Following the U.S. government’s decision to ease sanctions imposed on investments in Myanmar,  MasterCard (NYSE:MA) has entered an agreement with Myanmar’s Co-Operative Bank Ltd., to issue and facilitate payments through MasterCard branded cards across the country.  Myanmar is currently integrating with the global economy after decades of isolation and economic stagnation under military rule.
Our price estimate for MasterCard is $451, is in-line with the current market price.
Historically, Myanmar’s gross domestic product (GDP) annual growth rate has been around 2.9%, which is quite low for a developing country and much lower than its Asian neighbors. This trend might be about to change with investments from companies such as Coca-Cola Co (NYSE:KO) and automobile manufacturer Honda (NYSE:HMC). Visa (NYSE:V) is conducting workshops to train and prepare financial institutions in the country to accept and promote electronic payments. With a shift from authoritarianism to democracy and financial support from neighbors China and India, Myanmar’s 64 million strong population could prove to be a solid customer base for global companies.
MasterCard is taking a prudent approach with its foray into a hitherto unexplored territory. The company will initially operate out of Vietnam and will look to build a network of three or four banks to promote its services in the country. Promoting education and development are also important agendas, key to the MasterCard’s success in Myanmar.
The investment in Myanmar is part of MasterCard’s strategy to capitalize on growing economies in Asia. A number of countries in the region are going through a period of economic boom, particularly in the middle class income demographic, leading to an increase in demand for goods and services. The purchasing power of the average Asian household increased from 2% of the global middle-class in 1975, to 16% in 2010.  With more disposable income, people are looking to spend money for items other than just essentials, leading to increased spend. We expend this trend to have a positive impact on MasterCard’s transaction volumes.
Marketing Back Home
Elsewhere, in the U.S., MasterCard has agreed to purchase card-linked offers provider, Truaxis Inc.  The company’s platform allows customers to avail real-time offers while using credit or debit cards. As the offers are personalized and more easily conveyed than those offered through banks, MasterCard will use them to boost customer acceptance of its cards.
You can gauge the effect of a change in forecast by modifying the chart above.Notes:
- Myanmar, The New York Times, 20th August, 2012 [↩]
- MasterCard Moves Into Myanmar With First License Issued to Bank, Bloomberg, 5th September, 2012 [↩]
- Rise of middle classes in India, China key to growth in Asia, Economic Times, 4th April, 2012 [↩]
- MasterCard to buy consumer offers platform Truaxis, Reuters, 6th September, 2012 [↩]