@ CEDAR STRATEGIC's 3Q2016 briefing: Insights into developing Myanmar property

Room view at Cedar Strategic's hotel in Daya Bay, Huizhou city, Guangdong province, PRC (Photo: Company)

Cedar Strategic's turnaround is on track, with its dual-income strategy from its Daya Bay project helping to boost 3Q2016 top and bottom line.

In 3Q2016, the Group recognized revenue for the sale of 61 units worth RMB 45.2 million at its inaugural project in Daya Bay, Huizhou city, Guangdong province, PRC. The holiday resort also contributed rental income of RMB 2.4 million.

3Q2016 highlights:

• Top line growth of 11.8% quarter-on-quarter to RMB 47.7 million
• Profit attributable to shareholders was RMB 2.5 million (3Q2015: RMB 2.6 million loss)
• Rights issue in September raised net proceeds of S$18.46 million

The rights issue lifted the Group's cash reserves to RMB 130 million as at 30 September 2016.

As at 31 October 2016, S$10 million of the rights issue proceeds have gone toward funding the Daya Bay acquisition and S$6 million toward the funding of its acquisition of Golden City, an iconic mixed-use property development in Yangon, Myanmar.

The Group has yet to recognize the remaining 176 out of the 661 units that have been sold as of 30 September 2016.

For more information, refer to its financial statements here.

Q: How is the progress of your Golden City development?

Tan Thiam Hee: After the new Myanmar government came on board, the Yangon City Development Committee stopped many construction projects. Golden City is one of the few projects allowed to proceed.

During the last few months, sales of Golden City units picked up when buyers of other residential projects, which had problems in obtaining all the necessary regulatory approvals, switched to our project. 

There were even cases where the government stopped entire projects and told the developers to build somewhere else because the projects were located on land that had not been approved for such development.

Golden City Phase I as at August 2016. (Photo: Company)

Phase I of Golden City is ready for handover to home buyers. Few buildings in Yangon are as tall as Golden City. The progress of our development can be spotted from anywhere in the city.

When people see that the building is already completed, they gain confidence in our project. Home buyers who make payment can take delivery of the units within 2 months (if the units are under Phase I).

Q: How has the new government changed the macroeconomic environment in Myanmar?

Tan Thiam Hee: In Myanmar, it is very difficult to raise money for a residential property development project because everything needs to be equity funded.

The developers of Golden City were impressive in being able to start the project with minimal external funding. The difficult part is over and the project is now at the stage of being self-funded.

Banks and fund managers we talk to are showing much more interest in Yangon today compared to 4 to 5 years ago. For example, Fullerton Financial Holdings, a wholly-owned subsidiary of Temasek Holdings, has set up a microfinancing unit in Yangon and are very keen to get a bank licence there.

Many foreign banks have set up offices and are very keen to extend loans. However, they only extend up to US$15 million per company within Yangon due to capital adequacy and other requirements.

Foreign banks finance commercial property developments but do not finance residential projects. It is not possible to get financing from local banks because they do not have sufficient cash liquidity.