President & CEO's Statement

 

DEAR SHAREHOLDERS,

Over the recent years, SMI has developed a growing portfolio of high-growth consumer-related and infrastructure-related business enterprises in Myanmar and I am pleased to share the Group’s latest corporate highlights here.

SMI’s duty-free travel and fashion retail business started its retail presence with the completion of the duty-free and travel retail fashion and lifestyle stores in the new Yangon International Airport (“YIA”) Terminal One (“T1”) by September 2016, after being awarded more than 6,700 square metres of commercial space. The initial results of its retail operations at YIA are encouraging although it will take time for the new terminal to reach traffic flows at projected levels.

We have received much positive feedback from passengers and the airport management company on the quality of the duty-free and travel retail stores that we have created and this initial success has been widely noticed in the city itself.

Notably, we have used our relationship with DFS to supply a comprehensive portfolio of international wines & spirits and beauty brands for both departures and arrivals at YIA and have introduced more than 30 international fashion and lifestyle brands to create an outstanding retail experience for this very modern, newly-built terminal. This new terminal has dramatically increased the capacity of YIA to meet the expected rapid rise in international travellers; for business, for tourism and for Myanmar nationals who are also starting to travel overseas in greater numbers. This new terminal is already scheduled for further expansion and this will undoubtedly create new opportunities for SMI in travel retail at the airport.

A number of mall owners and developers in Myanmar are seeing SMI as a highly desirable partner and we have been pleased to work with Junction City – a new integrated upscale development in downtown Yangon. We have been able to introduce several international brands that we work with at the airport into Junction City and nearly all of these retail stores have been opened by the end of April 2017.

We have also been fortunate enough to sign an exclusive distribution agreement with Shiseido Asia Pacific, one of the world’s leading cosmetic houses, in February 2017 and the first Shiseido flagship counter in Myanmar will be opening in Junction City by mid year 2017.

F&B Franchise started off with the successful opening of two Coffee Bean and Tea Leaf outlets at T1 at YIA and we just recently opened another store at the new domestic terminal (T3). The first Crystal Jade Kitchen was successfully opened at the airport and this has been swiftly followed by another Crystal Jade Kitchen at Junction City, in which opened in April together with the much anticipated Ippudo ramen restaurant.

F&B Distribution is in the process of revamping its portfolio of fresh food, packaged food brands and wines managed as a joint venture with Quarto Products Pte. Ltd. The acquisition of a rare wine license in Myanmar by the Group is expected to enhance the Group’s market position in the growing international food and beverage market in Myanmar.

Auto started its franchise operations for Europcar in May 2015 and it has grown rapidly with over 160 cars in its fleet. Further expansion of this business segment has been hampered by restrictions on car imports but we have been resourceful in sourcing cars from the growing number of car brands locally assembled. Its portfolio of clients includes top international corporations, international hotel groups and airlines. With our Europcar operations in Myanmar, SMI Auto is the first international car rental brand marked by high levels of service, international insurance and well-trained local drivers.

Construction Services, the exclusive dealer for SANY, China’s leading construction equipment manufacturer in Myanmar, have seen significant growth in FY2017. An increasingly strong relationship with the manufacturer and a strengthened management team have boosted sales with more infrastructure and real estate projects coming on stream in Myanmar. In addition, we have invested time to put in place a broader business model with improved financial packages and options for our customers.

Logistics is a joint venture signed with one of Japan’s leading logistics companies, Senko. A modern warehouse has been designed and built, incorporating cold and chill storage facilities. The initial market reaction has been extremely positive and this bodes well for our future proposed expansion in this market segment.

Serviced Offices occupancy rates continue to rise as more international businesses develop an entry strategy for Myanmar.

Telecom Towers started the construction of its tower contract with Ooredoo on schedule from 1st July 2015. Almost 100 towers have been completed and nearly 50% of these towers have a co-lease up with some of the Mobile Network Operators in the country. However, after a strategic review, SMI’s management and its Board of Directors have decided that this business would benefit from higher levels of capital investment to build a stronger market position and so we have been willing to listen to offers that we have received for this business.

Separately, a decision has been made to exit the telecom equipment services segment and a notice of non-renewal of the distribution contract has been given to the supplier.

Steps have been taken during FY2017 to put in place a comprehensive Enterprise Resource Planning, accounting and human resource set of systems with full implementation expected in FY2018.

Another testament of our vision in Myanmar, we have been heartened by the positive investors’ reaction to the successful share placement exercise led by a major Singapore-based bank in November 2016.

Moving Ahead With a growing relationship with domestic and international financial institutions as well as the improved global investor sentiment towards Myanmar, SMI will continue to keep its focus on consumer-related and business-related products and services, whilst looking to strengthen the range and depth of our five core business pillars in Myanmar.

 

Mark Bedingham

 President and Chief Executive Officer