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Q2 finance news snapshot

The second quarter of 2016 has proven eventful for everything finance in Cambodia, with a number of planned business deals and proposed developments being flagged.

This occurred against a backdrop of heightened activity within the microfinance space, placing the spotlight on upcoming merger activity as a flurry of foreign commercial banks showed interest in Cambodia’s growing financial services sector.

April 6
Nagacorp Ltd., the Cayman Islands-registered operator of Cambodia’s NagaWorld casino and hotel complex, recorded $153.8 million in gross gaming revenue during the first quarter of 2016, a 35 per cent increase over the same period last year.

The revenue growth was driven by an impressive 65 per cent increase in VIP rolling chip turnover, which topped $2.79 billion during the period.

The unaudited first-quarter operational highlights also showed mass electronic gaming machine revenue at $381 million during the period, a 32 per cent year-on-year increase, while mass public floor table buy-ins increased to $149.8 million, up by 15 per cent year-on-year.

April 11
A government official confirmed Cambodian conglomerate, the Royal Group, was in talks with two foreign state-owned petroleum companies to conduct feasibility studies for an oil pipeline that would run from Sihanoukville to Phnom Penh.

Meng Saktheara, secretary of state at the Ministry of Mines and Energy, said the Royal Group was engaged in discussions to develop Cambodia’s downstream capabilities via a pipeline.

Meanwhile, a source close to the project’s talks confirmed that Royal Group chairman Kith Meng met visiting representatives of China Pipeline Bureau, to discuss a proposed route for an oil pipeline.

April 19
Australian authorities expanded the scope of an ongoing investigation into Australian mining firm OZ Minerals over claims it engaged in bribery in Cambodia in 2009.

The ASX-listed miner said the Australian Federal Police were taking a closer look at its former Cambodian operations as part of an investigation into the 2009 buyout of a partner in the company’s former joint venture gold exploration project in Mondulkiri province.

The Australian mining company first came under scrutiny in 2011 when a report alleged it paid more than $1 million to three board members of local firm Shin Ha Mining Co who had highly placed relatives in the Ministry of Mines and Energy.

April 27
Cambodia’s current account balance deficit was the equivalent of $542 million in the fourth quarter of 2015, the equivalent of 11.5 per cent of GDP, the National Bank of Cambodia said in a report.

It said the current account deficit increased by about $121 million in the previous quarter due to “an increase of 24.5 per cent in the deficits of balance on goods, and a decrease of 34.7 per cent in the surplus of net current transfers”.

However, this deficit “was partly offset by an increase of 22.8 per cent in the surplus of net services and a decrease of 9.2 per cent in net income”.

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Lim Chiv Ho (r.) the CEO of Phnom Penh Special Economic Zone, rings the bell to herald her company’s listing at the CSX on May 30. ATHENA ZELANDONI

May 11
Marking a major vote of confidence in Cambodia’s banking and finance sector, The National Bank of Canada paid $103 million to increase its stake in Cambodia-based Advanced Bank of Asia (ABA Bank) from 42 per cent to 90 per cent.

National Bank of Canada took a controlling stake in ABA Bank with the share purchase, raising its total investment in the bank to $148 million.

A spokeswoman said Cambodia’s strong economic growth encouraged it to deepen its investment in its banking sector. “We are continually on the lookout for long-term investment opportunities in high-growth markets,” she said.

May 20
Khmer Specialized Bank officially launched operations, becoming number 13 in a market that analysts believe is already crowded.

Converted from the microfinance institution Angkor ACE Star Credit Limited, the bank graduated into specialised status after it was infused with $21 million by the lender’s main shareholder, Cao Yunde.

Sophal Sophat, head of the marketing department, said the bank will initially target lending services before it eventually seeks a commercial bank license.

May 25
Facilitated by Taiwan’s First Commercial Bank, seven foreign banks provided $35 million in a syndicated loan to Sathapana Bank Plc, a newly formed Cambodian commercial bank, to expand its existing microfinance operations and broaden its commercial lending portfolio.

Signed in Taipei, the loan brings together a host of Taiwanese lenders that previously had not financed banks in the Kingdom, signalling a shift that Asian lenders have become more confident in providing lines of credit to institutions that previously operated as microfinance institutions (MFIs), according to Sathapana’s CEO.

He added that while MFIs previously relied primarily on Western lenders to expand its operations, the Taiwanese bank’s loan paves the way for more Asian banks to build up Sathapana’s capital.

May 27
In what could be Cambodia’s biggest step forward into the ASEAN Economic Community (AEC) in terms of taxation deals and fiscal transparency, details on Cambodia’s first bilateral double taxation agreement (DTA) with Singapore were released.

While the bilateral agreement has yet to become legally binding, analysts say that this sets the stage for increased economic integration as the country aims to up protection for multinational corporations.

The document clarifies tax rights for both countries on all forms of income. According to the document, withholding tax on dividends, interest, and royalties would be subject to a maximum rate of 10 per cent – almost a third less than its current rate for non-residents at 14 per cent.

May 31
Phnom Penh SEZ (PPSEZ) debuted on Cambodia’s nascent stock exchange, but the company had an underwhelming start to trading, with shares ending the day at 2,890 riel ($0.71), down 3 per cent from its opening price of 2,980 riel ($0.73).

The company, which operates the most successful industrial park in the country, became the fourth listed company on the Cambodian Securities Exchange (CSX) after successfully raising $8.2 million from its initial public offering earlier in May.

While PPSEZ primarily gathered the attention of institutional investors from Thailand, Japan and Malaysia when it offered 11.6 million shares during its book-build – a 20 per cent stake of its enlarged issued share – the entire 58 million shares were finally released to the public in the morning.

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South Korea’s Woori Bank vied to purchase 50 per cent of Prasac, Cambodia’s largest MFI. WIKI COMMONS

June 1
With ever-diversifying business interests, timber tycoon Try Pheap, who has been accused by Global Witness of running large-scale illegal timber operations in protected forest areas, plans on beginning construction of a $300 million international port located on the coastline of Kampot province later this year, a company spokesman confirmed.

The new port will be a joint development between Hong Kong-based Hutchison Port Holdings Limited after the two companies signed a memorandum of understanding.

The port will be located on 50 of the 300 hectares of land the tycoon owns in the Teuk Chhou district of Kampot. The port will reach three kilometres into the sea at 15 metres deep, and is designed to be able to handle 20,000 tonnes of cargo with every shipment, including oil.

June 7
The Cambodian Federation of Employers and Business Associations (CAMFEBA) launched an ASEAN Economic Community guidebook aimed at providing employers with practical recommendations to help businesses better understand the dynamic regional changes of integration.

The guidebook was produced through a partnership between the International Labour Organization and CAMFEBA with technical cooperation from the Cambodia Development Research Institute – a local independent think tank.

The book sums up key challenges that Cambodian employers face, such as lack of awareness and preparedness for a more inclusive economic region.

June 8
Woori Bank, South Korea’s second-largest bank in terms of assets, is vying to purchase a 50 per cent stake Cambodia’s largest microfinance institution, Prasac, the company’s CEO confirmed.

Despite confirming that the two lending giants were close to hammering out a deal, Prasac CEO Sim Senacheert declined to provide further information.

Mergers and acquisitions of the Kingdom’s MFIs have become more common as foreign commercial banks look to tap into Cambodia’s robust lending growth.

Stephen Higgins, managing partner of Cambodia-based investment firm Mekong Strategic Partners, said that the NBC has taken a very sensible approach towards large deposit-taking MFIs that are looking to graduate into commercial banks.

“The major MFIs are attractive because they have strong distribution networks, good governance, and high return on equity,” he said. “In fact, these factors make them a lot more attractive than most banks in this market.”

June 13
The downfall of real estate mogul Sung Bonna started to play out following his arrest on fraud charges stemming from a bounced cheque.

Bonna, chairman of Bunna Realty Group, was taken into custody in mid-June and summarily charged with issuing a cheque to wealthy businessman Keo Hun without having adequate funds to cover it.

While local media reported that the cheque was to pay back a $400,000 debt, Ly Sophanna, a spokesman for Phnom Penh Municipal Court, could not confirm the exact amount that Bonna was being charged for.

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