Adding its name to a rapidly growing list of private companies, Tonlesap Airlines is gearing up for an initial public offering on the Cambodia Securities Exchange. And like many of these companies, the listing is still years off as Tonlesap prepares the tax and financial information required to go public.

The three years of records is one of the major factors holding companies from listing on the exchange. While many insiders have said the three-year benchmark promotes a higher degree of transparency – and a more stable CSX – others say the time is an eternity not only for interested companies, but for the exchange itself, whose only traded company is losing the attention of investors.

“This is the biggest problem,” chief executive at Phnom Penh Securities Firm Plc Stephen Hsu said of the challenges in meeting the three-year financials requirement. Phnom Penh Securities signed an IPO listing agreement with Tonlesap in June.

“We’ve talked with a lot of companies that are very interested in listing, but 2012 is the only year that they have financial statements for.”

This puts the earliest listing date for those companies at least two years away. And while the CSX waits for more IPOs, interest in one of Cambodia’s biggest financial milestones has waned, according to Hsu.

The firm has recently recommended that the Securities and Exchange Commission of Cambodia (SECC) lower the required documentation to one year of financial and tax history, Hsu said, a move that he said would boost the number of companies on the bourse. Vietnam’s State Securities Commission requires only one year of disclosure from potential listing companies.

Phnom Penh Water Supply Authority has seen a few dark days since its IPO in mid-April. On Monday, no shares were traded, a first for the company but a common regional trait, seen also recently on the Lao Securities Exchange.

In August alone, Banque Pour Le Commerce Exterieur Lao, Laos’s biggest bank and one of two companies listed on the LSX, saw four days without trades.

Despite the relatively large size of the two Lao IPOs that jump-started the exchange in early 2011, trade volume has been considerably low after a quick rise and fall in prices. The value of PPWSA has traced a similar arch.

PPWSA – renowned in Cambodia for its efficiency – dipped once below its initial listing price in mid-July. Since then the company has traded within US$0.12 of its $1.53 listing price. PPWSA closed up 0.79 per cent yesterday at $1.58.

At least two years of documentation is needed to pinpoint irregularities in financial documents, Grant Thornton Cambodia managing partner Kenneth Atkinson said yesterday on the sidelines of the National Conference on Accountancy in Phnom Penh. The event focused on transparent bookkeeping and its role in the Kingdom’s fledging capital market. Atkinson said he supported the current SECC regulations.

From the perspective of underwriters and investors, three-year of documentation would ensure longer-term stability in the market, said Han Kyung-tae, the Cambodia representative for Tong Yang Securities Plc, which underwrote PPWSA’s IPO.

“I understand the rationale behind one-year statements, but it would be a temporary solution to boosting the capital markets. In the long term, this would not be good for the health of the market,” he said yesterday, noting that SECC requirements on net assets and profits for listing companies were already low.

Still, the need to speed up the listing process is well recognised by officials. Sok Dara, deputy director general of the SECC said as much during a speech yesterday at the accounting conference.

“The CSX cannot rely on one company ... We started with one company but now we need to ensure liquidity and that [trading] actually reflects the development of the market,” he said, according to a live translation of his speech.

The SECC could not be reached yesterday for comment. Tonlesap Airlines declined to comment.

To contact the reporter on this story: Don Weinland at [email protected]