What Is The Potential Of Yoma Strategic Holdings Ltd’s KFC Business In Myanmar?
Yoma Strategic Holdings Ltd (SGX: Z59) is a conglomerate that focuses on Myanmar. It has business interests in a wide variety of sectors, such as real estate development, agriculture, tourism, vehicle distribution, and even food & beverage retail.
In the company’s fiscal year ended 31 March 2017 (FY2017), 53% of its revenue came from its real-estate-related businesses. This may change in the near future as Yoma Strategic has a target of having more than 50% of its revenue sourced from its non-real estate businesses.
One of Yoma Strategic’s strategies to become more diversified is to grow its KFC restaurant business in Myanmar (the company is a master franchisee for KFC restaurants in the country).
So far, this strategy seems to be working as Yoma Strategic has grown its KFC store count from just one in 2015 to 12 stores today. Moreover, in FY2017, Yoma Strategic’s Consumers business segment, which houses the KFC restaurants business, grew its revenue by 137% to S$10.9 million. The segment was the fastest-growing segment for Yoma Strategic during the fiscal year.
The company expects to have 22 KFC restaurants open in Myanmar by March 2018. Investors may be thinking: Just how big can the KFC business be in Myanmar? We can try to estimate the potential of the business by looking at other nearby Southeast Asian countries.
The table below shows the number of KFC stores in Malaysia, Thailand, Vietnam, Indonesia, Cambodia, and Myanmar. It also shows the population and number of stores per million people for each of the aforementioned countries.
Source: KFC websites for each country; Worldometer
It turns out that Malaysians are big fans of KFC, with over 600 stores serving a relatively small population of 31 million people – this works out to over 19 restaurants per million people. At the other end of the spectrum, if we exclude Myanmar, there is Cambodia, which only has 0.7 KFC restaurants per million people.
But, even if Myanmar reaches a penetration rate of just 0.7 KFC restaurants per million people, we are looking at around 40 stores in the country – that’s over three times the current count. If Myanmar can get close to the numbers in Thailand, that would be a store count of close to 500.
A Foolish conclusion
The exercise above is a rough estimate of the potential of Yoma Strategic’s KFC business. Clearly, there are huge differences between the various countries studied. But, we can conclude with reasonable confidence that, in the absence of any major execution issues, Yoma Strategic should be able to grow the KFC store count in Myanmar to at least 40 in the future.