The Securities and Exchange Regulator of Cambodia (SERC) and Cambodia Chamber of Commerce (CCC) on December 27 urged local small- and medium-sized enterprises (SME) to issue initial public offerings (IPO) and list on the Cambodia Securities Exchange (CSX).
This, they said, would provide new and long-term financing options and tax incentives, and help build sustainable businesses with stronger corporate governance arrangements.
Speaking at a workshop on financing options for local SMEs, SERC director-general Sou Socheat underscored that these businesses face a number of challenges related to skills, technical knowledge, the fulfilment of legal obligations, competition with foreign enterprises, and especially a lack of capital.
The CSX’s 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.
Socheat noted that the SERC has amended its regulations to make it easier for SMEs to issue securities and list publicly on the Growth Board, which he said would contribute to their development.
According to SERC regulations, to list on the secondary board, companies are required to have a minimum of $500,000 in operating capital, and release one year of audited financial results, which must show a positive net profit or positive operating cash flow with gross profit margin of at least 10 per cent.
“An IPO will bring enormous benefits for SMEs, including strengthening their reputations, reducing their subsequent financing costs – even through bank borrowing, and strengthening good governance,” Socheat said.
Listing will also ensure compliance with the law, offer tax incentives, and help companies operate transparently and sustainably, he said.
CCC president and Royal Group of Companies Ltd chairman Kith Meng proposed raising capital through capital markets as a worth-while option, indicating that the associated regulations and protocols could better enable companies to adhere to recognised standards, including good governance principles and transparency rules.
Submarine fibre optic cable solutions provider Telcotech Ltd, one of Royal Group’s companies, decided to issue $20 million in bonds on the CSX after weighing the benefits of listing on the bourse, he shared.
“Consider raising capital through the capital market. Although there are some obstacles to be addressed, don’t worry, because we have securities regulators to provide ample support during the operation, and the capital market is a fantastic place to put your money, especially for long-term investments,” Meng said.
To date, just two companies have listed securities on the Growth Board – DBD Engineering Plc and Telcotech.