Via The Emerging Frontiers blog, a look at Myanmar:

Looking for the latest Asian frontier market? Mongolia is so 2011; check out Myanmar instead.

The 55 million-person-strong Southeast Asian nation, tucked between India and China, is emerging from nearly two decades of Western sanctions. The military junta whose actions precipitated those U.S. and European strictures promoted the use of the name Myanmar, beginning in 1989. Before that, the country was known as Burma—a name still used by some.

Investor interest in Myanmar was first piqued in March 2011, with the formation of a new government, led by Thein Sein, which in turn followed on the release of the National League for Democracy leader Aung San Suu Kyi from house arrest in November 2010. Since then, reform has hurtled forward with the easing of sanctions and parliamentary by-elections in April 2012 (although NLD politicians have been refusing to take their seats because of wrangling over the phrasing of the oath of office).

Right now, though, the country’s economic isolation, a legacy of the Western sanctions, means there are only very limited ways to get financial exposure to it. Singapore is the most accessible route, but even there, options are essentially restricted to two micro-caps— Yoma Strategic Holdings (ticker: Z59.Singapore), with a stock-market value of 280 milllion Singapore dollars (U.S.$225 million), and the smaller Interra Resources (5GI.Singapore). Yoma is the purer play. The real-estate developer is part of the SPA Group, a conglomerate of Myanmar-focused businesses.

Yoma’s primary assets consist of land-development rights for parcels close to downtown Rangoon.

It also has plans for a 70% economic interest in development rights related to Star City, a new residential and commercial development close to an area expected to be designated a special economic zone. Plans call for the interest to be funded by a rights issue of S$91 million (about U.S.$73 million).

WHILE ALL OF THIS SOUNDS exciting, that excitement is well-reflected in the price: Since November, Yoma has jumped more than 500%, to 53 Singapore cents a share. That is equivalent to two times stated net asset value. The problem is, even a still zippy one-times NAV would require some rosy assumptions about the future.

As of the end of December 2011, remaining land development rights were carried at their 2005-06 historical cost of S$63.4 million. But the exact market value is hard to judge. Yoma doesn’t break out selling costs per square foot by development-rights plot and building, and as with all Burmese economic statistics, there is a paucity of data for comparisons.

With very generous assumptions, the land development rights’ value has doubled since 2005. This takes net asset value to almost S$200 million from its stated S$137 million.

Assume that all Western sanctions are dropped permanently, and that land prices grow at an impressive 15% annually until 2015. Without factoring in any central-bank tightening and assuming that the currency remains stable, this could take 2015 net asset value to S$290 million, suggesting a slight discount to NAV at current prices.

Of course, this doesn’t take into account the potential of Star City, which could be highly profitable. On the other hand, it also nearly doubles the existing share count.

Indeed, the current price appears to reflect zero economic speed bumps, let alone any political risk. For example, the country has been plagued since World War II by an extremely complex web of ethnic insurgencies in its border regions, which may or may not have been put to rest.

Finally, given plans to establish a new Myanmar stock exchange by 2015, patient investors may end up having more choices, which would eliminate any scarcity premium for the current Myanmar plays.

THIS IS NOT TO SAY THE FUTURE isn’t bright for Myanmar; but that assumption already is built into the price of the stocks available there. The current fervor also indicates how far the current global bull market has run since March 2009.

Frontier markets need a good story and typically capture investors’ imagination late in the cycle, amid plentiful risk appetite goosed with ample liquidity. In that respect, Myanmar’s mood feels similar to the excitement that whirled around Vietnam in 2006. But Vietnam had a fledgling stock market to soak up liquidity; the Burmese excitement has by default focused on small clutch of names. Alas, those who got caught up in the Vietnamese hype through late 2007 experienced a dizzying drop into 2008.

Will investors fare better in Asia’s latest frontier?