The Cambodia Securities Exchange (CSX) on September 1 said it had approved SBI Royal Securities Plc (SBIR) as a liquidity provider (LP) for the common stocks of Sihanoukville Autonomous Port (PAS) and DBD Engineering Plc over two-year terms, in an apparent bid to lend the two listed firms more credibility and potential to impress public investors.
LPs fall under the classification of “market makers” and act as intermediaries in securities markets, buying large amounts of shares from the subject company and distributing them in batches to financial institutions for resale to investors.
The CSX said in a statement that SBIR had assumed the obligation as LP for PAS on July 15, and would start as LP for DBD on September 6 – the day it is due to go public.
“The LP shall continue performing its activities under the Operating Rules of Securities Liquidity Providing of Cambodia Securities Exchange,” it emphasised.
SBIR managing director Seng Chan Thoeun noted that its new role as LP would provide more liquidity for the two listed securities.
He told The Post on September 2: “This is mainly to support the liquidity of DBD’s and PAS’ stocks. SBI Royal Securities is committed to the development of [the] capital market in Cambodia.”
CSX Market Operations Department director Kim Sophanita told The Post on September 2 that the LP role is “very important”, noting that institutions acting as LPs influence greater price stability of their underlying securities and ensure that they can be bought or sold at any given time.
The main role of the LP is to provide and secure the liquidity of securities, which will eventually establish equilibrium market prices, she stressed.
“Stocks with an embedded LP will attract more investors, especially during the IPO [initial public offering]. Some investors hesitate to buy small cap stocks due to liquidity concerns. Simply put, they’re afraid they wouldn’t be able to buy or sell immediately when they want to,” Sophanita said.
PAS, operator of Cambodia’s flagship deep-sea port, reported strong business performance in the second quarter of this year ended June 30, as it “continued an immense evolution to serve its business activities”.
The state-owned enterprise booked 85,857,554,000 riel ($21 million) in “revenue” and 14,075,967,000 riel in net profit after tax for the April-June period, up 13.53 per cent and 68.77 per cent year-on-year, respectively, from 75,625,617,000 riel and 8,340,124,000 riel.
It did not specify which particular revenue measure (gross, net) it was referring to.
And DBD sold all 6,461,538 shares on offer ahead of its IPO listing, scheduled for September 6, as it gets set to emerge as the first firm to go public on the CSX’s Growth Board.
The Growth Board was launched in late 2015 as a secondary platform to lift some of the barriers for listing and cater more to companies with less access to capital or financial resources. But it had failed to attract a single issuer over the years, even as the Main Board witnessed increasing growth.