Adding its name to a rapidly growing list of private companies, Tonlesap
Airlines is gearing up for an initial public offering on the Cambodia
Securities Exchange. And like many of these companies, the listing is still
years off as Tonlesap prepares the tax and financial information required to go
public.
The three years of records is one
of the major factors holding companies from listing on the exchange. While many
insiders have said the three-year benchmark promotes a higher degree of
transparency – and a more stable CSX – others say the time is an eternity not
only for interested companies, but for the exchange itself, whose only traded
company is losing the attention of investors.
“This is the biggest problem,”
chief executive at Phnom Penh Securities Firm Plc Stephen Hsu said of the
challenges in meeting the three-year financials requirement. Phnom Penh
Securities signed an IPO listing agreement with Tonlesap in June.
“We’ve talked with a lot of
companies that are very interested in listing, but 2012 is the only year that
they have financial statements for.”
This puts the earliest listing
date for those companies at least two years away. And while the CSX waits for
more IPOs, interest in one of Cambodia’s biggest financial milestones has
waned, according to Hsu.
The firm has recently recommended
that the Securities and Exchange Commission of Cambodia (SECC) lower the
required documentation to one year of financial and tax history, Hsu said, a
move that he said would boost the number of companies on the bourse. Vietnam’s
State Securities Commission requires only one year of disclosure from potential
listing companies.
Phnom Penh Water Supply Authority
has seen a few dark days since its IPO in mid-April. On Monday, no shares were
traded, a first for the company but a common regional trait, seen also recently
on the Lao Securities Exchange.
In August alone, Banque Pour Le
Commerce Exterieur Lao, Laos’s biggest bank and one of two companies listed on
the LSX, saw four days without trades.
Despite the relatively large size
of the two Lao IPOs that jump-started the exchange in early 2011, trade volume
has been considerably low after a quick rise and fall in prices. The value of
PPWSA has traced a similar arch.
PPWSA – renowned in Cambodia for
its efficiency – dipped once below its initial listing price in mid-July. Since
then the company has traded within US$0.12 of its $1.53 listing price. PPWSA
closed up 0.79 per cent yesterday at $1.58.
At least two years of
documentation is needed to pinpoint irregularities in financial documents,
Grant Thornton Cambodia managing partner Kenneth Atkinson said yesterday on the
sidelines of the National Conference on Accountancy in Phnom Penh. The event
focused on transparent bookkeeping and its role in the Kingdom’s fledging
capital market. Atkinson said he supported the current SECC regulations.
From the perspective of
underwriters and investors, three-year of documentation would ensure
longer-term stability in the market, said Han Kyung-tae, the Cambodia
representative for Tong Yang Securities Plc, which underwrote PPWSA’s IPO.
“I understand the rationale
behind one-year statements, but it would be a temporary solution to boosting
the capital markets. In the long term, this would not be good for the health of
the market,” he said yesterday, noting that SECC requirements on net assets and
profits for listing companies were already low.
Still, the need to speed up the
listing process is well recognised by officials. Sok Dara, deputy director
general of the SECC said as much during a speech yesterday at the accounting
conference.
“The CSX cannot rely on one
company ... We started with one company but now we need to ensure liquidity and
that [trading] actually reflects the development of the market,” he said,
according to a live translation of his speech.
The SECC could not be reached
yesterday for comment. Tonlesap Airlines declined to comment.
Don Weinland
Business & Investment Opportunities
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