The Cambodia Securities Exchange (CSX) is set to receive its first-ever initial public offering (IPO) approval application for a company to list on its Growth Board in more than five years since the secondary board was first launched.
According to the company’s underwriter SBI Royal Securities, the Listing Eligibility Review Application and Disclosure Document will be submitted to the CSX and its regulator the Securities Exchange of Commission of Cambodia (SECC) this month.
They added information about the company in detail, including its name, will be released after the SECC’s approval. It was disclosed that it has an annual revenue of $9 to $10 million and profit of more than $1 million awarded under the Excellence Program of the SECC.
Seng Chan Thoeun, managing director at SBI Royal Securities said, “I have been working on this company’s application for more than two years. It is a good growth-board company but the biggest hurdles to overcome have been the audited financial statements and first-time adoption of international financial reporting standards, which require three years of figure comparisons,” he said. “Though there are challenges in preparation, the board is a great place for SMEs looking for capial,” he added.
The CSX Growth Board was introduced in 2015 in addition to the Main Board and was designed for small and medium enterprises (SMEs) as a fundraising option after complaints of fundraising problems for investment and working capital.
The board has remained unlisted because SMEs have citied auditing concerns and too many regulation requirements which has made listing unattractive despite the government announcing favourable tax advantages.
The major requirements for listing on the Growth Board state that shareholders’ equity should be more than 2 billion riels ($500,000) in comparison to the Main Board’s 30 billion riels ($7.5 million) minimum.
Potential listings also require either a positive net income for the latest year or positive operating cash flow or gross profit margin of 10 percent and/or more.
Hong Sok Hour, chief executive officer of the CSX, said, the Growth Board has been designed for diversification as it removes barriers to entry and reduces compliance costs associated with the exchange.
“Companies wanting to list on the Growth Board require only one year of audited reports, in comparison with two years that are required for the Main Board, and companies have to work with auditing firms in compliance with auditing standards,” he said.
“Tax incentives are still available for all companies and SMEs are more likely to get full tax incentives, such as the 50 percent reduction on tax on profit, if they float at least 20 percent of their authorised shares,” he added.
Ha Jong Weon, chief operating officer of the CSX, said there are several companies preparing documents and currently working with their IPO teams to list on the CSX next year. He added some of them are from construction, engineering and the real estate sectors.
Ha said, “Based on the IPO mechanism guidelines, the applicant may submit a “letter of intention” to the SECC and start forming the IPO team. After the team has completed its due diligence, the company shall submit a “listing eligibility review application to the CSX”.
“We have not received any applications yet so when these documents are submitted it will be our first application ever received,” he added.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.