Companies of Varied Potential Preparing for Bourse

If all goes according to plan, three state-owned enterprises will be traded on Cambodia’s new stock ex­change in less than four months.

While investors and financial ex­perts have so far mused over the im­portance that the firms—Tele­com Cambodia, Phnom Penh Water Supply Authority and Siha­nouk­ville Autonomous Port—bolster standards in corporate governance and ac­counting, little has been said about the business credentials or growth potential of the companies.

Experts say each possesses very different investment prospects and each comes with unique risk factors.

While PPWSA already boasts a steady revenue stream—revenues at the company increased by 10 percent to $25 million last year—it does not have much room for expansion.

Telecom Cambodia, on the other hand, has a long way to go in terms of corporate governance, according to officials at securities firms. How­ever, it has room to grow, as much of the country is still not connected to the Internet and telecommunications infrastructure is lacking.

As for Sihanoukville Autonomous Port, its growth largely hinges on Cambodia’s ability to increase trade levels, as the export markets in the US and Europe continue to struggle with low levels of economic growth.

Han Kyung-tae, managing director of Tong Yang Securities, one of seven underwriting firms licensed to work on the bourse, said that while the water authority would grow slowly, its steady revenues should help to attract longer-term investors.

Telecom Cambodia, however, can expand its fiber-optic network—which currently runs over 1,700 km—and then tap into a steady stream of revenues by charging other telecom firms a fee for using its infrastructure.

“There is still a large amount of potential for [Telecom Cambodia] to increase capacity of the network as well as the network’s coverage,” said Mr Han. “Their main business will continue to grow.”

Mr Han said PPWSA would more likely provide buyers with a fixed bond-type investment, while the other two state-owned companies would be more likely to have fluctuating stock.

“At this moment, the safest bet is the water supply authority,” he said.

Investors, though, point to Telecom Cambodia as having more potential for higher returns than the other two state-owned companies.

“Telecom Cambodia will be better I think,” said Kim Yang-jin, CEO of Phnom Penh Commercial Bank, citing the growing market of mobile telephone and Internet users in the country.

Revenues at Telecom Cambodia jumped 14 percent to $32 million in 2010, and profits at the Sihanoukville Autonomous Port increased slightly to $3 million.

No matter how three companies evolve after going public, financial experts say investors will first look at the corporate governance and transparency of each of the companies before making any investment decision.

“They really need to strengthen their corporate governance to minimize their risk,” said Sam Pheakdei, a manager at the auditing and consultancy firm KPMG. Investors “are looking for the companies that have…good structure and regular external audits.”

Chea Visoth, assistant general director at the Phnom Penh Water Supply Authority, said the company expects to increase its coverage slightly due to the government decision in September to place five extra districts in Kandal province under the jurisdiction of Phnom Penh municipality.

But PPWSA already supplies 90 percent of the capital and has little room for expansion beyond this.

“As you know, the Phnom Penh area is not yet totally supplied,” said Mr Visoth, adding that the company had no plans to expand beyond Phnom Penh.

Lao Saroeun, director general of Telecom Cambodia, said his firm’s initial public offering was expected to earn about $10 million and that the capital would be used to expand the company’s fiber-optic network.



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