Myanmar Investments Intl Ltd Audited results for the year to 31 March 2019 (6157N)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Myanmar Investments International Limited	LSE:MIL	London	Ordinary Share	VGG636111004	ORD NPV

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.03	0.0235	0.04				0.00	01:00:00

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
	0	0		N/A	0

TIDMMIL

RNS Number : 6157N

Myanmar Investments Intl Ltd

25 September 2019

 
 This announcement contains inside   25 September 2019 
  information

Myanmar Investments International Limited

Audited financial results for the year to 31 March 2019

Myanmar Investments International Limited [AIM: MIL] ("MIL" or the "Company"), the Myanmar focused investment company, today announces its audited financial results for the year to 31 March 2019.

Copies of the Company's annual report and accounts will be sent to shareholders and warrantholders shortly and will also be available to download from the Company's website.

Future Strategy

Given the slow pace of change in Myanmar and expectations that the next few years are likely to be difficult and volatile for the country's economy, the Directors believe that the Company's current strategy is unlikely to generate an appropriate risk adjusted return commensurate with an investment in a frontier economy. Accordingly the Directors feel that it is appropriate to start planning for an orderly disposal of our three investments with a view to ultimately winding up the Company.

So this year's AGM, to be held in Yangon on 24 October 2019, will include a resolution to amend the Company's Investment Policy such that the Board can:

   --    undertake an orderly disposal of its investments; and 
   --    return surplus capital to shareholders.

If the resolution is approved, the Directors will look to undertake an orderly disposal of its investments in MFIL and Medicare in consultation with our joint venture partners. The investment in Apollo Towers will most likely continue to be held until such time as our joint venture partners are able to create an exit opportunity.

In due course the Directors plan to put a winding up proposal to Shareholders.

Further details of these proposals are included in the Chairmen's Letter.

Business review

The Company has invested in three businesses:

Apollo Towers

   --   To date the Company has invested US$21 million in Apollo Towers

-- The Directors have been advised that the share swap with Towers Holdings should be completed in the near future

-- Under the share swap, the Company will exchange its indirect interest of 9.1 per cent of Apollo Towers for an indirect interest of 4.1 per cent of Towers Holding

-- The share swap effectively brings Apollo Towers and Pan Asia Towers, another Myanmar independent tower company, under the common ownership of Towers Holdings

-- On a pro-forma basis, had the share swap taken place before 31 March 2019, then Towers Holdings would have had a portfolio of approximately 3,150 towers hosting around 6,450 tenants; a Lease Up Rate of 2.0x

-- Similarly, Towers Holdings' proforma March 2019 normalised and annualised Revenue and EBITDA would have been US$119 million and US$69 million respectively

-- Future growth will be driven by an increase in the tower portfolio and also by an increase in tenancies as co-location rates rise

Myanmar Finance International Limited ("MFIL")

   --   MIL has invested US$2.7 million for a 37.5 per cent shareholding 
   --   One of Myanmar's leading microfinance companies.

-- Strong growth in its borrower base and loan book at 31 March 2019 at 71,500 and US$14.6 million, representing compound annual growth rates ("CAGR") of 54 per cent and 107 per cent respectively since investment

   --   Secured US$12.3 million in Kyat-denominated debt facilities

-- MFIL focuses on urban and semi-rural lending in Yangon, Bago and Mon State but plans to expand to other states during the coming year.

Medicare

   --   MIL has invested US$2.1 million for a 48.6 per cent shareholding 
   --   Greenfield joint venture in pharmaceutical, health and beauty franchise retailing 
   --   A joint venture with Medicare, Vietnam's leading pharmacy, health and beauty retail group.

-- Designed to capitalise on both an expected rise in consumer spending power and an absence of modern retail outlets with similar offerings

   --   Today it has 21 stores in operation with plans to have 31 open by the end of December 2019

Financial review

During the past year our net asset value ("NAV") has decreased by 12 per cent and was US$33.3 million as at 31 March 2019. This was driven mainly by the reduction in the assessed value of our investments in MFIL (down US$1.9 million to US$4.4 million, driven mainly by a marked reduction in the comparable companies' multiples coupled with a 13.5 per cent depreciation in the Myanmar Kyat) and Medicare (down US$183,000 to US$1.2 million). What is not reflected in these numbers is the possible uplift in our investment in Apollo Towers as the share exchange with Towers Holdings has not yet occurred, even though we have already committed to completing this. Had the share exchange occurred before year-end then the Directors estimate that our NAV as at 31 March 2019 would have been US$39.3 million, an increase over the year of 3.7 per cent.

During the year we drastically reduced our operating "run-rate" costs from US$2.2 million per annum to the equivalent of US$1.2 million per annum by year-end. As a result our loss per share reduced 25 per cent compared to the prior year.

William Knight, Chairman of MIL, "The decision to move towards starting an orderly wind down of the Company is not one that has been taken lightly but reflects the harsh realities of both trying to raise significant new funds for investment in Myanmar as well as identifying suitable investments in Myanmar."

He also added, "Mike Dean has advised us of his intention to step down sometime after this year's AGM. We thank him for his whole-hearted commitment over the past six years and wish him well in his future endeavours."

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 
  / Seamus Fricker                     finnCap Ltd 
  Grant Thornton UK LLP                +44 (0) 20 7220 0500 
  +44 (0) 20 7383 5100

For more information about MIL, please visit www.myanmarinvestments.com

CHAIRMEN'S LETTER

Dear fellow shareholder

Change in strategy

While we are pleased with the positive impact that our business has had in Myanmar, after significant discussions the Directors believe that our current strategy in Myanmar is unlikely to generate an appropriate risk adjusted return commensurate with an investment in a frontier economy. We are therefore writing to propose that your Company should commence an orderly winding down and to return capital to shareholders.

Our decision is based on a number of factors including but not limited to; post Rakhine crisis difficulties in raising significant capital in western markets, a fragile domestic banking system, increasingly complex political landscape and the slow pace of reform.

We are now holding around US$3 million of cash and have streamlined our operations thereby significantly reducing our operating expenses. We propose to proactively seek to dispose of our investments in MFIL and Medicare.

Our investment in Apollo Towers, which is in the final stages of being exchanged for an investment in Towers Holdings, should not require additional funding. We also believe that in due course the resultant investment in Towers Holdings can be exited by way of a sale to a strategic investor or a listing on one of the region's stock exchanges.

We therefore envisage a period of proactivity as we look to sell our investments in MFIL and Medicare. Once this has been achieved, we will then significantly streamline what is left of the business to monitor and manage the process of exiting from Towers Holdings. In this second phase we do not envisage that we will require a Yangon office nor a significant number of staff.

During the past year, as part of our evaluation of the strategic options available to the Company, we had explored the possibility of a tie-up with Myanmar Strategic Holdings Limited, another London listed company which invests in Myanmar. However the Directors did not believe that the terms offered would have been acceptable to the Company's shareholders and therefore did not proceed.

Board change

Michael Dean, the Finance Director, has indicated that he will look to step down some time after this year's AGM. The Board will look to put in place a suitable replacement to handle the changed needs of the Company, especially if the winding down resolution is approved at the AGM.

Impact investing

We are pleased with the positive impact each of our businesses has had in Myanmar. Collectively they employ around 500 people.

Towers Holdings has built 29 per cent of the country's independent telecoms towers. Estimating the number of subscribers that benefit from this is not possible but on the basis of the total number of subscribers in Myanmar, they clearly number in the millions. So utilising our towers, these citizens can now readily communicate and access information. This not only brings education and enrichment to their lives but also supports their, and Myanmar's, economic advancement.

Today MFIL has over 66,000 borrowers. That is 66,000 households which have been economically empowered to expand their businesses (small shops, trading businesses, food stalls etc) through MFIL's ethical lending practices. MFIL's rural outreach is nearly 40 per cent of its business and this has a significant impact on enabling rural communities to access legitimate funds. MFIL also strongly believes in women's empowerment: over 80 per cent of its borrowers are women, while internally 60 per cent of its management are women.

Medicare's objective is to provide affordable health and beauty products to its customers. All our Medicare stores adhere to the Good Pharmacy Practice ("GPP") to contribute to health improvement and to help customers with health problems make the best use of genuine, quality and affordable medicines. This means providing medicines which have been shipped and stored properly; that the correct medicine has been dispensed as treatment for the relevant ailment; and that the medicine is still within its 'sell-by date'. Simple concepts but ones that are not widespread in Myanmar today.

Corporate Governance

The Company seeks to uphold the fundamental principles of good corporate governance and has adopted the Quoted Companies Alliance 2018 Corporate Governance Code. The Chairman's Statement on Corporate Governance provides greater detail on how the Board itself operates as well as the steps taken to ensure that its staff adhere to principles such as compliance with the UK anti-bribery legislation.

Annual General Meeting

This year's Annual General Meeting ("AGM") will be held at The British Club, Yangon, Myanmar at 9.00am (Myanmar time) on Thursday 24 October 2019. Shareholders who cannot attend the Annual General Meeting in person are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are able to lodge their votes electronically. Details are set out in the Notice of the Annual General Meeting at the end of this report.

Of particular importance is the resolution relating to the proposed change to the investing strategy of the Company. As explained above, the Directors have determined that it would be in the best interests of Shareholders to formally amend the investment objective of the Company and to commence steps to complete an orderly winding down of the business of the Company in the medium term (the "Winding Down"). To effect the Winding Down, as the Company realises its assets it intends to make periodic distributions to Shareholders of the surplus capital that is received from the proceeds of the Winding Down.

No specific date can be set for when the Winding Down will be completed but following the exit from the last of the Company's investments, which will most likely be Towers Holdings, the Directors intend to put forward a formal proposal for winding up the Company. Shareholders should bear in mind that no representations can be made as to the exact timing, terms and quantum of disposals or returns of value, all of which will depend, among other things, on market and general economic conditions and could be adversely affected by changes in, among other things, interest rates, rates of inflation, market, foreign exchange, taxation, competition and political events. For these reasons, Shareholders should bear in mind that the net asset value periodically determined by the Directors is done in good faith but may not be an indicator of the values ultimately realised.

With regard to the Company's existing warrants, in the event that capital is returned to the shareholders, in accordance with the warrant instrument the Board will exercise its discretion, with the advice of the Company's auditors, to determine what adjustments should be made to reflect the consequences of the reduction in capital.

Accordingly, item 6 to be proposed at the AGM is a resolution to amend the investment objective and policies of the Company on terms set out below.

The proposed amendments to the Company's investment objective and policies are as follows:

"The Company will seek to realise the Company's investments in an orderly manner, such realisations to be effected at such times, on such terms and in such manner as the Directors (in their absolute discretion) may determine.

Following such realisations, the Company will make periodic returns of surplus capital to Shareholders on such terms and in such manner as the Directors (in their absolute discretion) may determine.

The Company shall not make any new investments in projects to which it is not already committed. However, this will not preclude the Directors (in their absolute discretion) from: (a) authorising the expenditure of such capital as is necessary to: (i) complete arrangements pertaining to the Company's existing investments; or (ii) carry out any activities that the Directors (in their absolute discretion) deem appropriate to ensure the saleability of any existing investment; or (b) entering into any contract or other arrangement with any third party to realise all or any part of the Company's existing investments.

Following the disposal of all of the Company's existing investments, the Directors intend to put a winding up proposal to the Shareholders."

The Directors consider that approval of the ordinary business is in the Company's best interests and in the best interest of the shareholders as a whole and recommend that you VOTE IN FAVOUR of each of the resolutions to be proposed at the AGM.

On behalf of the Board, we should like to take this opportunity to thank a number of our key stakeholders: our staff for their professionalism and commitment; our business partners for all of their advice and contributions; and our shareholders for their continued support. In particular we should like to thank Mike for his whole-hearted commitment over the past six years and wish him well in his future endeavours.

 
 William Knight        Aung Htun 
 Chairman              Deputy Chairman 
 25 September 2019     25 September 2019

EXECUTIVE DIRECTORS' REVIEW

Business Review

Overall, our businesses have performed well:

-- Apollo Tower: the long-planned increases in co-locations have driven growth in EBITDA and the combination with Pan Asia Towers will produce greater synergies and economies of scale;

-- MFIL: with additional equity investment and additional debt facilities in place the business has grown well in size, product mix and geographic reach. This growth has however been tempered by an increase in the portfolio-at-risk due to borrower over-indebtedness and excessive competition; and

-- Medicare: the business has experienced strong growth with 17 branches open at the end of March 2019, an increase over the year of 8 branches. As of today this has increased even further to 21 branches and a further 10 branches are targeted to be opened before the end of December 2019.

In all cases, Myanmar Investment's team have been closely embedded in these businesses to provide strategic advice as well as hands-on local knowledge.

Financial Review

Net Asset Value

The Directors assess the Group's NAV attributable to the shareholders of the Company as at 31 March 2019 to be US$33.3 million, a year-on-year decrease of 12 per cent. This represents US$0.87 per share, based on the number of shares in issue at the year-end. This change principally reflects the net changes in the Directors' assessment of the values of the Company's investments, described in more detail below, less the Group's running costs for the year.

As at 31 March 2019 the Group's NAV consisted of:

-- an investment in Apollo Towers, the telecommunication tower business, of US$24 million, excluding the non-controlling interests, determined using a comparable EBITDA multiple methodology;

-- an investment in MFIL, the microfinance business, of US$4.4 million, determined using a price to book value methodology;

-- an investment in Medicare, the pharmaceutical, health and beauty retail franchise business, of US$1.2 million, determined based on the cost of the investment less attributable losses (akin to underlying NAV); and

   --     cash and other net assets/liabilities of US$3.5 million.

Apollo Towers

As at 31 March 2018 the Directors had assessed the value of the Group's investment in Apollo Towers, excluding the non-controlling interests attributable to the minority shareholders of MIL 4, to be US$24 million by using a discounted cashflow ("DCF") basis of valuation. Using the same methodology as at 30 September 2018 the valuation remained the same.

Plans have been put in place to bring Apollo Towers and Pan Asia Majestic Eagle Limited ("Pan Asia Towers"), under the ultimate common ownership of a new holding company Towers (M) Holdings Pte. Ltd. ("Towers Holdings"). Given that the combined businesses have greater scale and maturity, the Directors believe that it is suitable time to move away from a DCF basis of valuation and have instead valued the investment by reference to the run-rate EBITDA and prevailing comparable EV/EBITDA multiples. DCF as a methodology relies on a number of critical forward looking assumptions and slight changes in one or two variables can have a significant effect on the range of potential values. Whilst in the early stages of a business there may be little choice to using DCF, as a business matures it is more appropriate to look to a present value rather than a discounted future value. As the business has significantly matured and is generating stable and growing earnings, the Directors believe it appropriate to adopt a market-based valuation methodology, especially given a sufficient universe of appropriate comparable listed companies and transactions. Although there is greater upside still to be achieved after the reorganisation, and the Directors continually review options to create liquidity and/or monetisation of the investment, at this point the indication from the joint venture partner is that they are not contemplating an exit in the near future.

Using this methodology the Directors have assessed the value of the Group's investment in Apollo Towers as at 31 March 2019 to be US$24 million. While this is equal to the valuation as at 31 March 2018, the main components of the valuation methodology changed as follows:

   --    Increase in run-rate EBITDA resulting in increase in value of approximately US$1.7 million; 
   --    Increase in net debt resulting in decrease in value of approximately US1.8 million; and

-- Decrease in comparable EBITDA multiple resulting in decrease in value of approximately US$0.1 million.

The value of Apollo Towers is the same as last year and shows a profit of US$3.2 million over the cost of the investment and equates to an IRR since the initial investment in July 2015 of 4.0 per cent.

Under the planned share exchange, the Company's 66.6 per cent owned subsidiary, MIL 4 Limited ("MIL4"), will swap its 13.7 per cent shareholding in Apollo Towers for a 6.2 per cent shareholding in Towers Holdings, which already owns Pan Asia Towers. MIL4 had committed to this course of action back in November 2017. If the share exchange had been completed by 31 March 2019 then the Directors estimate that that the Company's attributable shareholding in Towers Holdings would have been worth US$30 million as at that date. Based on this valuation this would represent a profit of US$9.2 million over the cost of the investment and equate to an IRR of 10.5 per cent.

MFIL

As at 31 March 2018 the Directors had assessed the value of the Group's investment in MFIL to be US$6.3 million, using the price to forward book value methodology.

The use of the forward book value, which is then discounted back to the valuation date, is appropriate for companies on a steep growth trend, as MFIL has been. However, as such businesses mature it is more appropriate to value them on their present value and thereby remove the estimations and assumptions associated with using forecasts. Therefore the Directors have applied a market-based price to book value multiple to the equity book value as at 31 March 2019.

Using this methodology the Directors have assessed the value of the Group's investment in MFIL as at 31 March 2019 to be US$4.4 million. If the Group had applied this methodology for 31 March 2018, the net change in value between 2018 and 2019 can broadly be attributed to:

   --    Increase in book value resulting in an increase in value of approximately US$1.6 million;

-- Decrease in comparable book value multiple used resulting in decrease in value of approximately US$2.3 million; and

-- Appreciation of the US dollar against the Myanmar Kyat by 13.5 per cent resulting in a decrease in value of approximately US$0.7 million.

The revised value of MFIL represents a decrease over the year of 30 per cent but is still a profit of US$1.7 million over the cost of the investment. This equates to an IRR since the initial investment in September 2014 of 15.5 per cent.

Medicare

As at 31 March 2018 the Directors had assessed the value of the Group's investment in Medicare to be US$1.4 million, using the price of a recent investment ("PRI") methodology.

Integral to Medicare's business plan is that it will continue to open new stores but as these stores take time to become profitable it is inevitable that there will be a period of start-up losses. As such the Directors feel that it is appropriate to reflect these losses in the valuation and have therefore moved from a PRI methodology to NAV, being the investment cost to date less the proportionate share of Medicare's losses.

Using this methodology the Directors have assessed the value of the Group's investment in Medicare as at 31 March 2019 to be US$1.2 million. The revised value of Medicare represents a loss of US$0.95 million on the cost of the investment.

Summary of NAV

In the attached audited financial statements, the NAV attributable to shareholders differs from the above stated value of US$33.3 million due to the following adjustments:

 
                                     US$ millions 
 NAV per the audited financial 
  statements                                 31.4 
 MFIL (1)                                     1.9 
 NAV per the Directors' valuation            33.3 
                                    =============

Note 1: In accordance with IFRS 11 Joint Arrangements, the investment in MFIL is accounted for as an investment in a joint venture using the equity method. Whereas in accordance with the Group's Valuation Policy the Directors' valuation for MFIL is determined using the price to book value methodology as described in the International Private Equity and Venture Capital Guidelines.

Financial results

For the year to 31 March 2019 the Group's audited loss after tax was US$2.4 million, a significant reduction on last year's US$3.1 million whilst the loss per share decreased 25 per cent year-on-year.

As announced last year, the Board had set in motion a series of cost cutting measures to significantly reduce our overheads. These reductions were phased in over the year and the Company reduced its recurring core cash-based overheads (including the costs of being a quoted company but excluding discretionary compensation, share option expenses and transaction costs), from US$2.2 million for the year to 31 March 2018 to US$1.6 million for the year to 31 March 2019, a reduction of 27 per cent. For a more accurate assessment of the year end cash-based overheads, the annualised costs for March 2019 equate to US$1.2 million, which represents a year on year reduction of 46 per cent.

Outside of our overheads the most significant items were:

   --     our share of Medicare's losses which were US$600,000 compared to last year's US$325,000; 
   --     our share of MFIL's profits which were US$112,000 compared to last year's US$135,000;

-- the impact of the share-based payments arising from the Group's Employee Share Option Scheme; and

   --     transaction costs associated with investigating investments that did not come to fruition.

Change of year end

The Myanmar Government has announced that all Myanmar companies must change their financial year end to 30 September of each year, commencing this year, 2019. As such all of the Company's investee companies must change their year end and therefore the Company will do the same.

This will be effected in a phased manner: the Company will issue interim accounts for the six months to 30 September 2019 and also 31 March 2020. It will then produce audited accounts for the 18 months to 30 September 2020. The two sets of interim accounts will be reviewed by BDO LLP, the Company's statutory auditors. The interim accounts and the final audit accounts will all be targeted to be issued within 3 months of their respective period ends.

Dividends

Based on the above the Directors do not recommend payment of a dividend at this time.

Working Capital

As of the date of this report the Group has adequate financial resources to cover its working capital needs for the next 12 months.

 
 Craig Martin          Michael Dean 
 Managing Director     Finance Director 
 25 September 2019     25 September 2019

FINANCIAL STATEMENTS FOR THE YEARED 31 MARCH 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEARED 31 MARCH 2019

 
                                              Note         2019         2018 
                                                            US$          US$ 
 
Revenue                                                       -            - 
 
Other item of income 
Finance income                                 4            514          530 
 
Items of expense 
Employee benefits expense                      5      (916,343)  (1,601,194) 
Depreciation expense                           13      (22,001)      (8,789) 
Other operating expenses                            (1,006,933)  (1,252,959) 
Finance costs                                  6       (12,715)     (15,211) 
Share of results of joint ventures, 
 net of tax                                    10     (491,290)    (190,949) 
 
Loss before income tax                         7    (2,448,768)  (3,068,572) 
 
Income tax expense                             8          (436)      (6,164) 
 
Loss for the financial year                         (2,449,204)  (3,074,736) 
                                                    ===========  =========== 
 
Other comprehensive income: 
Items that may be reclassified subsequently 
 to profit or loss: 
Exchange (loss)/gain arising on translation 
 of foreign

   operations                                  10     (263,584)       57,051 
Fair value gain on available-for-sale 
 financial assets                              11             -    4,604,478 
Other comprehensive income for the 
 financial year, net of tax                           (263,584)    4,661,529 
                                                    -----------  ----------- 
Total comprehensive income for the 
 financial year                                     (2,712,788)    1,586,793 
                                                    ===========  =========== 
 
Loss attributable to: 
Owners of the parent                                (2,420,931)  (3,049,533) 
Non-controlling interests                      14      (28,273)     (25,203) 
                                                    -----------  ----------- 
                                                    (2,449,204)  (3,074,736) 
                                                    ===========  =========== 
 
Total comprehensive income attributable 
 to: 
Owners of the parent                                (2,684,515)       77,170 
Non-controlling interests                      14      (28,273)    1,509,623 
                                                    (2,712,788)    1,586,793 
                                                    ===========  =========== 
 
Loss per share (cents) 
 
  *    Basic and diluted                       9         (6.42)       (8.57) 
                                                    ===========  ===========