Second corporate bond by LOLC listed on CSX

Cambodia’s second corporate bond issued by microfinance firm LOLC (Cambodia) Plc officially listed in the Cambodia Securities Exchange (CSX) on Friday, after it was completely purchased by institutional investors when the subscription period ended on April 26.

LOLC issued two types of bonds – namely FX-indexed bonds and fixed-coupon bonds – and successfully raised 80 billion riel ($20 million) for the growth of its lending business.

Underwritten by Yuanta Securities, the bonds were subscribed with an interest rate of eight per cent per annum for FX-indexed bonds and nine per cent per annum for fixed-coupon bonds with a maturity date of three years. A total of 800,000 bonds were issued, valued at 100,000 riel per unit.

Yuanta Securities’s research head Sim Dara said on Thursday that demand for both types of bonds were greater than the offering, resulting in an oversubscription.

“There were actually investors who came later after we had already closed the books,” he said.

According to Dara, the investors that purchased the bonds were institutional investors, mostly foreign-owned local banks.

He added that while the bonds will be available for trading on the CSX, active trading like stocks is not expected, as corporate bonds are in general less liquid compared to sovereign bonds.

“Since investors are mainly long-term institutional investors with big investment size, transactions may rarely happen,” he said.

CSX Market Operations Department director Sophanita Kim on Thursday said the second bond listing will provide more confidence to companies who are considering raising funds through the capital market.

While companies have been hesitant to enter the new market, and waiting and observing others, Sophanita said the success of the second bond issuance and many IPOs will help provide a boost of confidence for other firms.

“Many companies – especially financial institutions – are now trying to issue bonds in the capital market to enjoy the tax incentives granted by the government. I recommend other companies who haven’t thought of it to do it now and grasp these huge advantages,” she said.

“For long-term growth, they should consider issuing equity other than debt.”

Source: Phnom Penh Post | 10 May 2019 | Author: Hor Kimsay

National Bank of Canada to buy final 10% of ABA

Montreal-based National Bank of Canada (NBC) recently unveiled plans to acquire the final 10 per cent stake in the Cambodia-based ABA Bank, which would give it 100 per cent ownership of the bank.

The 10 per cent of ABA in question is currently owned by Damir Karassayev, a former head of the Kazakhstan Stock Exchange.

According to a report from Canadian newspaper the Financial Post, NBC president and CEO Louis Vachon told shareholders at the bank’s annual meeting in Quebec City on April 24 that they had the option of buying the remaining 10 per cent of ABA in the coming months.

“Yes, our intention is to buy the remaining 10 per cent of ABA Bank,” an NBC spokesperson confirmed to the Financial Post.

According to the spokesperson, the bank is closely monitoring growth forecasts for Cambodia, which remain strong.

An investor presentation in November predicted ABA would record a profit of around $70 million last year, up from $7.5 million in 2014. ABA now has 66 branches, 4,500 employees and more than 450,000 customers across the Kingdom, according to NBC.

In March, Vachon paid a visit to ABA in Cambodia – his third visit since 2017 – demonstrating NBC’s strong commitment to the Cambodian bank’s development.

Vachon said in an ABA press release during the visit that there are many reasons NBC decided to invest in the Cambodian bank.

“There are many reasons National Bank of Canada decided to invest in ABA. One of them is the future of Cambodia, as we saw a very bright future for the country and its people,” he said in the releases.

Source: Phnom Penh Post | 3rd May 2019

Business Rankings Edge Up

Cambodia improved its ranking for the ease of doing business from 133 last year to 127 in 2015, making marked progress in the number of days and procedures required to start a business, though it is still ranked well below the world average, according to a World Bank study released yesterday.

The Doing Business 2016 report ranks Cambodia behind most of its fellow ASEAN member states, save for Laos and Myanmar. The critical issue of ease of starting a business continues to register a dismal ranking of 180 out of 189 countries, only a slight improvement from the 184 it placed last year.

“It is true that Cambodia drastically reduced time and procedures to open a business, but the ranking is relative and other economies are doing better than Cambodia,” said Jean Arlet, who co-authored the annual report.

One of the most important metrics is the time required to start a business. While in Cambodia this took 87 days, the world average was just 20 days, and more than half of the 25 countries in the East Asia and Pacific region required 20 days or less to incorporate a business, according to the report.

Increasing Cambodia’s ease of starting a business has been a pet project of Commerce Minister Sun Chanthol, who earlier this year said that reforms, such as online registration of businesses, could rocket the Kingdom’s ranking to 21. However, Chanthol qualified that claim by saying the drastic improvement would only be possible if other countries do not make any progress.

The delay in starting up a company could up the costs for new business owners and at the same time eat away at incentives provided by the government, such as tax holidays and customs duty exemptions, said Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia.

“The government should continue its effort to streamline the procedures and utilise more online internet systems [to complete these] procedures,” Suzuki said.

The World Bank report highlighted that the cost of starting a business and the minimum capital requirement as a percentage of income per capita were other factors that weighed down Cambodia’s ease of doing business.

Suzuki said Cambodia’s minimum capital requirement seemed high due to the country’s low per capita income figure, but this was not a deterrent to prospective businesses.

“The minimum capital requirement in Cambodia is not a big problem for foreign direct investment,” he added.

On the bright side, Cambodia performed well on the ease of getting credit, ranking 15, a notch lower than its 12th place finish last year. The ranking was boosted by a high score on the strength of protections for banks and customers alike.

Joe Farrugia, CEO of Hong Leong Bank in Cambodia, said apart from the ease of accessing credit, customers were also better prepared nowadays to fulfill bank credit requirements, though startups still faced some challenges.

“However, in general, banks do not offer lending facilities to completely new or startup companies for simple reasons – lack of business and financial data for sound assessment of their business viability and profitability,” he said.

While consumer and bank protections were in place, Farrugia said that enforcement was a whole different issue.

“I believe that whilst Cambodia scored well in this area, you should put it in perspective and look at the history of legal challenges and enforcements before suggesting we are actually in a very strong and safe legal position,” he added.

Prospective business operators are also concerned about securing a stable supply of electricity. While Cambodia’s ranking in getting electricity dropped from 139 to 145 this year, the World Bank said that improvements were seen in the quality of the power supply and reductions in the number and duration of power outages.

Singapore was ranked number one overall for the 10th consecutive year, with Malaysia being the other highly-placed ASEAN nation at rank 18. Vietnam was lauded for bringing in five major reforms, the highest in the region, which resulted in a small move up from 93 to 90.

Source: Phnom Penh Post | October 29, 2015 | By: Ananth Baliga