TIDMMIL
RNS Number : 4786B
Myanmar Investments Intl Ltd
21 September 2018
This announcement contains inside 21 September 2018
information
Myanmar Investments International Limited
Update on Apollo Towers
Myanmar Investments International Limited ("MIL" or the
"Company"), the AIM-quoted Myanmar focused investment company, is
pleased to announce that its subsidiary MIL 4 Limited ("MIL 4") has
agreed that it will exchange the shares it holds in its investee
company, Apollo Towers Holdings Limited ("Apollo Towers"), for
shares in Towers (M) Holdings Pte. Ltd. ("Towers Holdings") which
owns Pan Asia Majestic Eagle Limited ("Pan Asia Towers") another
Myanmar independent tower company ("ITC").
Upon completion of this reorganisation, MIL 4's existing 13.5
per cent shareholding in Apollo Towers will be exchanged for a
shareholding of approximately 6.2 per cent in Towers Holdings, of
which approximately 4.2 per cent will be indirectly held by
MIL.
Apollo Towers
Through MIL 4, MIL is an indirect shareholder in Apollo Towers,
which owns Myanmar's second largest ITC, Apollo Towers Myanmar
Limited ("Apollo Myanmar"). Apollo Myanmar has constructed and
operates approximately 1,800 of the estimated 9,200 ITC
telecommunications towers in Myanmar. Apollo Myanmar recently
secured a large-scale commitment for additional tenancies on its
existing towers from Telecom International Myanmar Company Limited,
Myanmar's most recently licenced Mobile Network Operator ("MNO"),
operating under the brand name "MyTel". The Directors of MIL (the
"Directors") believe that this will have a positive impact on
Apollo Towers' profitability. MIL currently holds a 66.7 per cent
shareholding in MIL 4 which in turn holds a 13.5 per cent
shareholding in Apollo Towers, giving MIL an indirect interest of
9.0 per cent in Apollo Towers.
It is intended that all of the shares in Apollo Towers will be
exchanged by its shareholders for new shares in Towers
Holdings.
Pan Asia Towers
This reorganisation forms part of a much larger transaction
under which funds controlled by TPG Capital ("TPG"), an equity
investment platform of TPG (one of the world's largest alternative
asset managers with assets under management of US$84 billion), have
set up Towers Holdings which has acquired Pan Asia Towers,
Myanmar's fourth largest ITC.
Pan Asia Towers was established in 2013 and owns approximately
1,300 towers that it has constructed and leased to Ooredoo Myanmar
Limited and other MNOs under long-term lease agreements. In
addition, Pan Asia Towers has long-term contracts with all of the
country's MNOs and has also secured a large-scale commitment for
additional tenancies from MyTel.
Apollo Myanmar and Pan Asia Towers have been instrumental in
rolling out the telecommunications infrastructure that has lifted
Myanmar's mobile penetration rate, as measured by the number of
active SIM cards relative to the total population, from 10 per cent
in 2013 to ostensibly 100 per cent today. However, with many
subscribers having dual SIMs Telenor estimates the number of unique
mobile subscribers to be only half of this number. Analysys Mason,
a telecommunications consulting and research company, therefore
estimates that Myanmar has only about 67 per cent of the towers in
place that are required by 2021 to meet the MNOs' target of
nationwide coverage. Consequently, both Apollo Myanmar and Pan Asia
Towers continue to be committed to their role as key infrastructure
partners for the country's MNOs and the building of further
telecommunications towers.
This unprecedented roll out of telecommunications infrastructure
has been supported by a favourable regulatory framework that seeks
to limit the duplication of towers through proximity regulations
which promote infrastructure sharing amongst MNOs. As a result,
Analysys Mason expects that the tenants per tower for Myanmar ITCs
(known as the "Lease-up-Rate" or "LUR") will grow from 1.5x in 2017
to 2.2x by 2021. By adding additional tenants to existing towers,
the ITCs can significantly improve the yield on invested capital
making each additional tenant highly accretive in terms of EBITDA
and eventually enterprise value.
Towers Holdings
It is intended that both Apollo Towers and Pan Asia Towers will
be under the common ownership of Towers Holdings. Together the two
businesses will have an initial aggregated portfolio of
approximately 3,100 towers and 6,000 tenants, which, on a pro-forma
aggregated basis, would have represented a LUR of 2.0x as at the
end of March 2018. The Directors estimate that, on a pro-forma
aggregated basis, the two businesses would have had combined
revenues of approximately US$90 million and an EBITDA of
approximately US$53 million for the financial year ending 31 March
2018. Apollo Towers' and Pan Asia Towers' unaudited management
accounts for the three months from January to March 2018, were they
to be annualised and aggregated, indicate annual revenues of US$102
million and an EBITDA of US$59 million.
Going forward, the two businesses intend to increase the number
of towers in their portfolios and, given the existing undrawn debt
facilities available to them both, coupled with cash flows from
their operations, there will be available capital to add a further
1,000 additional towers over the next few years. Additionally, the
two businesses intend to add additional tenancies to these new
towers as well as their existing towers and thereby increase the
combined LUR from the current pro-forma level of 2.0x and will
target to achieve or exceed an LUR 2.2x within a few years in line
with the market.
The existing debt facilities will remain in place, including the
US$250 million loan facility granted by the US Government's
Overseas Private Investment Corporation ("OPIC") to Apollo Myanmar
(of which only US$165 million has been drawn) and Apollo Towers'
US$100 million mezzanine facility. In addition, based on the
existing and new acquisition debt facilities, less the available
cash, the net debt in the two businesses at closing is expected to
be approximately US$319 million.
Once the reorganisation is complete, MIL 4's 13.5 per cent
shareholding in Apollo Towers will have been exchanged for an
approximate 6.2 per cent shareholding in Towers Holdings. The
ratio, for deriving the relative shareholdings in Towers Holdings,
was derived on an arm's length basis between MIL 4 and TPG taking
into account input from an independent valuer and is still subject
to finalisation of some of the account balances. MIL's indirect
interest in Towers Holdings will be approximately 4.2 per cent.
The Directors have assessed the fair value of MIL's investment
in Apollo Towers as at 31 March 2018 to be US$24 million, using a
discounted cashflow basis of valuation. The Directors believe that
contributing MIL's investment in Apollo Towers into the
reorganisation will enhance the future growth of this investment.
It is expected that the future gains the two businesses will
achieve will exceed the value accretion that might be achieved by
Apollo Towers and Pan Asia Towers independently. The two businesses
are expected to manage Myanmar's largest portfolio of towers and
the Directors believe that together they will have stronger growth
prospects than Apollo Towers on its own. The Directors also believe
that the increased scale of the two businesses will make them more
competitive in servicing the needs of its customers and provide
them with economies of scale to operate more efficiently. It is
considered that having the two businesses under common ownership
would make a suitable candidate for strategic investors or a
listing on one of the region's stock exchanges over the next three
to five years. It is therefore advantageous for MIL to move its
investment into a combined business holding company rather than
remain as a minority investor in one of the businesses.
As referred to in earlier announcements, MIL had the opportunity
to invest in Pan Asia Towers directly. However, the Directors
ultimately felt that the Company already had a large enough
exposure to the Myanmar telecom tower sector through the investment
in Apollo Towers and that participating in the reorganisation
without additional investment was a preferred strategy.
Mike Dean, co-founder of MIL, commented:
"The surge in mobile telephony in Myanmar has been one of the
outstanding Myanmar success stories of the past few years. Apollo
Towers has been at the forefront of this incredible transition. By
bringing Apollo Towers and Pan Asia Towers under common ownership
we believe that the combined businesses will continue to grow in
strength and profitability as it brings affordable telephony and
data services to more and more Myanmar citizens."
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information please contact:
Craig Martin Michael Dean
Managing Director Finance Director
Myanmar Investments International Myanmar Investments International
Limited Limited
+95 (0) 1 391 804 +95 (0) 1 391 804
craigmartin@myanmarinvestments.com mikedean@myanmarinvestments.com
Nominated Adviser Broker
Philip Secrett / Jamie Barklem William Marle / Giles Rolls
Grant Thornton UK LLP finnCap Ltd
+44 (0) 20 7383 5100 +44 (0) 20 7220 0500
For more information about MIL, please visit
www.myanmarinvestments.com
Notes to Editors
Myanmar Investments International Limited (AIM: MIL) was the
first Myanmar-focused investment company to be admitted to trading
on the AIM market of the London Stock Exchange. MIL was established
in 2013 with the intention of building long-term shareholder value
by proactively investing in a diversified portfolio of Myanmar
businesses that will benefit from the country's re-emergence and
ongoing economic development. The Company is led by an experienced
and entrepreneurial team who between them have considerable
industrial, corporate and financial management experience.
MIL aims to identify investments with strong growth which if
necessary can be "de-risked" through the introduction of
experienced senior line-management, mentors and/or strategic
partners sourced by MIL's management board. The Company's main
focus is on opportunities that are experiencing acute supply and
demand imbalances.
MIL provides investors with a highly disciplined and
conservative investment process into one of the most promising
growth opportunities of this era.
MIL's largest investment to-date (US$21 million investment for a
9.0 per cent effective shareholding) is in Apollo Towers, Myanmar's
second largest telecommunications towers company with 1,800 towers.
Apollo operates in the high growth telecommunications sector with a
strong management that is growing the number of co-locations (i.e.
multiple tenancies) on its portfolio of towers. In June 2016, OPIC
provided a US$250 million debt facility to Apollo Towers. The
reorganisation with Pan Asia Towers is expected to produce a more
efficient and profitable combined investment.
MIL's first investment in August 2014 was into Myanmar Finance
International Limited ("MFIL") which today is one of the leading
microfinance companies in Myanmar. Since MIL invested, MFIL's
business has expanded rapidly. The business is profitable with a
sustainable expansion plan for long-term growth. In November 2015,
the Norwegian Government's Norwegian Investment Fund for Developing
Countries ("Norfund"), the Norwegian development finance
institution, also became a 25 per cent shareholder in MFIL.
MIL's third investment in May 2017 was into Medicare
International Health and Beauty Pte. Ltd., ("Medicare"). This was a
greenfield pharmacy, healthcare and personal care product retail
franchise joint venture. The joint venture partners are: a) H&B
Management Solutions Pte. Ltd., which owns Medicare Vietnam, one of
the largest pharmacy, health, beauty and personal care retail
groups which runs over 70 outlets in Vietnam; and b) Randy Guttery,
an industry veteran with significant experience leading Asian-based
retail concepts. It is expected that Medicare will fill a vacuum in
the present retail landscape and at the same time tap into the
rapid growth of the middle and affluent classes in Myanmar.
Myanmar, a country of approximately 54 million people and
roughly the size of France, has been isolated for much of the last
50 years. Strategically situated in one of the world's most
economically dynamic regions amid the intersection of India, China
and South East Asia it is a key component of China's 'One Belt One
Road' strategy providing direct access to the Indian Ocean.
Whilst it was once one of the more prosperous countries in
Southeast Asia with an abundance of natural resources (oil, natural
gas, arable land, tourist attractions and a long coastline), it is
now one of the least developed countries in the world. However, it
has a number of competitive advantages: a population of 54 million
people (it is the 26(th) most populous country in the world); a
large workforce with a high literacy rate of 90%; 68% of the
population is of working age (between 15 and 65); and 28% of the
population is under 24 which is expected to provide a strengthening
consumer demand.
Today its economy is picking up and the IMF is projecting GDP
growth for Myanmar to average 7.2% p.a. through to 2023.
Myanmar has undergone an unprecedented transformational reform
process, initiated by the U Thein Sein administration in 2011. The
elections in 2015 were the first democratic elections in 50
years.
This remarkable change has not been without its difficulties and
the situation in Rakhine state, which stems from a complex and
historically charged background, remains un-remedied. The Advisory
Commission on the Rakhine State crisis, led by the late former UN
Secretary-General Kofi Annan, has provided an important framework
which can provide the foundations for addressing the distressing
situation there.
For more information about MIL, please visit
www.myanmarinvestments.com
MMK 1,560 = US$1.00 as at 20 September 2018
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