8 Dec 2016 07:00
8 December 2016
This announcement contains inside information
Myanmar Investments International Limited
Unaudited interim results for the six months ended 30 September 2016
Myanmar Investments International Limited (AIM:MIL) ("Myanmar Investments", "MIL" or the "Company"), the AIM-quoted Myanmar focused investment company, today announces its unaudited interim financial results for the six months to 30 September 2016.
All dates refer to 2016 unless otherwise stated.
Highlights
Myanmar update
· IMF expects GDP growth to continue at 7.7%pa over the next 5 years
· The United States has removed all remaining sanctions against Myanmar and re-admitted the country to its GSP preferential tariff system
· The new Myanmar Investment Law passed in October will streamline and simplify foreign direct investment ("FDI")
· On-going reforms continue in key sectors of the economy
Myanmar Investments International Limited update
· Apollo Towers
o Completed approximately 1,800 towers with plans to build another 2,000
o Secured a US$250 million loan from the United States government's Overseas Private Investment Corporation ("OPIC") to support the company's growth
o The imminent entry of a fourth telecom operator into the Myanmar economy is expected to provide a significant uptick in colocation adding further momentum to Apollo's growing EBITDA
· Myanmar Finance International Limited ("MFIL")
o Secured a US$1 million, local-currency loan from Maybank, the first of a series of debt financings planned for the coming years
o Since investing in September 2014, the borrowers have grown to over 38,000 and the loan book to MMK 6.5 billion (US$5 million; CAGR of 95% and 185% respectively)
o Branch network of six branches with plans to open four more in the coming year
· The Company has continued to develop a strong pipeline with a focus on consumer related and capacity constrained opportunities
· MIL is currently evaluating a number of deals in retail, healthcare, mobile financial services, tourism, energy, logistics and education
· Successful completion of a US$4.2 million subscription in September from new and existing shareholders
· Considering an additional listing for the Company in Asia
· Hosted its annual Investor Day in Yangon which was well attended and well received
For the six months to 30 September the Company's unaudited consolidated loss after tax was US$1.33 million. This represents:
· recurrent overheads associated with running the Company's business (US$1.08 million); and
· the impact of the share based payments arising from the Company's Employee Share Option Plan (US$253,000).
The Directors have determined that MIL's net asset value as at 30 September was US$27.2 million, or US$0.89 per share. This does not reflect any embedded gains within the investments and represents a 12.1% increase in the net asset value over the 6-month period to 30 September which is mainly attributable to :
· the equity fund raising in September of US$4.2 million; less
· the cash overheads of US$1.08 million for the period.
Aung Htun, the Company's Managing Director, commented, "Myanmar is going through a transitional period as the new administration finds its feet and charts the means to achieve its long term policy goals. Whilst this has meant a slowdown in business activity, measured for example by FDI, it does not reflect the grassroots economic momentum that we witness here on the streets, in the factories and in the shops. As such we remain bullish on Myanmar's near term and longer term prospects."
The information contained within this announcement is considered to be inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 prior to its release.
For further information please contact:
Aung Htun Managing Director Myanmar Investments International Ltd +95 1 391 804 +95 94 0160 0501 aunghtun@myanmarinvestments.com | Michael Dean Finance Director Myanmar Investments International Ltd +95 1 391 804 +95 94 2006 4957 mikedean@myanmarinvestments.com |
Nominated Adviser Philip Secrett / Jamie Barklem/ Carolyn Sansom Grant Thornton UK LLP +44 (0) 207 383 5100 |
Broker Andrew Pinder / David Herring Alistair Roberts (Hong Kong) Investec Bank plc +44 (0) 207 597 4000 |
Further information can be obtained from the Company's website www.myanmarinvestments.com.
CHAIRMAN'S LETTER
COUNTRY UPDATE
The foundations of Myanmar's growth continue to strengthen. In the past few months we have seen a number of key steps forward across a range of economic, social and political issues.
The new administration has continued the reform process started by its predecessor. We now have a new Foreign Investment Law that will simplify and streamline the process of making investments into Myanmar. In the government's pipeline we also have the new Companies Act which will significantly modernise the legal framework for companies doing business here.
Equally significantly was the US Government's decision to cancel all remaining sanctions against Myanmar and at the same time admit the country into its Generalised System of Preferences ("GSP") preferential tariff system. As His Excellency Scot Marciel, the US Ambassador to Myanmar, explained at MIL's annual Investor Day in October, this removes a significant impediment to companies engaging with Myanmar and we expect there to be a material increase in FDI and general trading as a result.
COMPANY UPDATE
During this period the Company has continued to advance in three key areas:
· Solid performance by both of our investments;
· Good progress on developing our pipeline; and
· Raising additional equity funding to continue our growth momentum.
Apollo Towers
Apollo Towers Pte. Ltd. ("Apollo") continues to play a leading role in Myanmar's fast-paced telecommunication sector and connecting the vast country that is Myanmar. Apollo is close to completing its second order for Telenor and currently boasts a tower portfolio of approximately 1,800 towers making it Myanmar's second largest independent tower company. What is more, Apollo has secured a US$250 million loan facility from the United States' OPIC, which will be instrumental to growing Apollo's portfolio by an additional 2,000 towers in the medium term.
In addition to expanding its asset base, Apollo has positioned itself for the expected entry of the fourth telecom operator - a joint venture between Vietnam's Viettel, a consortium of 11 Myanmar companies and Myanmar Economic Corporation. The Myanmar telco tower environment has been very conducive to high tenancy rates and the entry of the fourth operator is certain to boost co-location rates further. The Myanmar telecommunications sector continues to be an attractive space and a major focal point in the country's successful reform process.
MFIL
Myanmar Finance International Ltd. ("MFIL"), our microfinance business, has continued to exhibit strong growth during the period. Since the Company's investment in September 2014, the number of borrowers and the loan portfolio has grown to over 38,000 borrowers and 6.5 billion kyats (US$5 million) as of 30 September; a CAGR of 95% and 185% respectively. As a result of this MFIL has enjoyed strong profit growth on an unlevered basis.
On 31 October, MFIL secured a US$1 million-equivalent, local-currency loan from Malayan Banking Berhad, Yangon Branch ("Maybank"). The loan from Maybank will allow MFIL to further increase its outreach and expand its loan portfolio. By adding gearing to MFIL's funding this will also have a significant positive uplift in MFIL's return on equity.
In addition, MFIL plans to launch new products and open a further four branches within the next 12 months. The Company intends to continue to play an active role to assist MFIL to secure further debt financing in the coming years, as MFIL consolidates its position as one of the leading microfinance operators in Myanmar.
Pipeline
We continue to see a large number of investment opportunities; to date we have evaluated over 185 potential investments.
We sift quickly through these and hone in on those that offer credible risk-adjusted returns. Typically, these are situations with:
· local entrepreneurs who have grown their business in spite of the past difficulties in Myanmar and who are now looking to raise capital to propel the business to the next level - MFIL would be an example of this; or
· foreign players, well experienced in their sector, looking to enter the same, often untouched, space in Myanmar - Apollo would be an example of this.
From these we have seen two trends emerging: consumer related and capacity constrained opportunities.
Consumer related opportunities
This is a nascent sector with a limited number of mainly small operators. However, experience elsewhere in the region has shown that this sector at this stage can yield significant growth. The predicted growth of the Middle and Affluent Class ("MAC") and the significant increase in their disposable income is expected to drive demand for many years to come.
Here we are focussing especially on opportunities in retailing, healthcare and family entertainment; building the brands of tomorrow in otherwise empty spaces.
A recurrent feature of the consumer sector opportunities is that they require only a modest initial investment that can then be scaled up as the business develops and the ability to develop more branches unfolds.
For this sector we have assembled a panel of experienced Asian retail executives that we can bring in to assist with the initial investment assessment, or if needed to remain in the business as company executives, mentors or board members.
In all cases the objective is to develop market-leading franchises that can either be sold to multinationals in 3 to 5 years or held for their cashflows.
Capacity constrained opportunities
These represent situations where there is an acute imbalance between supply and demand and yet a significant requirement for capital investment to unlock the supply. Typically, these are larger ticket opportunities (up to US$25 million). Often we look to partner with a proven international company who is looking for a strong and knowledgeable local partner. Our investment in Apollo is an example of this type of opportunity.
Given the size of these investments we would look to bring in a syndicate of investors (possibly including our own shareholders) but hold an appropriate sized investment on our own books. We would take responsibility for managing the syndicate's investment and in return charge fees and also take a carried interest thereby leveraging the opportunity by extracting a higher reward than just the IRR of the investment itself.
These opportunities include shortages of soft infrastructure (for example financial services, education etc.) as well as more traditional hard infrastructure (for example utilities such as power, waste water treatment etc.). An additional attraction of these types of opportunities is that debt funding from third parties (DFIs, international banks, etc) is also more readily available. The US$250 million loan from the US Government's OPIC to Apollo would be an illustration of this.
In this space we are well advanced on a number of opportunities in power, mobile money and logistics and hope to announce one or more of these in due course.
Financial Performance
For the six months to 30 September MIL's unaudited consolidated loss after tax was US$1.33 million.
This represents:
· the overheads associated with running the Company's business (US$1.08 million); and
· the impact of the share based payments arising from the Company's Employee Share Option Plan ("ESOP") (US$253,000).
The non-cash share based payment charge of US$253,000 is a significant increase over prior periods. This arises following the delayed granting of most of the remaining ESOPs, that had been available but not granted, in January 2016. Following the accounting treatment for this, the impact on the Company's financial performance is spread over the 3 year vesting period and therefore will remain at around this annualised level for the full year to 31 March 2017.
It should be noted that for the same 6-month period last year the consolidated loss after tax, excluding the share based payments, was US$1.07 million. As such the level of cash overheads for the 6 months to 30 September has risen by only $10,000 in the past year.
The Directors have determined that MIL's Net Asset Value ("NAV") as at 30 September was US$27.2 million, or US$0.89 per share. This represents a 12.1% increase in the NAV over the 6-month period to 30 September which is mainly attributable to:
· the equity fund raising in September of US$4.2 million; less
· cash overheads (ie excluding the impact of the ESOP) of US$1.08 million.
In accordance with the Company's stated policy, the Company's investments in Apollo and MFIL have been determined by reference to the prevailing International Private Equity and Venture Capital Guidelines. As such both investments have been valued at transactions that have taken place in the past 12 months. For Apollo the valuation is derived from the pricing for the share subscription in December 2015, which was agreed amongst the shareholders to be the same price that MIL paid when it first invested in July 2015. For MFIL the valuation is based on the embedded pricing used when Norfund exercised their option to become a 25% shareholder in MFIL in November 2015.
As such these values do not necessarily reflect what might be considered to be the realisable value of the investments.
In the following unaudited financial statements, which have been prepared in compliance with IFRS, the net asset value differs from the above stated value due to the following differences:
US$ | |
NAV at end of period as per the unaudited financial statements | 27,088,125 |
Less: Apollo transaction costs Note 1 | (190,388) |
Add: MFIL difference in valuation methodology Note 1 | 339,334 |
NAV at end of period as per the Directors' valuation | 27,237,071 |
Note 1 - further details on the differences between the IFRS basis of valuation adopted in the unaudited financial statements and the valuation adopted by the Directors, in accordance with the International Private Equity and Venture Capital Guidelines, can be found in the Executive Directors Report in the Company's 2016 Annual Report which can be found on our website at www.myanmarinvestments.com.
Fundraising
On 16 September the Company raised US$4.2 million through an equity issue of new ordinary shares and warrants. The proceeds will be used for future investment as well as covering the Company's general overheads. Whilst existing shareholders continued to support the Company's growth, new shareholders also participated in this round.
MIL has now raised over US$34 million since inception from a broad based group of shareholders with an increasing number of institutional investors. In accordance with the Company's strategy we will consider raising additional equity to fund further investments.
We are also examining the prospects for establishing an additional listing for the Company in Asia. We believe that a listing nearer Myanmar may be of benefit in attracting regional investors, both institutional and retail, which in turn could help build liquidity in the trading of the Company's shares and warrants. That said, since the appointment of Investec, as our corporate broker in February, our liquidity has increased fourfold.
Investor Day
We were pleased to host our annual Investor Day conference on 17 October 2016. The event attracted a significant group of institutional and high net worth investors from Europe and Asia, who joined us in Yangon for two days to review and discuss the economic and political situation in Myanmar. We also included a tour of economic developments in downtown Yangon as well as presentations by the management of our two investments. The conference was very well received and we look forward to hosting next year's Investor Day in October 2017 in Yangon.
Outlook
The situation in Myanmar continues to steadily improve, though possibly not as fast as some would have liked. Nonetheless we believe the progress is sustainable and irreversible.
Against this backdrop our two investments continue to perform well and both of them have scope for strong growth for the foreseeable future.
Additionally, we are working on a number of exciting new investments. The pace of concluding these may not have been as fast as one might have hoped for as we have prioritised the prudence and discipline gained from decades of experience in this area. Nonetheless opportunities abound and with skill and patience we are confident we can continue to deploy the funds we have raised into attractive investments.
With our focus on consumer and capacity constrained opportunities we believe these will provide us with both capital gains and strong recurrent cashflows.
I should like to thank all of the staff for their hard work over this period and commend the Executive Directors for keeping our overheads in line with last year's and well within budget.
My thanks also to my fellow shareholders for your continued support.
William Knight
Chairman
7 December 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Present Interims | Prior Interims(1) | Prior Full Year | ||
Note | 1 April 2016 to 30 Sept 2016 | 1 April 2015 to 30 Sep 2015 | 1 April 2015 to 31 March 2016 | |
Unaudited | Unaudited | Audited | ||
US$ | US$ | US$ | ||
Revenue | - | - | - | |
Other item of income | ||||
Other income | 4 | 75 | - | 21,090 |
Items of expense | ||||
Employee benefits expense | 5 | (846,445) | (710,286) | (1,384,158) |
Depreciation expense | 12 | (8,381) | (7,305) | (14,996) |
Other operating expenses | (515,423) | (386,417) | (840,653) | |
Finance costs | 6 | (6,761) | (5,984) | (14,413) |
Share of results of joint venture, net of tax | 10 | 47,942 | (1,811) | 16,485 |
Loss before income tax | 7 | (1,328,993) | (1,111,803) | (2,216,645) |
Income tax expense | 8 | (5,382) | (1,251) | (19,009) |
Loss for the financial period | (1,334,375) | (1,113,054) | (2,235,654) | |
Other comprehensive income: | ||||
Items that may be reclassified subsequently to profit or loss: | ||||
Exchange loss arising on translation of foreign operations | (55,153) | - | (188,435) | |
Exchange differences arising from dilution of interest in joint ventures | - | - | 107,303 | |
Other comprehensive income for the financial period, net of tax | 10 | (55,153) | - | (81,132) |
Total comprehensive income for the financial period | (1,389,528) | (1,113,054) | (2,316,786) | |
Loss attributable to: | ||||
Owners of the parent | (1,332,330) | (1,113,054) | (2,233,369) | |
Non-controlling interests | (2,045) | - | (2,285) | |
(1,334,375) | (1,113,054) | (2,235,654) | ||
Total comprehensive income attributable to: | ||||
Owners of the parent | (1,387,483) | (1,113,054) | (2,314,501) | |
Non-controlling interests | (2,045) | - | (2,285) | |
(1,389,528) | (1,113,054) | (2,316,786) | ||
Loss per share (cents) | ||||
- Basic and diluted | 9 | (4.84) | (6.79) | (10.21) |
(1) Restated to conform to the Company's accounting policies as detailed in the audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Present Interims | Prior Interims(1) | Prior Full Year | ||
Notes | 1 April 2016 to 30 Sept 2016 | 1 April 2015 to 30 Sep 2015 | 1 April 2015 to 31 March 2016 | |
Unaudited | Unaudited | Audited | ||
US$ | US$ | US$ | ||
| ASSETS | ||||
| Non-current assets | ||||
Investment in joint venture | 10 | 1,806,746 | 1,715,051 | 1,813,957 |
Available for sale financial assets | 11 | 31,395,522 | 30,182,725 | 31,385,522 |
Plant and equipment | 12 | 9,556 | 19,305 | 16,887 |
33,211,824 | 31,917,081 | 33,216,366 | ||
Current assets | ||||
Other receivables | 155,934 | 47,236 | 91,750 | |
Cash and cash equivalents | 4,545,048 | 3,608,234 | 1,386,059 | |
4,700,982 | 3,655,470 | 1,477,809 | ||
| TOTAL ASSETS | 37,912,806 | 35,572,551 | 34,694,175 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Share capital | 14 | 32,833,525 | 28,788,345 | 28,765,805 |
Share option reserve | 15 | 566,870 | 201,996 | 313,561 |
Accumulated losses | (6,175,985) | (3,723,340) | (4,843,655) | |
Foreign exchange reserve | (136,285) | - | (81,132) | |
Equity attributable to owners of the parent | 27,088,125 | 25,267,001 | 24,154,579 | |
Non-controlling interests | 10,396,603 | 10,000,000 | 10,398,648 | |
Total equity | 37,484,728 | 35,267,001 | 34,553,227 | |
LIABILITIES | ||||
Current liabilities | ||||
Other payables | 414,760 | 304,299 | 131,421 | |
Income tax payable | 13,318 | 1,251 | 9,527 | |
Total current liabilities | 428,078 | 305,550 | 140,948 | |
TOTAL EQUITY AND LIABILITIES | 37,912,806 | 35,572,551 | 34,694,175 | |
NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY | 27,088,125 | 25,267,001 | 24,154,579 |
(1) Restated to conform to the Company's accounting policies as detailed in the audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2016
Note | Sharecapital | Share optionreserve | Foreign exchange reserve | Accumulated losses | Equity attributable to owners of the parent | Non- controlling interests | Total | |||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | ||||
At 1 April 2016 | 28,765,805 | 313,561 | (81,132) | (4,843,655) | 24,154,579 | 10,398,648 | 34,553,227 | |||
Loss for the financial period | (1,332,330) | (1,332,330) | (2,045) | (1,334,375) | ||||||
Other comprehensive income for the financial period | ||||||||||
Exchange losses arising on translation of foreign operations | 10 | (55,153) | (55,153) | (55,153) | ||||||
Total other comprehensive income for the financial period | (55,153) | (55,153) | (55,153) | |||||||
Total comprehensive income for the financial period | (55,153) | (1,332,330) | (1,387,483) | (2,045) | (1,389,528) | |||||
Total transactions with non-controlling interests | ||||||||||
Contributions by and distributions to owners | ||||||||||
Issue of shares | 14 | 4,224,591 | 4,224,591 | 4,224,591 | ||||||
Share issue expenses | 14 | (156,871) | (156,871) | (156,871) | ||||||
Grant of share options to employees | 15 | 253,309 | 253,309 | 253,309 | ||||||
Total contributions by and distributions to owners | 4,067,720 | 253,309 | 4,321,029 | 4,321,029 | ||||||
At 30 September 2016 | 32,833,525 | 566,870 | (136,285) | (6,175,985) | 27,088,125 | 10,396,603 | 37,484,728 | |||
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2016
|
| ||||||||
Note | Sharecapital | Share optionreserve | Foreign exchange reserve | Accumulated losses | Equity attributable to owners of the parent | Non- controlling interests | Total | ||
US$ | US$ | US$ | US$ | US$ | US$ | US$ | |||
At 1 April 2015 | 8,996,282 | 160,113 | - | (2,610,286) | 6,546,109 | - | 6,546,109 | ||
Loss for the financial year | - | - | - | (2,233,369) | (2,233,369) | (2,285) | (2,235,654) | ||
Other comprehensive income for the financial year | |||||||||
Exchange losses arising on translation of foreign operations | - | - | (188,435) | - | (188,435) | - | (188,435) | ||
Exchange differences arising from dilution of interest in joint ventures | - | - | 107,303 | - | 107,303 | - | 107,303 | ||
Total other comprehensive income for the financial year | 10 | - | - | (81,132) | - | (81,132) | - | (81,132) | |
Total comprehensive income for the financial year | - | - | (81,132) | (2,233,369) | (2,314,501) | (2,285) | (2,316,786) | ||
Transactions with non-controlling interests: | |||||||||
Contribution from non-controlling interests to a subsidiary | - | - | - | - | - | 10,400,933 | 10,400,933 | ||
Total transactions with non-controlling interests | - | - | - | - | - | 10,400,933 | 10,400,933 | ||
Contributions by and distributions to owners | |||||||||
Issue of shares | 14 | 19,942,397 | - | - | - | 19,942,397 | - | 19,942,397 | |
Share issue expenses | 14 | (172,874) | - | - | - | (172,874) | - | (172,874) | |
Grant of share options to employees | 15 | - | 153,448 | - | - | 153,448 | - | 153,448 | |
Total contributions by and distributions to owners | 19,769,523 | 153,448 | - | - | 19,922,971 | - | 19,922,971 | ||
At 31 March 2016 | 28,765,805 | 313,561 | (81,132) | (4,843,655) | 24,154,579 | 10,398,648 | 34,553,227 | ||
CONSOLIDATED STATEMENT OF CASH FLOWS
Present Interims | Prior Interims(1) | Prior Full Year | ||
Period ended 30 Sept 2016 | Period ended 30 Sept 2015 | Period ended 31 March 2016 | ||
Unaudited | Unaudited | Audited | ||
Note | US$ | US$ | US$ | |
Operating activities | ||||
Loss before income tax | (1,328,993) | (1,111,803) | (2,216,645) | |
Adjustments for: | ||||
Interest income | 4 | (75) | - | (181) |
Finance costs | 6 | 6,761 | 5,984 | 14,413 |
Depreciation of plant and equipment | 12 | 8,381 | 7,305 | 14,996 |
Share-based payment expense | 15 | 253,309 | 41,883 | 153,448 |
Share of results of joint venture, net of tax | 10 | (47,942) | 1,811 | (16,485) |
Gain on dilution of interest in joint venture | - | - | (20,909) | |
Operating cash flows before working capital changes | (1,108,559) | (1,054,820) | (2,071,363) | |
Changes in working capital: | ||||
Other receivables | (64,184) | 41,618 | (2,896) | |
Other payables | 283,339 | 239,090 | 66,226 | |
Cash used in operations | (889,404) | (774,112) | (2,008,033) | |
Interest received | 75 | - | 181 | |
Finance costs paid | (6,761) | (5,984) | (14,413) | |
Income tax paid | (1,591) | (1,251) | (10,747) | |
Net cash flows used in operating activities | (897,681) | (781,347) | (2,033,012) | |
Investing activities | ||||
Investment in available for sale securities | 11 | (10,000) | (30,182,725) | (31,385,522) |
Investment in joint venture | 10 | - | (266,667) | (407,500) |
Purchase of plant and equipment | 12 | (1,050) | (2,358) | (7,631) |
Net cash flows used in investing activities | (11,050) | (30,451,750) | (31,800,653) | |
Financing activities | ||||
Contribution from non-controlling interests to a subsidiary | - | 10,000,000 | 10,400,933 | |
Net proceeds from issuance of shares | 14 | 4,067,720 | 19,792,064 | 19,769,523 |
Increase in short-term deposits pledged | - | - | (163) | |
Net cash flows generated from financing activities | 4,067,720 | 29,792,064 | 30,170,293 | |
Net change in cash and cash equivalents | 3,158,989 | (1,441,033) | (3,663,372) | |
Cash and equivalents at beginning of the year | 1,349,915 | 5,013,287 | 5,013,287 | |
Cash and equivalents at end of financial period | 4,508,904 | 3,572,254 | 1,349,915 |
(1) Restated to conform to the Company's accounting policies as detailed in the audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2016
1. General corporate information
Myanmar Investments International Limited ("the Company") is a limited liability company incorporated and domiciled in the British Virgin Islands ("BVI"). The Company's registered office is at Jayla Place, Wickhams Cay I, Road Town, Tortola, British Virgin Islands.
The Company's ordinary shares and warrants are traded on the AIM market of the London Stock Exchange under the ticker symbols MIL and MILW respectively.
The Company has been established for the purpose of identifying and investing in, and disposing of, businesses operating in or with business exposure to Myanmar. The Company will target businesses operating in sectors that the Directors believe have strong growth potential and thereby can be expected to provide attractive yields, capital gains or both.
Details of the Company's investment in its joint venture are disclosed in Note 10; its investment in available-for-sale financial assets are disclosed in Note 11 and the principal activities of the subsidiaries are disclosed in Note 13.
The consolidated financial statements of the Company and its subsidiaries (the "Group") for the six month period ended 30 September 2016 were approved by the Board of Directors on 7 December 2016.
Whilst the financial information included in this announcement has been prepared in accordance with the International Financial Reporting Standards ("IFRS"), this announcement does not in itself contain sufficient information to comply with IFRS. The full audited financial statements of the Company for the year to 31 March 2016 can be found on the Company's website at www.myanmarinvestments.com.
1.1 Going concern
After due and careful enquiries, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future.
This expectation is based on a review of the Company's existing financial resources, its present and expected future commitments in terms of its overheads and running costs; and its commitments to its existing investments.
Accordingly, the Directors have adopted the going concern basis in preparing the consolidated financial statements.
2. Summary of significant accounting policies
The Company's accounting policies are available in the full audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
3. Significant accounting judgements and estimates
The Company's significant accounting judgements and estimates used in the preparation of these financial statements are available in the full audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
4. Other income
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | |
US$ | US$ | US$ | |
Interest income | 75 | - | 181 |
Gain on dilution of interest in joint venture | - | - | 20,909 |
75 | - | 21,090 |
5. Employee benefits expense
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | |
US$ | US$ | US$ | |
Salaries, wages and other staff benefits | 593,136 | 668,403 | 1,230,710 |
Share option expenses | 253,309 | 41,883 | 153,448 |
846,445 | 710,286 | 1,384,158 |
The employee benefits expense includes the remuneration of Directors as disclosed in Note 16.
6. Finance costs
Finance costs represent bank charges for the financial period.
7. Loss before income tax
In addition to the charges and credits disclosed elsewhere in the notes to the consolidated financial statements, the above includes the following charges and credits:
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | |
US$ | US$ | US$ | |
Auditor's remuneration | 21,183 | 24,836 | 48,791 |
Consultants fees | 226,101 | 124,461 | 264,591 |
Foreign exchange loss, net | - | - | 1,242 |
Operating lease expenses | 40,473 | 60,400 | 83,460 |
Professional fees | 13,618 | 19,877 | 16,076 |
Travel and accommodation | 53,276 | 26,891 | 84,998 |
8. Income tax
Income tax represents tax arising from the provision of inter-company management services.
9. Loss per share
Basic loss per share is calculated by dividing the loss for the financial period attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial period.
The following reflects the loss and share data used in the basic and diluted loss per share computation:
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | ||||
Loss for the financial period attributable to owners of the Company (US$) | (1,332,330) |
(1,113,054) | (2,233,369) | |||
Weighted average number of ordinary shares during the financial period applicable to basic loss per share | 27,553,577 |
16,403,349 | 21,884,673 | |||
Loss per share | ||||||
Basic and diluted (cents) | (4.84) | (6.79) | (10.21) |
| ||
Diluted loss per share is the same as the basic loss per share because the potential ordinary shares to be converted are anti-dilutive as the effect of the shares conversion would be to decrease the loss per share.
10. Investment in joint venture
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | ||
Investment in joint venture (37.5%) | US$ | US$ | US$ | |
At 1 April | 1,813,957 | 1,450,195 | 1,450,195 | |
Investments during the year | - | 266,667 | 407,500 | |
Share of results of joint venture, net of tax | 47,942 | (1,811) | 16,485 | |
Foreign exchange adjustment | (55,153) | - | (81,132) | |
Gain on dilution of interest in joint venture | - | - | 20,909 | |
At period end | 1,806,746 | 1,715,051 | 1,813,957 |
On 26 August 2014 the Company's wholly-owned subsidiary, Myanmar Investments Limited ("MIL"), signed a joint venture agreement ("JVA") with Myanmar Finance Company Limited ("MFC") in which, the two parties agreed to establish a Myanmar microfinance joint venture company, Myanmar Finance International Ltd. ("MFIL"). The principal activities of MFIL are in line with the Company's strategy of investing in Myanmar businesses operating in sectors with strong growth potential.
Under the terms of the JVA, MFC injected its existing microfinance business into the joint venture which is jointly managed by MIL and MFC. The two partners agreed to a four-phased contribution with MIL owning 55 per cent of the new company and MFC holding the remaining 45 per cent.
On 7 August 2015, MIL invested an additional US$266,667 in MFIL (which included US$120,000 as premium paid, reflecting MFC's injected microfinance business), and the Company's equity interest in MFIL remained at 55%. MIL equity capital contributions to date totalled US1,779,167.
On 16 November 2015, The Norwegian Investment Fund for Developing Countries ("Norfund") exercised an option to subscribe for new shares in MFIL for a total consideration of US$1,430,720. Concurrent with Norfund's investment, the fourth and final tranche of the initial capital specified under the JVA was called from MIL and MFC and MIL invested an additional US$140,833 bringing its total capital contribution to date to US$1,920,000. Following Norfund's investment and the final capital contributions by MIL and MFC, MIL's and MFC's shareholdings in MFIL were each reduced to 37.5%, while Norfund now has a 25% shareholding in MFIL.
MFIL is a well-established provider of microfinance loans to small-scale business operators in rural and urban areas of Yangon and neighbouring Bago.
MFIL is deemed to be a joint venture of the Company as the appointment of its directors and the allocation of voting rights for key business decisions require the unanimous approval of all its shareholders.
11. Available-for-sale financial assets
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | |
Available-for-sale financial assets | US$ | US$ | US$ |
Unquoted equity shares, at cost | 31,395,522 | 30,182,725 | 31,385,522 |
MIL 4 Limited ("MIL 4"), a 66.67% owned subsidiary (see Note 13), was incorporated by the Company to acquire shares in Apollo Towers Pte. Ltd. ("Apollo"), an unquoted Singapore incorporated company.
On 29 July 2015, MIL 4 acquired a 14.18% stake in Apollo for a purchase consideration of US$30,182,725.
On 24 December 2015, Apollo held a further round of fund raising in which MIL 4 only invested US$1,202,797 into Apollo, resulting in a dilution of MIL 4's equity interest to 13.48%.
On 16 June 2016, MIL4 acquired a warrant for a total consideration of US$10,000, allowing MIL4 to purchase for a nominal amount 1.56% of Apollo's total capital stock on a fully diluted basis. As a result of this MIL4 now has an effective equity interest of 14.0% in Apollo and the Company's effective equity interest in Apollo is 9.3%.
Apollo owns and operates a leading telecommunication towers business in Myanmar through its subsidiary Apollo Towers Myanmar Limited.
In accordance with IFRS, the investment in unquoted equity securities is stated at cost, including transaction costs, less impairment loss, if any, as its fair value cannot be determined reliably. The investment is denominated in United States Dollars.
12. Plant and equipment
Computer equipment | Office equipment | Furniture and fittings | Total | |
US$ | US$ | US$ | US$ | |
Financial period ended 30 September 2016 | ||||
Cost | ||||
Balance at 1 April 2016 | 13,739 | 4,580 | 30,155 | 48,474 |
Additions | 625 | - | 425 | 1,050 |
Balance at 30 September 2016 | 14,364 | 4,580 | 30,580 | 49,524 |
Accumulated depreciation | ||||
Balance at 1 April 2016 | 7,649 | 1,599 | 22,339 | 31,587 |
Depreciation for the financial period | 2,495 | 764 | 5,122 | 8,381 |
Balance at 30 September 2016 | 10,144 | 2,363 | 27,461 | 39,968 |
Carrying amount | ||||
Balance at 30 September 2016 | 4,220 | 2,217 | 3,119 | 9,556 |
Financial year ended 31 March 2016 | ||||
Cost | ||||
Balance at 1 April 2015 | 10,749 | 2,297 | 27,797 | 40,843 |
Additions | 2,990 | 2,283 | 2,358 | 7,631 |
Balance at 31 March 2016 | 13,739 | 4,580 | 30,155 | 48,474 |
Accumulated depreciation | ||||
Balance at 1 April 2015 | 3,604 | 752 | 12,235 | 16,591 |
Depreciation for the financial year | 4,045 | 847 | 10,104 | 14,996 |
Balance at 31 March 2016 | 7,649 | 1,599 | 22,339 | 31,587 |
Carrying amount | ||||
Balance at 31 March 2016 | 6,090 | 2,981 | 7,816 | 16,887 |
13. Investment in subsidiaries
Details of the investments in which the Group has a controlling interest are as follows:
Name of subsidiaries | Country of incorporation/ principal place of business | Principal activities | Proportion ofownership interest held by the Group | Proportion ofownership interest held by non-control interests | ||
% | % | |||||
Myanmar Investments Limited | Singapore | Investment holding company | 100 | - | ||
MIL Management Pte. Ltd. | Singapore | Provision of management services to the Group | 100 | - | ||
MIL No. 2 Pte. Ltd. | Singapore | Dormant | 100 | - | ||
MIL No. 3 Pte. Ltd. | Singapore | Dormant | 100 | - | ||
MIL 4 Limited | British Virgin Islands | Investment holding company | 66.67 | 33.33 | ||
Held by MIL Management Pte. Ltd. | ||||||
MIL Management Co., Ltd | Myanmar | Provision of management services to the Group | 100 | - | ||
14. Share capital
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year to 31 March 2016 | ||||
US$ | US$ | US$ | ||||
Issued and fully-paid share capital: | ||||||
Ordinary shares at the beginning of the financial period | 28,765,805 | 8,996,282 | 8,996,282 | |||
Issuance of ordinary shares during the financial period | 4,224,591 | 19,942,397 | 19,942,397 | |||
Share issuance expenses | (156,871) | (150,334) | (172,874) | |||
32,833,525 | 28,788,345 | 28,765,805 | ||||
Equity Instruments in issue |
Ordinary Shares |
Warrants |
| |||
At the beginning of the financial period | 27,300,833 | 15,240,027 |
| |||
Issued during the financial period | 3,245,447 | 811,368 |
| |||
Warrant conversion | 7,347 | (7,347) |
| |||
At the end of the financial period | 30,553,627 | 16,044,048 |
| |||
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share without restriction at meetings of the Company.
All shares have been admitted to trading on AIM under the ticker MIL.
The new ordinary shares issued during the financial period ranked pari passu in all respects with the existing ordinary shares of the Company.
Warrants
The Warrants entitle the holder to subscribe for an Ordinary Share at an exercise price of US$0.75. The Warrants may be exercised during each 15 Business Day period commencing on the first day of each Quarter during the Subscription Period (from 21 June 2015 to 21 June 2018).
All Warrants have been admitted to trading on AIM under the ticker MILW.
15. Share option reserve
Details of the Share Option Plan (the "Plan")
Details of the Share Option Plan (the "Plan") are available in the audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
As at 30 September 2016, there were 3,004,628 share options available for issue under the Plan of which 2,089,761 had been granted. These granted share options have a weighted average exercise price of US$1.201 per share and a weighted average contractual life of 8.72 years.
The 3,004,628 share options available were created under the following series:
Series/Date | Occasion | Number | Exercise price (USD) |
Series 1 | Admission Placing and Subscription | 584,261 | 1.100 |
Series 2 | Second Subscription | 361,700 | 1.155 |
Series 3 | Third Subscription | 1,734,121 | 1.265 |
Series 4 | Fourth Subscription | 324,546 | 1.430 |
3,004,628 |
The following share-based payment arrangements were in existence during the current financial period:
Option series | Number of share options | Grant date | Expiry date | Exercise price (USD) | Fair value at grant date |
Series 1 | 410,000 | 27 June 2013 | 26 June 2023 | 1.100 | 153,495 |
Series 1 | 25,000 | 9 December 2013 | 8 December 2023 | 1.100 | 19,015 |
Series 1 | 132,261 | 25 September 2014 | 24 September 2024 | 1.100 | 62,937 |
Series 2 | 24,000 | 2 June 2015 | 1 June 2025 | 1.155 | 14,671 |
Series 1 | 10,200 | 15 January 2016 | 14 January 2026 | 1.100 | 6,235 |
Series 2 | 331,700 | 15 January 2016 | 14 January 2026 | 1.155 | 193,562 |
Series 3 | 956,600 | 15 January 2016 | 14 January 2026 | 1.265 | 508,734 |
Series 3 | 200,000 | 28 June 2016 | 27 June 2026 | 1.265 | 139,847 |
2,089,761 |
Fair value of share options granted in the financial period
The weighted average fair value of the share options granted during the financial period was US$0.699. Share options were priced using Black-Scholes option pricing model. Expected volatility is based on historical share price volatility from the date of grant of the share options.
The Black-Scholes option pricing model uses the following assumptions:
Grant Date | |
28 June 2016 | |
Grant date share price (US$) | 1.628 |
Exercise price (US$) | 1.265 |
Expected volatility | 22.47% |
Option life | 10 years |
Risk-free annual interest rates | 1.46% |
The Group recognised a net expense of US$253,309 related to equity-settled share-based payment transactions during the financial period.
Movement in share options during the financial period
The following reconciles the share options outstanding at the start and end of the period.
Number | Weighted average exercise price | |
US$ | ||
Balance at start of thefinancial period | 1,894,661 | 1.194 |
Granted | 200,000 | 1.265 |
Forfeited | (4,900) | 1.117 |
Balance at end of financial period | 2,089,761 | 1.201 |
No share options were exercised during the financial period.
Movement in share option reserve during the financial period
6 months to 30 September 2016 | 6 months to 30 September 2015 | Year ended 31 March 2016 | |
US$ | US$ | US$ | |
Balance at start of the financial period | 313,561 | 160,113 | 160,113 |
Grant of share options | 253,309 | 41,883 | 153,448 |
Balance at end of financial period | 566,870 | 201,996 | 313,561 |
16. Significant related party disclosures
Compensation of key management personnel
Director remuneration for the six month period ended 30 September 2016 is as follows:
Directors' fee | Short term employee benefits(1) | Share option plan | Total | ||
US$ | US$ | US$ | US$ | ||
Executive directors | |||||
Maung Aung Htun | - | 178,434 | 89,935 | 268,369 | |
Anthony Michael Dean | - | 167,558 | 82,141 | 249,699 | |
Independent non-executive directors | |||||
Christopher William Knight | 20,000 | - | 16,451 | 36,451 | |
Craig Robert Martin | 15,000 | - | 16,552 | 31,552 | |
Christopher David Appleton | 15,000 | - | 16,652 | 31,652 | |
Henrik Bodenstab | 11,200 | - | - | 11,200 | |
61,200 | 345,993 | 221,731 | 628,924 | ||
| |||||
(1) The short term employee benefits also includes rental expenses paid for Directors' accommodation.
17. Dividends
The Directors of the Company do not recommend any dividend in respect of the six month period ended 30 September 2016.
18. Financial risk management objectives and policies
The Company's financial risk management objectives and policies are available in the audited financial statements for the year to 31 March 2016, a copy of which can be found on the Company's website at www.myanmarinvestments.com.
19. Subsequent events
There have been no material subsequent events since the period end.