Cambodia Bourse Sees End to IPO Drought

November 12, 2012, 
The Wall Street Journal

By CHUN HAN WONG
 

PHNOM PENH—Cambodia's stock market is set for a revival early next year when initial public offerings are expected by at least four local companies, ending a drought for a bourse that has hosted just one listing since its trading debut in April.

State-owned Telecom Cambodia and Sihanoukville Autonomous Port are likely to list by June, while two private garment manufacturers are preparing for first-quarter IPOs, Cambodia Securities Exchange Chief Executive Hong Sok Hour said in an interview Monday.

Cambodia's fledging stock market has foundered since the boisterous launch last April of the country's first-ever listing, the $20 million flotation of state-owned Phnom Penh Water Supply Authority. Industry executives say a dearth of further IPOs—as candidates struggled to meet regulatory requirements or decided to hold off until the market gains depth and liquidity—quelled investors' initial exuberance.

The share price of Phnom Penh Water Supply Authority, which jumped 63% in its first week of trading and peaked at 10,300 Cambodian riel (about $2.56) on strong volume, has given up all its gains. The stock ended Monday flat at 6,200 riel, below its 6,300 riel IPO price.

The stock market is "a very new concept for the Cambodian people," said Nguon Sokha, director general at the National Bank of Cambodia, in an interview last week. It will take time for the investor pool to deepen, she said. Of the 4,000 investor accounts at licensed brokerages, about a third are held by foreigners, according to the Cambodian bourse, also known as CSX.

On the other side, many of Cambodia's large private enterprises don't see an immediate need to go public. Acleda Bank PLC, for example—the country's largest lender by assets—has long-term plans to list, but only when it needs fresh capital and considers the local regulatory and investment climate sufficiently robust, chief executive In Channy said Monday.

As central banker Ms. Sokha put it, the big private enterprises "want to see the state-owned companies list first and give momentum to the market."

State-owned Telecom Cambodia and Sihanoukville Autonomous Port were originally scheduled to list by the end of 2012 but haven't been able to meet listing requirements in time, said Mr. Hong of CSX. After they list, the government could pick Phnom Penh Autonomous Port, a state-owned port operator, for its next IPO, according to the executive, who expects the momentum for new listings to pick up over the next two years.

Some smaller private companies have shown a keener interest than their larger counterparts, stockbrokers say. The two garment manufacturers considering IPOs early next year, Grand Twins International and TY Fashion Co., should be submitting formal applications within a month, said Stephen Hsu, chief executive of brokerage Phnom Penh Securities, which is handling those deals. The two are likely to raise a combined $60 million to $70 million, he said.

"Several other companies—ranging from banks to electricity companies—are also exploring IPOs," Mr. Hsu said. "If they pull off their listings, likely in the second half of 2013, we could have between seven to 10 companies on the stock exchange by the end of next year."