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Industrial park operator hopes to clinch land sales

A worker drives past the main entrance to the Phnom Penh Special Economic Zone in May.
A worker drives past the main entrance to the Phnom Penh Special Economic Zone in May. Hong Menea

Industrial park operator hopes to clinch land sales

Industrial park operator Phnom Penh SEZ anticipates that net profit will expand more than 10-fold by the end of this year after it cements deals with two Japanese manufacturing companies next month and hopes to capture an additional six investors as tenants, company representatives said during a presentation on Friday.

The company, which in May became the fourth company to list on the Cambodian Securities Exchange (CSX), projects it will rake in $10.6 million in revenue and clear $4.2 million net profit in the second half of the year, reversing its dismal start for 2016 on the back of slow land sales.

A half-year financial statement released earlier this month showed the company’s revenue plummeted to $562,000 during the first half of 2016, compared to $7.6 million during the same period a year earlier, with net profit reaching just $308,000.

Hiroshi Uematsu, CEO of Phnom Penh SEZ, acknowledged that the company had faced a worrying decline in net profit this year, but said he was confident that the land-sale deals in the pipeline would come to fruition.

“There are two deals with Japanese companies that are expected to happen when they visit again in September,” he said, adding that one of the companies makes parts for eyeglasses and the other is in the cosmetic supply chain industry.

A third Japanese manufacturer of automobile parts is anticipated to finalise a deal in October, he added. Other potential investors hail from Thailand, China and the United States.

Bob Anderson, deputy CEO of LCH Investment Group, the parent company of Phnom Penh SEZ, said the firm still had plenty of time to hammer out more deals and bring investment into its flagship 357-hectare industrial park on the outskirts of the capital.

“It is only August and we have until December [to make these deals,]” he said, adding that the company had “more than enough financial resources” to market and develop the Kingdom’s most developed special economic zone (SEZ).

When asked if the company was concerned about reaching its growth target, especially as the listed company has promised to distribute 20 per cent of its net profit to shareholders as an annual dividend, Anderson said that obviously struggling land sales was the main issue.

“That is why we are investing in rental factories,” he explained. “Clearly we recognise that we need a stable source of income.”

Fong Nee Wai, chief financial officer of Phnom Penh SEZ, told the Post last week that the company will restructure its business model in a bid to create sustainable and recurring income that is not based solely on land sales.

In 2015, 84.4 per cent of the company’s revenue was dependent on land sales. By 2020, it hopes to decrease that reliance to 50 per cent by building rental factories, providing construction services to investors and enhancing its security, electricity and water treatment facilities.

Nee Wai said last week that Phnom Penh SEZ would invest roughly $3 million into constructing rental factories. On Friday, he said that the company could do the construction cheaper by using the company’s in-house construction firm.

“We’ve had eight years to learn about the SEZ business, and we will use that knowledge to cut costs and generate other income,” he said. Uematsu said that shareholders of the company were not concerned yet about this year’s financials.

“They want us to increase our income,” he said. “But institutional investors are not concerned because we communicate with them regularly and they understand our growth strategy.”

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