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Logo of Phnom Penh Post newspaper Phnom Penh Post - Phnom Penh SEZ lines up investors for IPO

Phnom Penh SEZ chief financial officer Fong Nee Wai (left) speaks at Raffles Hotel Le Royal in Phnom Penh last month during a public presentation for the company’s IPO.
Phnom Penh SEZ chief financial officer Fong Nee Wai (left) speaks at Raffles Hotel Le Royal in Phnom Penh last month during a public presentation for the company’s IPO. Heng Chivoan

Phnom Penh SEZ lines up investors for IPO

After an unexpected surge in Thai investor interest, Phnom Penh SEZ Plc has secured sufficient commitments to fully cover the strategic and bookbuild share allocations of its initial public offering (IPO), and has determined an issue price for shares to be listed on the Cambodian stock market, the company said yesterday.

“Our shares are all fully subscribed for those shares that were allocated under the bookbuilding process,” said Fong Nee Wai, chief financial officer of Phnom Penh SEZ. “We had a small number of shares that were actually overflow from the potential investors’ stage to the bookbuilding.”

He said based on the bookbuild results and following approval by the market regulator the issue price of the company’s stock had been set at 2,860 riel per share, the equivalent of $0.71. The price represents the low end of the bookbuild’s $0.70-$1.00 indicative range, and a price-earnings (P/E) ratio of about 6.9x.

Phnom Penh SEZ, which operates the most successful industrial park in the country, is seeking capital to fund the expansion of its 347-hectare special economic zone (SEZ) in Phnom Penh, and development of a new 53-hectare SEZ on the Thai border near Poipet.

The company also plans to use a portion of its IPO proceeds to repay some of its bank loans, as working capital, and to defray listing fees and expenses.

The industrial park operator has offered up 11.6 million shares, representing a 20 per cent stake of its enlarged issued share. At $0.71 per share, the company can expect to raise $8.2 million in its share offering.

According to Nee Wai, Phnom Penh SEZ struggled to find strategic investors for its share offering after the regional capital market contracted late last year following a US Fed rate hike, an economic slowdown in China and bombings in Thailand.

He said even after scaling back expectations, the turnaround only came after Thai institutional investors seeking a safer destination for their capital rushed to snap up shares in the Cambodian stock offer.

Almost 90 per cent of the share allocation for strategic and bookbuild investors was covered by Thai investors, with the remainder filled by institutional investors from Japan and Malaysia, he said. And that caught him by surprise.

“When I first ran the investor roadshow last September I never thought of Thailand,” Nee Wai admits.

“All the way, I was thinking of Hong Kong, and yet Hong Kong gave us zero [investment], and Singapore zero. Luckily we had Japan and Malaysia, and by far the most, Thailand.”

“Two major investors from Thailand subscribed to more than a million shares, and we did not have enough number to allocate them in the cornerstone investor stage, so had to put it through to the next level,” he said.

“In a way it saved us a lot, as we never expected that.”

Nee Wai added that one of the two Thai investors was also looking to invest in Phnom Penh SEZ’s planned industrial park in Poipet, either as joint venture partner or co-operator.

Shares in Phnom Penh SEZ open for subscription today, with the listing on the Cambodian Securities Exchange (CSX) expected by the end of the month. The stock will trade as “PPSP” and is the fourth to list on the exchange.

Svay Hay, president and CEO of Acleda Securities, said while institutional investors participating in the bookbuild managed to push down the issue price to the low end of its price band, this bodes favourably for the 1.2 million shares to be offered during the retail subscription phase.

“Both individual and corporate investors will jump into subscription to buy the IPO shares and then trade,” he said, adding that with its issue price set at about 1.4 times par value, the stock price was poised to climb in secondary trading.

“The prime location and high level of growth profit margin and NPAT [net profit after tax] margin – at 54 per cent and 25 per cent, respectively – are considered . . . a durable competitive advantage, so it should attract all levels of investors,” Hay said.

Yet some potential investors expressed concern. One said the low-end pricing suggested that the bookbuild allocation was just barely subscribed, and wondered whether the underwriters might have had to cover some of the shares.

“I might hesitate to buy shares because it was presented as a growth company . . . and it clearly is not,” said the investor, who declined to be named.

He added that the company’s revised lower profit projections and high dependence on land sales for revenue were a worry, at least for now.

“Looking further ahead, if this dependency is reduced, then the quality of earnings increases, and that should benefit the share price,” he said.



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Don Rennie's picture

Dear Cam,

Although fully subscribed, all of the talk about this IPO for a listing on the CSX is laughable. Why?

1. This listing is basically a penny stock at less than 3,000 riel.

2. The disclosure document provided limited financial data.

3. The CSX has no bond (debt) issues.

4. Real estate land values in Phnom Penh are considerably overpriced.

5. The cost of this listing represents about 10% of the issue and this is very high. Listing fees can be as low as 1%. Average fees are 5%. For example, Facebook's listing fees were 1.1% of the capital raise.

6. The high cost of this issue's listing can mean that the stock is not liquid.

7. Cambodia contains "country risk."

8. On average, a total of 10,000 shares trade each day on the CSX.

Being a part of the CSX is child's play by any reasonable standard. If you want bang for your buck, you should list in Hong Kong, Singapore, Korea, or Japan.


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