270-072 Tel. (076) 222-811,(076) 222-683

(66-2) 264-5888 Fax. (66-2) 264-5899 Fax: (053) 272-618 Fax. (076) 222-861

Pak Chong Branch Cyber Branch @ North Nana Bangkhae Branch Krung Thai Bank PCL, 2 Floor, th 173 175, Mittapap Road, 6 Floor The Mall Group Building Bangkhae Nong Sarai, Pak Chong, North Nana Branch 275 Moo 1 Petchkasem Road, North Bangkhae, 35 Sukhumvit Rd.,Klong Toey Nua Nakhon Ratchasima 30130 Bangkhae, Bangkok 10160 Tel. (044) 279-511 Subdistrict , Wattana District, Tel. (66-2) 454-9979 Bangkok 10110 Fax. (044) 279-574 Fax. (66-2) 454-9970 Telephone: 083-490-2871

Nakhon Ratchasima Branch 624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171

Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.