YANGON —Yoma Strategic has agreed to buy the rental portfolio of Myan Shwe Pyi Tractors (MSP CAT), the Myanmar dealer of Caterpillar products, in a US$7 million tie-up, with both companies betting on growth in the construction, infrastructure and mining sectors.
The partnership will see vehicle rental company Yoma Fleet, a wholly-owned subsidiary of Yoma Strategic, rent the equipment back to MSP CAT on a profit-sharing basis. Yoma Fleet will also become the preferred financing partner for MSP CAT’s customers, including local and international construction companies.
The lack of financing for heavy machinery has historically been a major bottleneck to growth in the infrastructure and construction sectors, said Yoma Strategic CEO Mr Melyvn Pun. He said the company was now anticipating a “huge pick-up in infrastructure build-out as well as a resurgent mining sector”.
The growth of Yoma Fleet from an asset size of $30.3 million today, to a target asset size of over $200 million by 2023, is a priority for Yoma. The Singapore-listed conglomerate said in March it would focus on four “business pillars”: financial services, automotive and heavy equipment, consumer and real estate.
For MSP CAT, which has previously used its own resources to finance its rental operations, the deal also represents a chance to expand. Chair U Khin Maung Win told Frontier the company had tripled the size of its portfolio in less than two years.
This financing will enable it to take advantage of what he sees as “very strong potential in machine rental demand in the medium to long term”.
Since 2016, MSP CAT has also offered its customers deferred payment terms through hire-purchase financing from Yoma Bank. In that period, Caterpillar’s market share in Myanmar has doubled, Khin Maung Win said, despite turbulence in the construction and resource industries.
He foresaw continued short-term turbulence because of the uncertainty surrounding both industries, slower than expected foreign direct investment and a depreciation in the kyat, which has fallen by 16 percent against the US dollar this year.
However, Myanmar has a substantial need for infrastructure development and the government intends to allocate US$21.4 billion to rail, road, port and aviation projects by 2030 under its National Transport Master Plan. In the long run, Khin Maung Win said, heavy equipment rental “has a bright future”.