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Underwriter for first IPO bullish on Phnom Penh Water and the CSX

Underwriter for first IPO bullish on Phnom Penh Water and the CSX


The head of the underwriting team that will launch Cambodia’s first IPO April 18 is Han Kyung Tae, Managing Director of Tongyang Securities (Cambodia) PLC and a South Korean stock market specialist.

Han, known to his friends at “KT”, is confident about the floatation of the first stock, the state-owned Phnom Penh Water Supply Authority (PPWSA) on the Cambodia Securities Exchange (CSX).


“I could not imagine building an economy without a capital market.  Can you imagine an economy without a capital market?  Without a stock exchange? Take PPWSA’s IPO for example.  This IPO provides the issuer a good opportunity to expand their business and grow it with the IPO proceeds,  and it will eventually  contribute to the country’s economic growth by creating a virtuous cycle starting from employing more workers. They can satisfy the existing demand for water while they create new demands for goods and services.  From an investment point of view, they can benefit the good performance of the company as a public shareholder,” Han said.

Tongyang Securities (Cambodia) Ltd. is the Cambodian subsidiary of Tongyang Group, a South Korean conglomerate in financial services, information technology and manufacturing
Born in 1970, the son of a schoolteacher, Han earned a bachelor’s degree in economics from the University of Seoul in 1999. His cousin was a successful investment banker at a securities firm.

“I didn’t know anything about the securities business, but I saw my cousin make money, a lot of money.So I decided to join a securities firm, Tongyang, and started my career as a stock broker on the Korean exchange.”

Han enjoyed the work with a team of others, with his cousin as his boss. “We conducted due diligence exercise on the companies that we picked and then we made investments for our clients.  There was a big IT boom and we really enjoyed it.”

During those years, Han watched different types of investors who would follow stock-price movements, but would ignore a company’s fundamentals.

“I’m a big fan of Warren Buffett,” Han says.  “I studied him.  I believe in his investment strategy, theory and philosophy.  After three or four years of stockbroking, I changed my career, from dealing with stocks to dealing with futures and options.”

“Futures are a derivative financial product.  I traded futures of the stockmarket index and options of the stockmarket index.  Basically, I traded the stock market itself.  I only dealt with the Korean stock market.”

Along the way, Han met a very successful futures trader and learned a lot from him.

“He was making  around $10 million every year, and continues to make that now.  I was fascinated how he traded futures and how he read the market movements, his strategy, his philosophy.

“It was great to talk to him after the market close.  He answered my questions, and I learned a lot about markets. Then I studied trading futures and options of the Korean Stock Exchange and my performance was very good.”

Thanks to Han’s profits, he was transferred to Tongyang’s head-quarters and made vice-president in 2003.

After a year, Han volunteered to join a Tongyang program called the International Financial Expertise Education Program.  

“After six months in the program, I got a call from HR team and they said: ‘Would you be interested in going to Cambodia or Vietnam?’ ”

Han was surprised about Cambodia and Vietnam because he thought his likely destination would be New York or Tokyo, because Tongyang has offices in both those locations.

He had a conversation with his family and spoke to Tongyang’s human resources team, then got sent up to the chairman’s office.

“All of a sudden, they said ‘Follow me, and I met the chairman, Mr Hyun, for the first time.

“In a brief conversation with him for 15 minutes, he explained to me about the group’s plans for Southeast Asia. After the interview, the secretary was told to book the ticket and they ordered a new business card for me: country manager for Cambodia.”

Then, in December of 2006, the Korea Stock Exchange and the Ministry of Economy and Finance signed a Memorandum of Understanding, and that’s when Tongyang began to focus on stock exchange projects.

Han’s team at Tongyang became exclusive financial advisor to the Ministry of Economy and Finance.  

“We started working with MEF and  advised to them that the first group of companies listed in new stock exchanges were always the best state-run companies. Then the government finally chose Phnom Penh Water Supply Authority and two other SOEs. Cambodia  Telecom and Sihanoukville Port.”

Han says the April 18th opening day is going to be successful.

“We’ve been working very hard and very closely with the government and the issuer.  I feel good about it.  Cambodia has taken more time than other markets to make sure everything is in place.

“I think we will have a very good start.”
Seventy per cent of the 13 million shares being offered to the public will be for book building. This first type of subscription, book building, contributes to the determination of the share price. ACLEDA Bank is using 21 branches around Cambodia for customers who want to participate in the CSX.

“After the book building period, when we got all the information and the results of the subscription, we accept the final share price,” Han says.

“The actual subscription follows about a month later, and we expect  more public investors will join to purchase the remaining shares.”

On April 18, the first day of trading, the offering price will be set.

“On the first day of trading the quoted price can be within the range of 90 to 150 per cent of the offering price,” Han said.

This is when all sorts of stock exchange players will come into the mix and help the IPO be successful, both long-term players and short- and medium-term speculators.

“We need all of them to provide liquidity,” Han said.

Even when the stock went up 100 per cent during the opening of the Lao stock exchange, Han said, a long-term investor that he knows didn’t sell.

Han says the PPWSA is arguably the best water company in Asia after Singapore and Japan.

“PPWSA has a strong, committed, knowledgeable and well-trained management team. They have been continuously funded by international financial aid organizations and they have received a transfer of skills from other countries like Japan. Now they are even exporting their skills to other countries.”

“This is a good stock for the CSX. As an underwriter, we have strong confidence in this IPO. Although no one can be sure about the stock price movements, I have confidence in the long-term performance of the company.

“If I were an investor, I would stick with the company as long as the business performs well, then when there is a chance to sell the stock at a pretty good price, then I would consider selling.

“Buy a stock with a good company and then stick with that comp-any until the stock price reflects the fundamentals of the company and you will definitely have a chance to sell the stocks at a good price,” Han says.


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