Newsletter Issue 28 - September 2012
Leopard Cambodia Fund - Portfolio Company Highlights
ACLEDA Bank/ ASA Plc:
Leopard
Cambodia Fund holds an indirect equity position in Cambodia's largest
bank, ACLEDA, through the bank's staff shareholding company, ASA Plc. In
2Q 2012, ACLEDA reported solid results with loan growth of 36% Y-on-Y
to US$ 1.13 billion, and deposit growth of 33% Y-on-Y to US$ 1.26
billion. Net profits for the first six months rose 45.6% to US$ 31.6
million - well ahead of our forecasts. Meanwhile, non-performing loans
remained paltry at 0.32%. Having successfully expanded across borders
with 22 branches in Laos, ACLEDA has announced it plans to enter Myanmar
in 2013. This is significant because Myanmar's population is four times
the size of Cambodia's and has much lower banking penetration. In 2Q
ACLEDA paid a 31.6% share dividend. Leopard Cambodia Fund
also took an opportunity to further add to its stake in Acleda Bank via
ASA Plc through a secondary transaction.
Electricite Du Laos Generating Co. ("EDL"):
EDL
was the first listed company on the Laos Securities Exchange, and
Leopard Cambodia Fund participated in the IPO. EDL had a market
capitalization of around US$ 743 million and traded at 5.5 x 2012
expected net profits as reported by Bloomberg. In 2012 earnings per
share are expected to rise 29% as new capacity comes on line and newly
acquired plants are consolidated into earnings. The long term outlook
remains strong for EDL with various agencies increasing their long term
forecasts for energy demand in Laos and also in neighboring countries.
EDL financed the acquisition of the new plants through a 41% capital
increase in July composed of a rights issue (1 New for 4 Old shares) at
4,300 Laotian Kip (LAK) per share and a public offering at 4800 LAK per
share. Leopard Cambodia Fund took up its rights and collected an interim
cash dividend.
IPR:
Leopard
Cambodia Fund holds an investment in Intean Poalroath Rongroeurng Ltd.
("IPR"), a Cambodia microfinance institution, through a 33.6% equity
stake and convertible loan. In the first half of 2012 IPR booked a net
profit of US$ 317,093, a 2.2x gain Y-on-Y. Loans increased by 58%
Y-on-Y, while Non-performing loans dropped from 0.84% to 0.75% Q-on-Q.
IPR sourced a Thai Baht loan from Europe and is looking for additional
debt funding heading into the high disbursement season in late 2012.
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Leopard Capital News
Investment Team Change
Scott
Lewis has resigned as Chief Investment Officer of Leopard Capital
Cambodia to become Head of Corporate Finance at Oryx Petroleum in
Geneva. Scott remains an active Consultant Partner at Leopard Capital
and we thank him for his dedicated service. Richard Intrator has
replaced him as our Phnom Penh-based Chief Investment Officer. Richard's
30+ years of work experience as a chief executive, investment banker,
entrepreneur and strategic consultant will be highly valuable in
managing LCF's portfolio and preparing companies for exits. We warmly
welcome Richard to our team.
Leopard Asia Frontier Fund
Leopard
Capital expanded its frontier investment offerings into public equities
with the April launch of Leopard Asia Frontier Fund, which invests in
up to a dozen frontier stock exchanges across Asia, from Mongolia to
Papua New Guinea. The fund offers diversified access to a high growth
region with greater liquidity than our private equity funds, and is
managed by Thomas Hugger. For more information please contact our Group
Marketing Manager, Mohamed Ahamad, ma@leopardcapital.com.
Leopard Haiti Fund
In July Leopard Capital launched Haiti's first private equity fund, Leopard Haiti Fund, with
a $20 million first closing backed by The World Bank's International
Finance Corporation (IFC), Netherlands Development Finance (FMO), and
the Inter-American Development Bank's Multilateral Development Fund
(MIF). Leopard Haiti Fund will provide growth capital to Haitian
businesses with priority toward affordable housing, renewable energy,
food production, and tourism, seeking to achieve commercial returns in
businesses delivering positive social impact. The fund managers are
Thierry Bungener, Rilwan Meeran and Guy Balan, all based in
Port-au-Prince. Please write to Mohamed (above) for more details.
Leopard Myanmar Property Fund
Sweeping
political and economic reforms in Myanmar, or Burma, have led Leopard
Capital to create Leopard Myanmar Property Fund to participate in the
first wave of real estate development in a long neglected market. Those
who have visited Yangon recently know how hard it is to get a hotel
room, let alone rent an apartment, house, office, or retail unit. With
the expected final approval of the new Foreign Investment Law, Myanmar
will arguably become the world's most exciting real estate investment
market. The Fund's offering documents are almost ready now, so
interested participants should alert Mohamed.
Award
Leopard
Capital was recently named "Private Equity Firm of the Year" in
Acquisition International magazine's 2012 M&A Awards - the only PE
manager named that operates in emerging markets.
Blog
Stay up to date with breaking investment news about the world's most exciting frontier markets through Leopard Capital's "Emerging Frontiers Blog", www.emergingfrontiersblog.com. The blog tracks all the markets covered by Leopard Asia Frontier Fund and Leopard's current and upcoming private equity funds.
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Special Feature: "Phnom Penh Under Construction", by Steven Monroe
Residents of
Phnom Penh cannot help but notice the reawakening of the local real
estate scene. Newspapers intersperse stories of economic hardship in
advanced economies with local puff pieces about grand openings of
fashion shops, trendy restaurants and boutique hotels. Leisure seekers
can choose between sampling new coffee shops, amusement parks, golf
driving ranges, or a new sports arena. Furthermore two competing
world-class shopping malls are under planning by Hong Kong Land and
Japan's Aeon Group.
Having
interned at Leopard's Cambodia office for the past three months, I have
seen and experienced this small city's rapid growth on a daily basis. My
mornings begin at 6 a.m. with the crack of jackhammers from the
construction lot next door and the cackle of vendors hawking goods on
the street below. Out the door by half past seven, I find Phnom Penh's
streets already clogged with gleaming SUVs, and buzzing tuk-tuks and
motorbikes, all jockeying for position on the smoothly paved roads. As
we move to the city's outskirts, my tuk-tuk passes nondescript
shophouses selling row upon row of imported engines, tools, and floor
tiles, until we reach Leopard's office above Kingdom Breweries.
Overlooking
the Tonle-Sap River on the city's northern edge, our office provides a
panoramic view of the capital's skyline. Jutting out on the horizon and
sculpted like a glass-plated boot - or a dragon's back - is the nearly
completed Vattanac Capital Tower. At 38-stories, this US$ 170 million
project will become the tallest and probably highest standard building
in Cambodia. It is being built by a local banking family, as a
come-uppance to the nearby 32 story OCIC Tower, which houses a rival
local bank.
Looking out at the river, one can see a firm from China putting in pillars for the second span of the Chroy Changvar Bridge, 46 years after the first span was erected. The two new lanes will help reduce bridge congestion as the city sprawls across the river. On the far side, the modern-Gothic Norton University tower campus looks virtually complete now, and stands adjacent to the newly opened Beeline Arena, which has started hosting basketball and volleyball games. Looking nearly finished is the $18 million embankment reinforcement project that runs 1.7 kilometers from the bridge down to the Sokha hotel construction project at the end of the Chroy Changvar peninsula. The $100 million Sokha hotel has been topped out now at 16 stories and when it opens will give Phnom Penh a new convention center. The Sokha will join the Sofitel - which opened last year - as the city's first new five star hotels built in the last decade.
Looking out at the river, one can see a firm from China putting in pillars for the second span of the Chroy Changvar Bridge, 46 years after the first span was erected. The two new lanes will help reduce bridge congestion as the city sprawls across the river. On the far side, the modern-Gothic Norton University tower campus looks virtually complete now, and stands adjacent to the newly opened Beeline Arena, which has started hosting basketball and volleyball games. Looking nearly finished is the $18 million embankment reinforcement project that runs 1.7 kilometers from the bridge down to the Sokha hotel construction project at the end of the Chroy Changvar peninsula. The $100 million Sokha hotel has been topped out now at 16 stories and when it opens will give Phnom Penh a new convention center. The Sokha will join the Sofitel - which opened last year - as the city's first new five star hotels built in the last decade.
Back on our
side of the river, giant NagaWorld casino and 500 room hotel overflows
with Asian gamblers. The casino, which is listed in Hong Kong and a
holding of our Leopard Asia Frontier Fund, announced a 38% jump in
profits to USD 52.4 million in the first half of 2012. The monopoly
operator next plans to roll the dice and double capacity on a nearby
lot.
Nearby NagaWorld is Koh Pich - a dredged island off the banks of the Bassac River that is becoming a hub for restaurants and recreation. A few weekends ago, one of my Cambodian friends proudly showed me around, pointing out wedding halls, cinemas, amusement rides, a water park, and a golf driving range. The place was packed with teenage Cambodians in skinny jeans and "Angry Birds" baseball caps slurping smoothies by their scooters while texting vigorously. Half of Phnom Penh's residents are under 21, and these ones are the roots of Cambodia's future middle class. Frozen yogurt in hand, I struggled to keep up with my friend's tour of the island's present and planned facilities. "When Obama comes in November, he is expected to give his speech there" he boasted, pointing to a gaudy, polished, Roman columned auditorium in an empty lot. When we reached the island's edge, my friend administered his coup de grace. "See those boats dredging up dirt on the horizon? They are laying the groundwork for a marina that will hold sky scrapers, malls and a hotel with an infinity pool on top. One day, this might all look like Singapore", he predicted.
Nearby NagaWorld is Koh Pich - a dredged island off the banks of the Bassac River that is becoming a hub for restaurants and recreation. A few weekends ago, one of my Cambodian friends proudly showed me around, pointing out wedding halls, cinemas, amusement rides, a water park, and a golf driving range. The place was packed with teenage Cambodians in skinny jeans and "Angry Birds" baseball caps slurping smoothies by their scooters while texting vigorously. Half of Phnom Penh's residents are under 21, and these ones are the roots of Cambodia's future middle class. Frozen yogurt in hand, I struggled to keep up with my friend's tour of the island's present and planned facilities. "When Obama comes in November, he is expected to give his speech there" he boasted, pointing to a gaudy, polished, Roman columned auditorium in an empty lot. When we reached the island's edge, my friend administered his coup de grace. "See those boats dredging up dirt on the horizon? They are laying the groundwork for a marina that will hold sky scrapers, malls and a hotel with an infinity pool on top. One day, this might all look like Singapore", he predicted.
The flood of
real estate investment is having a profound, indelible impact on the
capital, and presents a threat to the city's natural and architectural
legacies. Boueng Kak Lake has recently been filled in by a local tycoon
in partnership with a China group, after local residents were forcibly
evicted. If developed, the increase supply of downtown real estate this
vast space could create would swamp foreseeable requirements for years.
The city's oldest French colonial building, proudly sporting an
octagonal pointed tower, was recently demolished, forever erasing a
historic landmark. However another several other run-down colonial
buildings have been handsomely renovated into commercial establishments,
such as The Exchange restaurant and Brown's
riverfront coffee shop. The city's Central Market has been restored to
its original 1937 Art Deco glory through a $4.2 million grant from
France.
Phnom Penh is a city in motion. Evacuated at
gunpoint and left abandoned from 1975-1978, the city has been
physically restored and expanded, and is now equipped to host ASEAN
Summits and world leaders. Optimistic entrepreneurs aspire to quickly
recover lost development years. One just hopes that in the rush to catch
up this delightful city doesn't toss away its charms, as so many other
Asian cities have done.
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