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New bourse rules to lure SMEs

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An employee at the CSX last year in Phnom Penh. Hong Menea

New bourse rules to lure SMEs

Cambodia’s market regulator has released listing criteria for a new trading platform – with reduced accounting and capital requirements – aimed at making it easier for small- and mid-sized firms to list on the fledgling stock exchange, Sok Dara, deputy director general of the Securities and Exchange Commission of Cambodia (SECC), said yesterday.

The new “Growth Board”, to be launched on the Cambodia Stock Exchange (CSX), will require small- and medium-sized enterprises (SMEs) to have a minimum operating capital of $500,000, down from the $10 million for the main board, Dara said. The companies will be required to release only one year of audited financial results, as compared to the three years required for bigger companies.

“We give the possibility of choices for SMEs to raise capital, beyond just financing and banking options,” Dara said. “It will strengthen and expand SMEs by implementing better business administration and organisation in their businesses.”

Companies looking to list will have the additional incentive of paying lower eligibility assessment and listing fees. But, unlike the main board, the new SME board will not have any requirements on the minimum amount to be raised in a public offering, giving companies the flexibility to decide for themselves, Dara added.

“Companies can discuss with the CSX, and if they think that it will make profit they can do it,” he said.

The CSX has struggled to attract firms since it launched in 2012. To date, only two companies have listed, utilities supplier Phnom Penh Water Supply Authority and Taiwanese garment manufacturer Grand Twins International.

Soleil Lamun, acting director of market operations at the exchange, said the new board will provide greater incentives for SMEs to go public and could grow faster than the main board.

“The new Growth Board will grow because the regulations are easier [for SMEs],” he said.

According to the recently released Industrial Development Policy, 37 per cent of small enterprises as of 2010 were registered and only 4 per cent of them had balance sheets, whereas, 72 per cent of medium-sized enterprises were registered, of which only 24 per cent had balance sheets.

Lamun said the lack of accounting practices among SMEs was one of the main obstacles for them to list on the CSX, and the exchange will be vigilant about a company’s financials in order to protect investors.

“If we allow any company or low-standard companies to register, investors will lose confidence,” he added.

While the new board only requires one year of audited results to be released, Svay Hay, CEO and president of Acleda Securities, said the reduced requirement will not increase the risk for potential investors.

“Value investors will consider price levels and fundamentals to trade those shares, not only financials,” he said.

He added that the new board could see a good amount of activity, as Cambodia has a substantial pool of SMEs to fuel the supply of listed companies.

Kuy Vat, CEO of real estate firm VTrust Group, said that the Growth Board’s more lenient listing requirements will encourage growth-oriented SMEs to list.

“There are a lot of SMEs that need access to finance and can use the stock exchange,” he said, adding that his firm is one of those considering going public. “So we can leverage the SME board and go public.”

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