March 27, 2012
Shares of the state-owned Phnom Penh Water Supply Authority (PPWSA) will trade at 6,300 riel, or $1.57, when the firm launches its initial public offering (IPO) on the Cambodian bourse on April 18, PPWSA announced yesterday.
The price puts the company at the top of the originally proposed range of between $1 and $1.57 per share. SBI Royal Holdings, a securities firm, said in a note to investors yesterday that the IPO’s book-building process for a total of 13 million shares, or 15 percent of the company, was 17 times oversubscribed.
Han Kyung-Tae, managing director of Tong Yang Securities, PPWSA’s underwriter, said that there were about 850 investors who offered bids during the book-building process and that about 500 were accepted.
“Most of the investors offered bids at the high-end of the price range, with only a few that put in [bids] lower than the 6,300 riel,” he said.
He also said that despite the overwhelming amount of bids, a majority comprised of individual investors who may have put in high bids as a way of ensuring they get shares.
”I believe that many of them do not have enough experience, information or tools to make an evaluation, but understand that they definitely want to get some shares, so they submit their bid price at the high end,” he said.
Investors said that the high valuation for the IPO had more to do with the excitement of trading stock in Cambodia than the actual value of the company.
“It is a well managed company with good growth prospects. However, at the very high end of the range, it’s an aggressive valuation compared to other water companies in the region,” said Scott Lewis, senior partner at investment firm Leopard Capital.
Mr. Lewis compared the enthusiasm for trading on the Cambodian bourse to the launch of the Laos Stock Exchange in January 2O11, which saw the value of stock for its two state-owned listed companies rally at first and then drop by half. “Usually, there is an excitement and euphoria, then the price settles down to a more rational level,” he said.
Telecom Cambodia and the Sihanoukville Autonomous Port, which are also state-owned companies, are also planning to launch an IPO on the Cambodian bourse, but no date has been set.
Photo credit Twin Oaks