The Cambodia Securities Exchange (CSX), its regulator, licensed underwriters and investors have responded to market concerns that four out of seven listed stocks have now fallen below their initial public offering price (IPO).
At the close of the market yesterday, Grand Twins International (Cambodia) Plc (GTI) was trading 69 percent below its 2014 IPO and Phnom Penh SEZ Plc (PPSP) at 35 percent below its 2016 launch.
Phnom Penh Water Supply Authority (PPWSA) was trading 8 percent below its 2012 IPO and Pestech (Cambodia) Plc (PEPC) was also 8 percent below its launch price in August this year.
The failure of these stocks to increase, or at least maintain, their initial value is worrying some potential investors as the CSX continues to try to attract more equity listings onto the local exchange, as well as encouraging more trading in the market to increase liquidity, seen as a major contributing factor to falling share prices, through an improved trading eco-system and overall community awareness.
CSX Chief Operations Officer Ha Jong Weon said it was important to note the stock performance does not always reflect company performance.
He added the fall of prices to below an IPO valuation might be because of the trading behaviour of investors who follow market trends more than business results.
“Companies such as PPWSA have increased profit while PEPC’s annual report also shows that the company has managed to gain profits, which is a very positive sign considering they experienced a loss last year. PPSP and GTI on the other hand didn’t perform well because of the impact of the COVID-19 pandemic,” he said.
“The CSX would like to encourage investors to look more deeply into the actual performance of the business to see whether it has potential or not,” he added.
He maintained that while he cannot say that it is the brokers’ or underwriters’ faults, it would be better if all the brokers and underwriters were more proactive toward investors’ education and consulting so that this can pave the way for future successful IPOs.
Securities Exchange Commission of Cambodia (SECC) licensed brokerage firm and underwriter of the PPSP IPO, SBI Royal Securities Head of Corporate Finance Seng Chan Thoeun, said the PPSP IPO was fairly valued when it first offered in 2016.
He said it had been the company’s current decline in performance that had been the major factor in its share price now falling below the IPO price, not an IPO overvaluation in 2016.
He said in many other exchanges around the world, including Vietnam and Thailand, the regulator or exchange often commissioned researched reports by investment advisers to obtain “fair market” stock valuations based on fundamentals.
However, this has yet to be implemented by the CSX or SECC.
Thoeun said: “We did try to explain fundamental analysis but we could not cover all retail investors. We try to work with some institutional investors in the event they need our opinion on a one-to-one basis. Institutional investors have a basis in valuation but, for retail investors, this is still limited.”
SECC Deputy Director-General Sok Dara said that as an independent regulator it is not its role to comment on stock prices either rising or falling but to ensure all regulations and requirements are adhered to.
“The SECC does not interfere with market forces. However, we are here to ensure a transparent and well-regulated exchange as well as appropriately licensing the brokers and underwriters who are allowed to operate within the market,” he said.
Mekong Strategic Partners Managing Director Stephen Higgins said it is important underwriters and companies work well together to ensure a successful IPO launch.
“No company wants unhappy shareholders and underwriters don’t want the blame because they will struggle to get future IPOs away. So there’s a lot of impetus to actually get the IPO price valued fairly,” he said.
In comparison with the three other stocks, ACLEDA Bank was trading 5 percent above its April IPO this year, Sihanoukville Autonomous Port 73 percent above its 2017 IPO and Phnom Penh Autonomous Port was 124 percent above its 2015 launch on the securities market.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.