Saturday, October 10, 2015

Urbanization in Myanmar to drive real estate market


Yangon will need around 75,000 new apartments to be built each year to accommodate the city’s growing population, but contractors are struggling to come anywhere close to this target.
More than 330,000 people migrate to Yangon each year from elsewhere in the country, but formidable challenges remain to building enough accommodation to keep up with the pace of urbanisation, Kyaw Kyaw Soe, associate secretary from the Myanmar Construction Entrepreneurs Association (MCEA) told The Myanmar Times.
Yangon has a population of 5.14 million, which increases by 6.6% each year, according to the MCEA estimates.
We have seen this time after time in the developing economies of the world. The movement of people from rural areas to urban areas. This trend will be no different in Myanmar as people move to the city looking for higher paying jobs. This will require more construction of apartments and infrastructure to support the larger population. This will lead to years of growth. I am moving Yoma Strategic Holdings from the watchlist to my investment portfolio as I am long term bullish on Myanmar and its 8-10% yearly growth.

Sunday, October 4, 2015

Myanmar economy to grow 10%


There is an Asian country that doesn't have an active stock market or even a credit rating. Yet its economy may grow by 10 percent this year. Meet Myanmar, an unlikely growth star.

The frenetic growth in the country formerly known as Burma is in stark contrast to many large emerging market countries that are struggling to muster any economic growth, having been hobbled by the largest capital outflows in nearly three decades,

In an interview with CNBC, Aung Tun Thet, economic adviser to Myanmar's President, said gross domestic product may grow by 10 percent in the financial year through March as Myanmar revamps its infrastructure and tourist inflows pick up. The Asian Development Bank estimates that the economy grew by 7.7% in calendar 2014.

The country has a lot of growth ahead of it as it is starting from such a small base. In addition the demographics are in in its favor as the majority of the population is young. I think with the recent strength in the US dollar causing many frontier and emerging market currencies to depreciate it is time to think about buying on discount. I am more than likely going to add Yoma Strategic Holdings to the portfolio as the vehicle to play the the growth in Myanmar.

Saturday, October 3, 2015

Telenor going directly to digital in Myanamr


Mobile towers multiplying across Myanmar are tactile reminders that a major technological leap is happening. Telenor alone has 3,100 towers nationwide – 100 percent of these equipped with 3G capabilities – and is expected to roll out another 3-4,000 towers by year’s end.

Myanmar’s economy is also entering a period in which its industries are maturing – take telecommunications. The operating environment has turned on a dime, providers are now able to deliver data more efficiently and prices of handsets are now lower than they have ever been – and still falling.

The change is seen in the customers as well. Of Telenor’s over 10 million (and counting) subscribers, 55 percent have passed on entry-level voice and text. They have skipped ahead to becoming data users.

“No one at Telenor Myanmar had expected it to get this high so quickly,” said Neelesh Pratap Singh, Head of IT, Telenor Myanmar.

Telenor is in my investment portfolio specifically because of this type of news. They are in quite a few emerging markets and it is fascinating to see how fast technology is getting accepted by this formerly backward country. Of course more data use means more revenue so this is good for Telenor shareholders. 

Yoma Strategic Holdings back on the watchlist

I am placing Yoma Strategic Holdings back on my watchlist for possible addition to my portfolio. To refresh memories Yoma is the Serge Pun controlled Singapore based vehicle that is investing in Myanmar. We made money in Yoma a couple of years ago when the US lifted economic sanctions on Myanmar as the military junta there began to loosen its grip on power. Since then the government has continued to liberalize the economy and this has resulted in economic growth in the 7% plus range. The price of the stock has come down quite a bit in the last year as emerging and frontier markets have been hit by the strong US dollar. Nevertheless, the economy in Myanmar continues to grow and the country has tremendous economic potential.

I am intrigued by Yoma's strategy. They are primarily engaged in real estate devlopment but I have noticed that they are expanding into all types of businesses. They are doing this by joint venturing with foreign partners which helps diversify risk. They are basically the Jardine Matheson of Myanmar. An example is the first KFC in Myanmar which has Yoma partnering with Yum Brands. Putting aside the nutritional debates people in developing markets like this stuff.

Here is Yoma's most recent presentation which gives more info on the company. I am still taking a look at Yoma and have it on my watch list.

Monday, September 28, 2015

Government of Colombia and FARC rebels agree tp peace



Mr. Santos said the rebel leader worried that the government would use the deadline to force the guerrillas to make concessions at the last minute, but he assured Mr. Londoño that he wanted only to speed up the end of the talks. That smoothed over the impasse.

Besides the deadline, the two sides announced Wednesday that the rebels would begin to hand over their weapons 60 days after the signing of a final peace deal.

And they said that according to their basic agreement, rebel leaders and military officers who had committed human rights violations and other egregious crimes during the war would be punished — a breakthrough on what had long been an obstacle to a final accord.

Mr. Santos said that the punishment would include detention in a special site that he described as “an austere installation” but “not a typical jail with black-and-white pajamas.”

Thousands of low-level FARC fighters would be granted an amnesty under the deal, but Mr. Santos said several dozen rebel leaders could be subject to the punishment, possibly including Mr. Londoño. The rebels would be required to confess to their crimes before a tribunal, and a failure to do so could lead to more severe punishment.

If the deal holds this will be terrific for Colombia as this insurgency has been running nearly 50 years. The constant pipeline attacks and bombs occasionally going off in the major cities is not prospective for foreign direct investment. I am very upbeat on the prospects for Colombia and this news re-enforces my view. Once oil prices recover and the fall in Peso abates interest in Colombia will return. One of the big benefits of peace could be the unleashing of a huge mineral exploration campaign in Colombia. Evidently it has huge resources that were not able to be exploited due to the civil war and interference by rebel groups. 


Colombia lies at the northern end of the Andean Cordillera, producer of 39 percent of the world's copper -- along with 21 percent of molybdenum and 7 percent of gold supply. The country has largely the same rocks as Chile, Peru and Ecuador, yet produces almost none of these metals other than bullion.

But the prospects are tremendous. Porphyry copper-gold showings around Colombia are some of the largest and richest in the world. They've just never been open to development -- with the civil war being one of the major impediments.

But a peace deal could change that, much like the end of fighting did in Peru in the 1990s, leading to huge discoveries -- including the Pierina gold deposit, one of the world's largest and lowest-cost producers.

Sunday, September 20, 2015

California Almond Crop Down



Statewide, yields have been slightly lighter, said Robert Curtis, the Almond Board of California’s director of agricultural affairs. Yields are on pace to meet the National Agricultural Statistics Service projection of 1.8 billion meat pounds, down 3 percent from its May forecast and 4 percent from last year’s crop. In all, 2 billion meat pounds were harvested in 2013.

“With the good weather, the harvest is progressing well with no real issues,” Curtis said in an email.
While the Borrors’ wells have been holding up, the continued stress on trees because of the ongoing drought is blamed for the overall decline in tonnage. Mike Mason, a grower and processor who chairs the almond board, said earlier this summer that farmers are “doing everything within their power to conserve water.”

Although not a big disaster the crop is down and prices are up. This should continue to  bolster Select Harvests Australian almond growing business.

Saturday, September 19, 2015

Don't forget about Mongolia


Rio Tinto said it is committed to expanding its Oyu Tolgoi copper mine in Mongolia based on a positive outlook for the metal and confidence that low production costs can buoy profits even as competitors cut output.

The miner wants to lock in up to $4.2 billion in project financing by November to build more than 200 km of tunnels to access higher-quality ores at the deposit over the next five to seven years, Craig Kinnell, Rio's chief development officer for copper and coal, said during a media tour of the mine this week.

The expansion should extend the mine's lifespan past 2100 and open up 80 percent of the resources available, making it the world's third-largest mine for copper and gold.
With new project approvals slowing elsewhere, Kinnell said he was confident demand would hold up, particularly in China.

"I can't see anything to reconsider given the quality of our resource," he said. "Our commitment is to bring this on as soon as possible".

I am still hopeful long term on Mongolia. The recent weakness in China and commodity markets has taken its toll on the Mongolian economy. Of course that means no one is talking about it or interested in it. That means its cheap. When Rio Tinto gets the financing and starts the development of the underground part of the mine the economy of Mongolia should recover. We need to remember that the entire GDP of Mongolia is only around $12 billion per year. So pumping in $4 billion to develop the mine will have a ripple effect throughout the economy.

Book Report #1

"The fascinating untold tale of Samuel Zemurray, the self-made banana mogul who went from penniless roadside banana peddler to kingmaker and capitalist revolutionary"
I really enjoyed this book as it is part biography, part action/adventure, and part business. In addition, I had never heard of this guy before reading this book. Sam Zemurray was an immigrant from Russia that built up the largest banana business in the US. Along the way he fomented revolutions in Central America, defied the US government and corporate America, and was a great benefactor to Tulane University and helped in the formation of Israel. An example of the kind of boot strap guy that built the US into the country it used to be. A couple of quotes by Zemurray that illustrate the type of guy he was. The United Fruit Company, of which he was a large shareholder, was struggling and managers in the field were being micromanaged. He told the CEO, "Do you trust the men in the field? If yes, then let them manage. If no then fire them and get the right guys." When he ended up taking over United Fruit from the New England blue bloods who were running it into the ground he walked into the United Fruit boardroom in Boston and dumped all of the proxies voting him in as CEO on the boardroom table and said, "You guys have been fucking up this company long enough, I'm here to fix it." Great book and a great man.

Madalena Forges Ahead in Argentina


While oil prices in the U.S. plummeted below $39, Canadian explorer Madalena Energy has forged ahead with a strong Q2 showing and preparations for its first horizontal multi-stage frack in Argentina, where oil prices defy the market at an amazing U.S.$77.

Madalena’s strong showing is not only spurred by high oil prices in Argentina and the country’s U.S. $11 million-plus incremental incentivized oil programs, but the company has a strong balance sheet, has kicked off a three-well, back-to back horizontal program and is now preparing to launch a new high-impact well to test two major resource plays. It’s also planning its first horizontal multi-stage frack well in the prized Vaca Muerta shale offsetting the activities of supermajor Shell (RDS.A) which is ramping up horizontal drilling right on Madalena’s border.

And as Argentina’s oil prices are coming in at $75-$77 despite low global prices, the effect is reverberating widely, incentivizing oil companies to put more money into the country’s oil and gas sector, which in turn means steady job creation.


 All told, Madalena holds over 950,000 net acres across five provinces in Argentina, which is poised to be the venue for the next North American-style shale boom Argentina is home to 27 billion barrels of recoverable oil and 802 trillion cubic feet of natural gas and its two shale basins could end up being bigger than the Eagle Ford and Bakken. But adding to the attraction is another significant aspect at a time of slumping oil prices: For producers in Argentina, the price of natural gas and oil is fixed at $7.5 per million British Thermal Units (BTU) for new gas developments and U.S.D $75 to $77 per barrel respectively, well above international oil prices.

Not only is Argentina shaping up to the be the next big-time shale venue, but Madalena’s acreage is right in the middle of massive unconventional exploration activities of some of the world’s biggest companies, including ExxonMobil (NYSE: XOM), Royal Dutch Shell (NYSE: RDS.A), Total (NYSE: TOT), Petronas, Pan American Energy, Wintershall, Chevron (NYSE: CVX) and Argentina’s state-owned YPF.

Great article that gives an update on what Madalena is doing in Argentina. Even though oil prices are low in the rest of the world, Argentina mandates a price floor and that incentivizes oil companies to invest and produce in Argentina. Their are upcoming elections in Argentina and all the major candidates have said they will continue to support the domestic oil and gas industry as they all have a goal of Argentina becoming energy independent. My view on Madalena has not changed, I expect they will be taken out by a larger company at some point. Their properties are all surrounded by oil majors like Exxon and Chevron. As the Vaca Muerta play continues to de-risk someone is going to step up and buy these guys out. This continues to be one of my best speculative plays.

This cannot last


After a credit-fueled energy boom and a punishing downturn, U.S. shale drillers now spend the vast majority of their operating cash flow paying off the debt they took out to expand their drilling.

The U.S. Energy Information Administration says in the second quarter, 83 percent of domestic oil companies’ operating cash flow went to paying off debt balances as their cash piles shrink because of cheap crude.

That compares to 58 percent in the second quarter of 2014 and about 44 percent in early 2012. Over the last five years, oil companies have collected more than $250 billion in risky junk bonds to extract millions of barrels of crude from shale rock in Texas and North Dakota, eventually leading to a global oil glut that has cut the price of oil by more than half.

The whole shale boom was predicated on cheap credit enabled by a Federal Reserve that has kept interest rates at zero for too long. This has enabled more mal-investment that must now be liquidated. When oil prices go up to new highs in the future you can blame the Fed.