Royal to raise $2bn to develop island

By Raphael Minder in Hong Kong

Published: August 17 2008

Related article: Kith Meng: Cambodia's Transforming Tycoon

Royal Group (owned Mr. Kith Meng), a Cambodian conglomerate whose interests range from banking to mobile telephony, is raising $2bn from private investors, together with Hong Kong-based Millennium Group, to develop Koh Rong, an island off Sihanoukville, Cambodia’s only deep-water port.

The move comes as property developers are planning billion-dollar investments to transform Cambodia’s coastline into one of Asia’s leading holiday destinations.

Such investments are designed to help diversify a Cambodian tourism industry that is heavily reliant on Angkor Wat and the country’s other inland historic treasures.

The amount planned by Royal will only cover the initial stages of the development, according to Mark Hanna, chief financial officer of Royal Group.

“We are talking about an island that is the same size as Hong Kong island, where we want to add things such as an airport, so ultimately we are certainly looking at several billions,” he told the Financial Times.

Meanwhile, MPDI, a subsidiary of Seng Enterprise, a family-owned group that is one of Cambodia’s leading construction companies, is working on another $2bn project, with unnamed US, Japanese and Middle Eastern investors. The project will triple the size of Kep, a neglected former French colonial resort

Seng’s plan involves reclaiming land along a 6km stretch of coastline and building luxury towers and bungalows. that will be able to house about 10,000 families.

They also include Preah Vihear, another temple that straddles the border with Thailand and whose disputed ownership has threatened to spark a military conflict between the two countries.

After decades of war and genocide overseen by the Khmer Rouge regime, Cambodia is playing catch-up to other south-east Asian tourism hotspots in countries such as Thailand and Malaysia.

In the 15 years since Cambodia’s return to multiparty democracy, the country has made an impressive economic recovery and tourism has grown almost tenfold to become the second most important sector after textiles. The number of visitors to Cambodia breached 2m for the first time last year, but of those only 122,000 visited the country’s beaches.

Vantha Seng, chief financial officer of Seng Enterprise, said construction in Kep was likely to start next year, thanks to a first round of financing of about $250m, with contributions from “well-known” Japanese, American and Middle Eastern funds and private equity firms.

She said the project could become Cambodia’s first offshore listing, either on the Hong Kong or Korean stock exchange. As to the targeted clientele, the developers are betting particularly on wealthy Asian pensioners from Singapore, South Korea and Japan. Some of the housing will also be reserved for Cambodians.

“We already have some bookings and it’s mainly from people under 50 who are preparing their retirement plans,” she said. “Thailand has shown how you can develop beautiful beaches but we also want to avoid some of the mistakes there and certainly want to remain upmarket.”

Copyright The Financial Times Limited 2008