President & CEO’s Statement

 

DEAR SHAREHOLDERS,

The direction that I outlined in the last annual report has been successfully carried on throughout FY2016 and should lead to substantial revenue growth in FY2017.

We have had major success with award at the Yangon International Airport (“YIA”) of over 6,700 sqm of commercial space all to be managed by SMI Retail. This exciting project will allow us to develop 3 locations at the new terminal at YIA and build on our relationship with DFS to supply a comprehensive portfolio of international wines & spirits and beauty brands for both departures and arrivals and then introduce more than 30 international fashion and lifestyle brands to create an outstanding retail experience to the beautifully designed new terminal. This new terminal will dramatically increase the capacity of YIA to meet the expected rapid rise in international travellers; for business, for tourism and for Myanmar nationals who will also start to travel overseas in greater numbers.

Several of the international brands coming to YIA have expressed an interest in working with SMI in the domestic market and this will be followed up in FY2017.

The group’s food and beverage interests through its two main entities; SMI F&B Pte Ltd and the Joint Venture with Quarto SMI F&B MM Pte Ltd have also started to grow; although a challenging regulatory environment has held back some of that growth, this should ease in the coming months. These companies have a growing portfolio of brands and supply sources ranging from meat and dairy to packaged foods. The portfolio will be expanded in the coming months and much work has been done recently to design a more effective distribution system. The acquisition of a rare wine license should also be helpful in building the company’s market position.

A very encouraging recent development has been the signing of a franchise agreement to operate two Coffee Bean and Tea Leaf outlets at the new terminal at YIA and also an agreement has been reached with Crystal Jade to open a CJ Kitchen there.

Discussions continue with a view to bringing well known F&B franchises to the domestic market.

SMI Auto started its franchise operations for Europcar in July 2015 and has grown rapidly with over 100 cars now in its fleet a number that is expected to triple over the next twelve months. The demand for driver inclusive services has been strong – across a broad range of customers: international companies, hotels and at the airport. SMI Auto provides the first international car rental brand marked up by high levels of service and well trained local drivers.

SMI Constructions Services, the exclusive dealer for SANY – China’s leading construction equipment manufacturer had a quieter year as several construction projects were put on hold in the lead up to the elections. However this time was used productively to put in place a broader business model featuring export sales, stock sales and rentals. The benefits of the broader strategy should be visible in FY2017. Also some new specialist equipment is expected to join the portfolio of products and services very soon.

Myanmar Infrastructure Group SMI’s telecom tower company started the construction of its tower contract for Ooredoo on schedule from 1st July 2015. The initial roll out was slightly delayed by unseasonally heavy monsoon rains and there has been some recent slowdown stemming from the operator’s strategy review. Nevertheless, almost 100 towers have been completed and construction continues. Promising discussions have also been initiated with other network operators for co-lease up on some of the built towers.

SMI-Senko Logistics is a joint venture signed with one of Japan’s leading logistics companies. A modern warehouse has been designed and will incorporate cold and chill storage facilities which are sorely lacking in Yangon. There will be an opportunity to develop this business further in the near future.

Occupancy rates continue to rise with the YGN Kinnaya serviced office JV with Arcc Offices; and SMI Mobile continues to grow its customer base.

Steps have been taken during FY2016 to put in place a comprehensive ERP, accounting and HR set of systems with full implementation expected in FY2017.

Updates

Nearly all of these businesses have been established during the course of FY2016 and will see substantial revenue flow increases in FY2017.

SMI will keep its focus on consumer products and services and business products and services, whilst looking to strengthen the range and depth of the products and services that it provides.

SMI is being helped by its growing relationship with international and local banks and the international investor climate in Myanmar has been strengthened by the relatively smooth change of government.

 

 

Mark Bedingham

President and Chief Executive Officer