Cambodia’s Phnom Penh Water Supply Authority – An Introduction
Cambodia entered into the IPO markets this year, with its first stock offering coming from the Phnom Penh Water Supply Authority (PPWSA). The April listing raised $20.5 million for PPWSA, which was impressive given that the company made only 13 million shares (15% of its total stock) available to the broader market. The remaining 85% will continue to be under the control of the Cambodian Ministry of Finance, as the Cambodian government remains reluctant to relinquish control of a governing stake in the company.
The break-down of how shares were allocated is an interesting aspect of the equation. Stock shares were made available to PPWSA employees and for domestic Cambodian investors, as the country its making an attempt to keep PPSWA Cambodian owned. But more than half of the available shares (15% of the company) were purchased by foreign investors in the IPO. All of this active market interest puts a positive perspective on the future performance of PPWSA, as the government is reluctant to make shares available and foreign investors are unable to purchase as much of the stock as they initially requested. Simple rules of supply and demand suggest that is is a strong positive for the company’s stock when looking at a long term perspective.
Drilling down to PPWSA’s financials, we can see that this is one of the Cambodia’s most stable and successful companies. PPWSA has already been widely recognized by more established government bodies (such as the Stockholm Water Foundation and the Asian Development Bank), and this stamp of approval helps give investors confirmation that the PPWSA is conducting business in an efficient and sustainable manner. The PPWSA’s quality of service can also be seen in its 2011 net profits, which came in at 32 billion Cambodian Riel (equal to $8 million US Dollars), and this is equal to a yearly increase of 4.9 percent, relative to the financial performance seen in 2010.
Another reason to expect stability in the PPWSA stock price (and in the Cambodian stock market as a whole) can be seen in the partnership between the Cambodia Securities Exchange and the Korea Exchange, which is responsible for operating the stock market in Seoul (the 13th largest stock market globally). The Korea exchange has taken minority ownership in the CSX (the Cambodian stock exchange) and this is expected to help investors trade in fair and transparent ways. Because of this, markets are expecting two additional state-run companies in Cambodia (Sihanoukville Autonomous Port and Telecom Cambodia), and potentially some private companies as well, to complete their IPOs this year.
These new additions to the companies available on the CSX will likely generate more media attention to the Cambodian stock market and its increasingly large variety of trading options that are made available to investors. Historically, these types of events are positive for emerging markets and so it is relatively unsurprising that most market analysts are expecting the companies listed on the CSX to be trading higher at this same time next year. Clearly, this is an exciting time for Cambodian investments.