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CSX future ‘hangs on Grand Twins’ success’

Stephen Hsu, CEO of Phnom Penh Securities, gives a speech during a presentation at Shenzhen Stock Exchange in China late last year
Stephen Hsu, CEO of Phnom Penh Securities, gives a speech during a presentation at Shenzhen Stock Exchange in China late last year. PHOTO SUPPLIED

CSX future ‘hangs on Grand Twins’ success’

The Cambodian Stock Exchange (CSX) is set to welcome the second company to go public since launching in 2012. Grand Twins International (GTI), a Taiwanese-owned garment manufacturer, announced its eight-million-share initial public offering in January. With the help of underwriting firm Phnom Penh Securities, GTI has cemented its share price at $2.41 and will officially list on May 29. This week, Stephen Hsu, CEO of Phnom Penh Securities (PPS), talks to the Post about investor sentiment surrounding the lIPO and about the future of Cambodia’s stock exchange.

How’s the IPO tracking and what is the mood among investors?
Foreign individual investors are willing to purchase more because of the lower price compared to other companies in the same industry in other countries. Institutional investors are readying to join during the subscription process – they didn’t join during book building as they were waiting for final price – since the offering price, $2.41, is set below their target price, which was $2.50.

Most domestic individual investors are comparing GTI’s market price with Phnom Penh Water Supply’s [PPWSA] without considering the potential returns, especially dividends, the number of shares and so on. This means that they have less understanding of Grand Twins and are instead waiting and see the situation after subscriptions are finished.

Domestic institutional and big individual investors are worried about the garment sector due to the issues around salary increments. However, they are considering subscribing some shares thanks to the good financial performance of GTI.

How does GTI’s offering compare to Phnom Penh Water Supply in 2012?
Though GTI’s book-building process was not as crowded as PPWSA’s, the process went smooth and the result was successful – oversubscribed. With strong interest from institutional investors, we’re confident the subscription process and listing of GTI will be just as successful.

What does so much foreign interest mean for the economy?
Foreign institutional investors, especially frontier market investors, always seek out potentially good listings in every emerging market. GTI is one of these cases. Investing in a Cambodian stock is the same as opening a company in Cambodia. To explain it better, these foreign institutional investors not only bring capital to expand the operations of the listed company, but also share their expertise with the listed business for
sustainable growth.

Are there more IPOs coming?
GTI’s IPO is crucial and critical for this newborn securities market, as every potential issuer is looking at this case. Once GTI succeeds, we are confident that there will be more by the end of 2014. We have three potential candidates to list within the next 12 months, while other underwriters have their own clients, I believe. The market will have at least five stocks by the end of 2015, if everything goes smooth.

Has GTI’s IPO been affected by the garment sector’s unrest?
For any garment manufacturer, performance and profit is directly affected by salary increments, especially since they compete purely on sale price. For Grand Twins, however, they compete with the others by quality, as they produce only world-renowned brands, which in turn offer high sale prices. In short, we don’t see any big issue of the sector’s unrest and wage disputes for Grand Twins and I hope that my clarification here can provide some confidence to local investors who often hesitate to join GTI due to this sector issue.

What does a more-populated CSX mean for the economy?
In every developed country, the stock market is always considered as a leading indicator of the country’s economy – the better performance of the stock market, the healthier the economy of that country. So, Cambodia’s stock market will play an important role for the development of the whole economy. The next three to five years are a critical period for the market to generate public confidence and attract more listed companies.

This interview has been edited for length and clarity

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