Golden City artist impressionCedar Strategic is taking a 49% stake in Golden City, an iconic property project next to the famous Shwedagon Pagoda (far right) and the Inya lake in the commercial heart of Yangon, Myanmar's largest city. (Artist's impression)

Cedar Strategic Holdings inked a deal in October 2016 to invest US$24.9 million for a 49% stake in Golden City, a brownfield luxury residential cum office, retail, and serviced apartments / hotel development on prime real estate at Yankin Road in Yangon.

In April 2016, Myanmar’s first civilian government in decades took office. In September 2016, it passed a law to promote foreign investment. This includes the removal of red tape, as well as the extension of tax incentives to businesses in selected sectors. In October 2016, U.S. economic sanctions against Myanmar imposed since 1997 were lifted because the military junta ceded power to civilian government.

Both the Asian Development Bank and International Monetary Fund are predicting its economic growth will exceed 8% for this year and next -- the highest rate in Asia.

“Locals in Myanmar are becoming increasing affluent. There is a shortage of quality condos as Yangon's luxury real estate market has yet to catch up with its rapid economic growth.”

- Tan Thiam Hee
Cedar Strategic


Yangon, the country's largest city with a population of nearly six million, is also its most important commercial centre. Yankin, where Golden City is located, is a thriving commercial hub of Yangon.

Myanmar is poised for a take-off in foreign investment, given the significant political events that took place in recent months. This is expected to drive demand for commercial & retail space, hotels and expatriate housing there, especially in an important business district like Yankin.

This district is within the vicinity of Yangon's most highly prized real estate with amenities such as Yangon's largest shopping mall, five-star hotels, fine dining, natural landscape like Inya lake, international schools as well as headquarters of MNCs such as Unilever, Keppel and LG.

“MNCs such as banks and airlines have indicated interest in Golden City’s commercial space as well as serviced apartments for their expatriate staff,” said CEO Tan Thiam Hee during an exclusive interview with NextInsight.

ThiamHee 2.2016

“Myanmar's enormous growth potential is at a tipping point now that its civilian government has taken office.”

- Tan Thiam Hee
(NextInsight file photo)

Based on a real estate valuation done in December 2015, the Golden City project has an estimated gross development value of US$694 million.

Given a GDV that is a whopping 70 times of the Group's 1HFY2016 revenue of RMB 67.1 million (about US$9.9 million), the project is expected to significantly lift the Group's revenue over the next few years as units are handed over.

The project is huge by Myanmar standards, with gross floor area of 3.6 million square feet for condominium towers, retail space as upmarket as that in developed nations, international grade offices, and serviced apartments / hotel development.

Its 33-storey towers can be easily spotted anywhere in Yangon as the country is at the stage of economic development when the number of skyscraper projects can be counted using the fingers on one’s hands. The Group’s strategy is to ride Myanmar’s transition from a frontier market into a developing one.

♦ Aligned interests
The purchase consideration for the Group's investment will comprise of US$10 million in cash and 5,152,700,000 Ordinary shares at the issue price of 0.4 Sing cents each (about US$14.9 million).

The cash portion will be funded by internal resources and a 6% US$5 million shareholder loan from the Group's controlling shareholder, Mr Luo Shandong, who holds 27.7%.

"The deal is structured such that the interests of Golden City's project developer will be aligned with the Group," said Mr Tan.

Upon completion of the deal, the Group will hold 70% in Uni Global Power Pte Ltd, a Singapore property developer that specializes in frontier markets. Uni Global Power holds 70% in Golden Land Real Estate Development Co (Golden Land), which is the Golden City project developer.

The vendors, Alex Zhu, Lai Xuejun and D3 Capital, will hold interests both in Uni Global Power as well as Cedar Strategic upon completion of the deal.

Alex Zhu is the CEO of Uni Global Power and the Chairman of Golden Land while Lai Xuejun is the general manager of Golden Land. D3 Capital is the family office of the Group's non-executive Director, Teo Cheng Kwee, who holds 3.2% in Cedar Strategic.

Strong project partners

An international team was assembled for the project: Australian Wavely International Landscape Design as well as China Southwest Architectural Design & Research Institute, a PRC SOE and one of the leading architectural design institutes in China. Reebonz, a leading online luxury sales company in Southeast Asia, will be the anchor tenant.

Stock price  0.4c
52-week range 0.2c-0.4c
Market cap S$62.2m
Price Earnings 32.8x
Price-Book 4.4x
Dividend yield -
Source: SGX StockFacts

The project has 4 phases. Phase one comprising of residential towers 1 to 4 was launched in 2014 and is 60% sold. Phase two comprising of residential towers 5 to 7 was launched in 2015 and is 20% sold.

"The Golden City apartment units have been transacted at between US$250 to US$320 psf. Prices are trending upward," said Mr Tan.

Phase one will be completed and progressively handed over beginning from the end of the year. Mr Tan expects that to contribute significantly to the Group's financial results for the year ending FY2016.

The management expects the valuation of Golden City to appreciate in tandem with rising demand for real estate in Yangon. There are two reasons for this.

Firstly, Myanmar's middle and affluent class is expected to double to 15% of its population by 2020, according to Boston Consulting Group. Secondly, Mr Tan expects demand to be boosted when Myanmar implements its strata title transfer process for foreigners. A law was passed by the Myanmar Parliament in January 2016 to allow foreigners to purchase up to 40% of the apartments in a condominium building.

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