Below is the transcript of a CNBC interview with Serge Pun, Executive Chairman, Yoma Strategic Holdings and First Myanmar Investment. The interview played out in CNBC's latest episode of Managing Asia on 18 September 2020, 5.30PM SG/HK (in APAC). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (CT): Mr. Pun, thank you so much for talking to me. As a group with major business in Myanmar, how would you describe the impact you're feeling from the current pandemic?
Serge Pun (SP): Well, we're all facing the same pandemic all over the world, the same all over Southeast Asia, but overall, Myanmar has been spared quite a bit. We've had a few spikes, but so far it is well-contain and the government is doing a great deal to contain it.
CT: To help mitigate the situation, Yoma Bank that you own is offering financial assistance to small- and medium-sized businesses. Tell me some of the measures you're taking as one of the country's leading lenders?
SP: We started actually February, way before it became very serious to realize that there is a problem with loan borrowers, particularly SMEs having the ability to repay on time because of the sudden drop off the revenues and so forth. So, in February, we offered all our SME borrowers a holiday in terms of principle repayment, and that was then extended after three months.
CT: Within the organization, you yourself took steps to manage costs and preserve cash, was it done purely on prudence on your part or did you see it simply as an opportunity to take out some of the excesses accumulated over the years?
SP: Covid has sort of done one thing to all of us, and that I think, is across the board to all corporations, as well as individuals, and that is it has compelled us to, to think again, what we're doing, whether we're doing it the right way, whether we can improve things, particularly in some areas where I think the threat of survival, existential sort of threat is so prevalent and is right in your face, it prompts you to actually take actions, and that's what we did. So, in that sense, that, again prompted us to look at cash flows very seriously. But what we did, I think, which I'm very happy with is that we actually concentrated more on increasing revenue on finding different ways to up our revenue stream, and that actually is very gratifying, because we actually discovered many ways of increasing revenue, making more sales.
CT: So, the pandemic has forced you to be more innovative, more creative as a result?
SP: Definitely, definitely, I think that's a silver lining as they call it.
CT: Where the company is now? Are you happy with the structure? Is it able to withstand further shocks if the pandemic continues?
SP: I am very confident that we are not only able to sustain and withstand the shocks, I'm also very confident that in the new normal, we will emerge stronger, much smarter, more resilient.
CT: With the exception of the tourism business on the Memories Group, the rest of your other listed companies under Yoma Group managed to grow revenues and profits. Where do you see business conditions for the rest of the year, does it look to you that the worst is over?
SP: Oh, I don't think the worst is over. To be honest, I think the worst might come again, particularly if there's a second and third wave. The biggest concern, of course, is having an outbreak of the pandemic across, but I am optimistic and and hopeful that that will not happen. So, overall, I think for our businesses, we're fine. We're fine in that we have the foundations well-built to sustain any sort of challenges, particularly temporary challenges. As you know, people are the most important element in a corporation. When you have people with the right mindset, I don't think you need to be too worried about the unforeseen sort of challenges that might come your way.
CT: So, when it comes to revenue and profits for the rest of the year, how does it look to you?
SP: I think it looks good. That's all I can say, it looks good.
CT: Since the National League for Democracy or NLD came into power November 2015, you've been rather vocal about the lack of economic reforms in the country. Are you seeing any evidence that the pandemic is pushing the Suu Kyi government to act more quickly?
SP: Yes, there's no doubt that the pandemic has actually prompted the government to push and initiate many of the large, multi-billion-dollar infrastructure projects to start, that's very clear. In the last six months, that has been very high on the agenda of economic activities. So, the answer to that question is, yes, the NLD government has actually moved the game up in terms of economic reforms, particularly in the infrastructure building sector sphere, which makes me very happy. It elates me because these investments have far reaching benefits and consequences than a simple sort of investment. They will bring a multiple sort of volume of economic activity because of the availability of the correct and required infrastructure, so that's good. So, yes, they have moved the game up.
CT: In terms of economic reforms, one of the areas that government is trying to fix is the energy sector, inviting tenders recently for solar power projects. As part of Yoma Micro Power, you yourself have built 250 mini solar plants within the country in some of the off grid rural areas. As part of the private sector, what role do you see yourself playing in helping the government solve the country's power shortage problems?
SP: Well, when we do something, we always hope that we'll do it right, we'll do good, and we will become the number one number two of the industry. That has always been the sort of guiding policy of our businesses. So, if you're asking me how big a player we want to be, yes, we want to be a major player in the solar and renewable energy sector. The mission is very clear. We will continue to roll out as many as many as 2,500 mini solar plants, mostly off grid in the coming year. That's a 10 times goal. We did 250 last year and we're hoping to do 2000 plus this year, so a good 12 months from now. So, it is a very ambitious plan, but we believe we have these adequate capital and human resource as well as technology backup to accomplish that.
CT: What are the returns like in power generation, give me an idea of how long it takes to break even and generate reasonable profits?
SP: Well, this kind of question is supposed to be trade secret, but I guess the industry is so common and known, it doesn't really matter. I think infrastructure projects are normally long-term projects. They're not a quick win sort of high return. There are steady returns that could take anywhere from eight to 10 years for your investment to be paid back, meaning to say they they're probably in the 8% to 12% IRR orbit. We're comfortable with that. That's basically how infrastructure projects are.
CT: So, you see power generation in the future being a critical revenue driver, a growth pillar for the entire group?
SP: I hope so. We have been working very hard over the past five, six years to transform the group into a conglomerate that has very steady, long-term income over the next two, three decades. That's very important because you don't want to be in a situation where every year you have to be thinking what to do next. You should build a business where it will go on basically remote control and that it will generate a steady stream of income over a long period of time. You improve upon that and you build upon that and that's our mission.
CT: Before the pandemic, in 2016, you entered a joint venture with Norway's Telenor group to launch a mobile payment provider Wave Money. To what extent has the pandemic resulted in a fundamental shift towards digital payments in Myanmar? Are all your investments now paying off?
SP: Well, Wave Money was one of the main beneficiaries I would say from COVID. The amount of customers account holders in Wave Money have just skyrocketed. We've had an extremely, extremely impressive growth on a month-to-month basis, and that's natural because the mobile money transfer through your phone app, without having to physically go to any bank branch or any person, is the way to move forward. Yoma Strategic will be buying majority stake in Wave Money and therefore, it will become one of our main pillars of our business plan.
CT: COVID-19 has also hit international travel. Your tourism business, the Memories Group is now under a lot of pressure. But you still say you're bullish on the tourism sector. Talk to us about the silver lining that you see.
SP: My optimism is based on some very fundamental rationale. Can you imagine that the business of tourism? Can you imagine that people will henceforth give up traveling? Can you imagine them saying, I never want to go on a holiday again. That's not going to happen. People would want to continue to travel, the minute they are capable of doing so or allowed to do so, because that's fundamental. Everybody wants to go somewhere. So, the tourism business will not die, that's for sure. In time, the international tourism business will revive.
CT: When do you see that happening?
SP: Well, I don't know. Honestly, I don't even want to speculate.
CT: Do we need to wait for a safe and viable COVID-19 vaccine for the international tourism business to recover?
SP: Absolutely. Absolutely. I think without an effective vaccine, it's very difficult to convince people that they are safe to go around. It is even more difficult to convince governments that they can relax a lot of the procedures and precautions because the consequences would be disastrous. So, prudent governments will continue to be cautious and be protective. But in Myanmar, for instance, we've seen domestic tourism really surge to a level that even surprised us. Hotels that we thought would be empty for a long time in our portfolio suddenly has got better occupation rates than pre-COVID. So, I think that says a lot.
CT: As a group, you've always had a significant exposure to the real estate sector in Myanmar. Despite the sluggish property market, your recent residential development City Loft saw an uptake of more than 80%. What are you doing differently that drew such strong buying interest?
SP: Well, in short, Christine, I think we did something right and that was probably two years back when the whole market was sort of icy cold and sales was difficult across the board for everybody. We believed that the only way to overcome that was not hoping for better government policies or tax breaks or other external factors, the key was to find what the affordability level was in this country and to produce something that is in that affordability bracket. Now, it may sound easy, but it's really not easy. Our affordability bracket is pretty low. You're talking of white-collar workers earning $1000 to $1,500 a month in terms of total household income, and you're talking of taking 40% of that amount for their own housing mortgages. Now, then, you have an element that you have to give them an apartment or flat condominium that actually is big enough to fit the whole family. And we successfully did it. And in the past 12 months, we've sold 600 odd units to people, the majority of whom are first time homebuyers - young, first time homebuyers, white collar workers, they are so happy and so proud that they can finally afford their own property in which they will live in for the first time. We broke that that lousy adage about young people in Myanmar having to wait for their parents to die to inherit a property, and that was sort of a very sad, dark, sort of joke that goes around. Now, they don't have to, they can actually stand on their own feet and buy something, own something live in it. I think that was the turning point of our real estate division success and we will continue to do that.
CT: Last year, you tied up with Philippines' largest conglomerates Ayala, who's going to put in more than $200 million in two of your companies. What does it mean to have Ayala as an investor for Yoma and for you? What new business ventures could come out of this new business partnership?
SP: Well, although this was months ago, I'm still very excited up till today that we have become strategic partners with Ayala. I have a great deal of respect for this corporation that has existed for 180 years or so. As I said, for any company to exist for more than 100 years, there's got to be something very outstanding, very good. Otherwise, you don't last that long. So, for us, we are very grateful and very excited to have the opportunity to learn how to manage our companies better. They bring in a great deal of expertise, in terms of technical business acumen, corporate governance, all these are things we will benefit from. As a young company that is building up the common shortfall is always capital, you never have enough capital to implement your aspirations, So, the $200 million that came in with the investment of Ayala corporation is very, very precious for us. It's very impactful for us. Of course, outside of that investment in our two companies, they also directly invested in our energy business. Going forward, I see this the possibility of us doing a lot of things at the entity level on different projects as these opportunities emerge.
CT: Yoma Bank, one of the financial lenders you founded in 1993, also attracted investor interest from the likes of Singapore's GIC and World Bank's International Finance Corp. How does it feel like to have such strong institutional investors as your shareholders? To what extent has it helped you open doors and opportunities?
SP: Well, my biggest thing I think I can say is that they have upped our game in corporate governance. They have upped our game in basically, compliance issues, governance issues. That over the long run, I think is the most valuable part. It's not that we need their banking expertise because that's not what it is. To be honest, whether or not the capital that they injected is the all-important thing. It is important, but capital is a lot out there. If we actually were willing to open up, I think there would be quite a number, maybe a dozen of pursuers that would love to get into the position they are now in Yoma Bank.
SP: Let's talk about that long queue you're talking for investors, who else are you talking to you any interest to bring in any other big foreign investors who might be interested to take stakes in some of the businesses you're building up in Myanmar?
SP: There are many, many large multinational corporations, people with adequate capital that have expressed keen interest in Myanmar. Our own group, I think in the last 12 months, we have attracted and brought in more than $600 million of FDI into this country. If you look across Southeast Asia. Myanmar is probably the last jewel that is still there, and you can still have a lot of opportunities.
CT: You're 67 years old, an influential business tycoon and a real estate mogul behind Yoma Strategic and First Myanmar Investment company. I understand you're now playing a more important role within the company. What sort of leadership are you hoping to provide to steer the company during this challenging period?
SP: Well, first of all, thank you for disclosing my age to the world.
CT: Was I correct?
SP: You are correct. You are correct. It's a bit difficult for me to sort of adapt or adjust to the age issue because sometimes I feel I'm still 40-odd, and yet my body tells me you're wrong. You're not 40 odd and you're breaking down like an old car that needs to go to the garage all the time. But coming back to some more serious thought of how to go forward. Yes, I think my role in the company will continue to be active, but active in a sense that I'd like to ensure that we have the right culture. We have the right culture to sustain and be around for another hundred years. COVID has given me prompted me to go back into operations in some quarters such as real estate which is my passion. So, I get very much involved in the real estate part of business now, and it has been very good. It's been very good.
SP: I understand you're also grooming your son Melvyn to eventually take over from you. What are you telling him about the best way to make money during good times and bad times?
SP: Well, I keep telling him the same thing. One, money will chase after you if you do the right things. Money will run from you if you do the wrong things. So, making money is doing the right things, and money will be there. Number two is that you got to work very hard because these things don't come easily. You can't expect it to be delivered to you on a silver platter. He must build that bond with his people before he can expect to be successful, and that requires a tremendous amount of time to invest. It's not just issuing orders, that will not do it. So, hopefully, hopefully, that will rub onto him.
SP: And finally, you first start out in real estate, then went into banking, healthcare, tourism, power, consumer related businesses. What's next? What is your overall vision for the group?
SP: I think we know that there are a few things that we call the promising industries in the New World. One is digital: digitalization and AI. Basic financial services will be a prerequisite to make any economy turn. So, that is something, of course, that's promising, but we're already in there. Real estate will never go away. We're already in there. Other than that, what's going to come, we'll see. They will come at the right time and sometimes when they come, we're not ready, we can't take advantage. So, we hope to be ready when these opportunities come.
CT: Spoken like a true businessman. Sir, thank you so much for talking to me. Please stay safe and well during this time.
SP: You too, thank you very much.
Jessica Tan Shu En
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