December 5, 2017 3:20 am JST

TMH Telecom set to become Myanmar's first true IPO

Equipment maker serves as a test case for nation's infant stock market

YUICHI NITTA, Nikkei staff writer

The Yangon Stock Exchange has listed only four companies since its debut in March 2016.

YANGON -- TMH Telecom gained approval Monday to become only the fifth corporation to go public in Myanmar's fledgling stock market -- and the first to raise fresh capital through an initial public offering.

The listing is expected to occur in January, though the announcement of the float's approval by the Yangon Stock Exchange did not specify a time frame.

TMH began business in 2007 as a maker of telephone exchange equipment, and its profile now includes transmission towers for cellphone operators as well as fiber-optic networks. The company reaps annual sales of roughly $8.8 million.

The IPO likely will garner 2 billion kyat ($1.46 million) in new capital, most of which will be used to expand business in the company's home base of Shan State, a knowledgeable source said. The lead managing underwriter is Myanmar Securities Exchange Centre, a joint venture between state-run Myanma Economic Bank and Japan's Daiwa Securities Group, according to Monday's announcement.

After Myanmar's military-backed government transferred power to a civilian administration in 2011, the country embarked on a series of economic reforms headlined by the creation of the Yangon Stock Exchange. But the YSX has struggled since its launch of trading in March 2016 to find participating companies and investors.

First Private Bank was the latest to go public, back in January. The Myanmar Stock Price Index, based on the weighted average of market capitalization for the components, has been on a soft descent ever since. At the end of November, Myanpix stood at 481.27 points, down 11.6% from the end of January.

The slide reflects a lack of confidence in the entire market rather than the earnings performances of particular companies. First Myanmar Investment -- an arm of conglomerate Serge Pun and Associates and the first company to list -- reported Friday that its profit per share doubled on the year for the six months ended in September. Yet the brokerage's share price that day still wallowed more than 20% below where it stood a year earlier.

The four companies already on the bourse have floated only existing shares, generating no new capital. The raising of fresh capital by TMH will serve as a test case for YSX regulators, as well as for brokerages and listed companies. Securities insiders express hope that TMH's listing will lead to wider consciousness of IPO fundraising and growth investment, which could spark a rally for the market.

"I trust that this new listing company will provide a good influence to the Myanmar economy," Masaharu Harada, a director of the YSX, told the Nikkei Asian Review. The success of this listing will encourage other companies to consider listing, he added.

The country's legislature last month enacted the new Myanmar Companies Act, which allows foreign capital to invest up to 35% in domestic businesses. Authorities also are expected soon to let foreigners participate in the YSX under certain conditions.

Daiwa Securities Group Inc.

Japan

Market(Ticker): TKS(8601)
Sector:
Industry:
Finance
Investment Banks/Brokers
Market cap(USD): 12,222.13M
Shares: 1,699.37M

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