Newsletter Issue 19 – November/December 2009

Newsletter Issue 19 – November/December 2009

Leopard Cambodia Fund Update

New commitments including an existing LP’s top-up have lifted Leopard Cambodia Fund (“LCF”)’s committed capital to $30,940,000. A warm welcome to these new investors; thanks for your support. For qualified investors who have been planning to invest but haven’t filled out the forms yet, LCF’s Final Closing is December 31, 2009. This is your last chance to make history as a partner of this pioneering fund.

November was a busy month here in Phnom Penh, as we hosted five consecutive visits from investors coming to check out our fund, while working through our growing pile of deals. The GP issued a capital call to LPs, and completed the following two investments:

LCF invested
$5,000,000 in a syndicated 18 month bridge loan to finance Royal Group’s acquisition of its partner’s 61.5% stake in CamGSM Co. Ltd, operator of Cambodia’s largest mobile phone network. The $421 million senior secured loan covers Royal Group’s $346 million share purchase, plus the retirement of CamGSM’s existing debt. The deal offers LCF equity-like returns backed by debt features such as full security over the company’s assets and shares, a personal guarantee, and a cash waterfall mechanism. This was the largest and most complex corporate transaction ever completed in Cambodia and moves the country closer to the mainstream of global finance. It took a great effort by all parties to complete this deal and we congratulate the Royal Group, their advisor Cambodia Capital, the various legal teams, the arrangers ANZ Bank and Standard Bank, and the other participants for achieving what could be Asia’s Deal of the Year. The loan will be repaid when Royal Group resells a controlling stake in CamGSM to a new foreign strategic investor, so there should be another big M&A deal ahead, which will again put Cambodia into the global spotlight.

LCF also extended a
$300,000 second tranche of its structured loan to Greenside Holdings, increasing its total exposure to $1,300,000. The electrical power grid (GTS Transmission) in Kampong Cham of which Greenside holds 45% is now completed and transferred to the state power company (EDC), which in return provides GTS Transmission’s shareholders a fixed monthly lease payment. Thus Greenside receives more than enough state-sourced cashflow to service its monthly interest, which provides LCF a locked in 20% return secured by a share pledge, dividend pledge, and personal guarantee.

We rate the two investments at the safer end of our risk spectrum as they provide immediate secured cashflow to LCF. Some of our other investments target larger returns but the cashflows are further out and are unsecured. Altogether we are aiming for a blended IRR of at least 30% p.a. with a prudent mix of financial instrument types, cashflow schedules, development stages, exit strategies, industries, business partners and management teams.

So where does LCF’s investment portfolio stand now? In its first 20 months, Leopard Cambodia Fund has now committed $15.8 million (51% of its capital) to five projects, and paid in $11.6 million of that. In addition we have signed Term Sheets for two other investment proposals which are now undergoing legal due diligence and documentation: a $3.1 million venture investment in a new WiMAX broadband service provider, and a $1.5 million growth investment in a profitable Microfinance Institution, after which the Fund will be 66% committed. For the remaining uncommitted $10 million or so of our current fund size, we are in advanced discussions to invest in a bank, a rice mill, a water bottler, a seafood processing plant, a renewable energy producer, a family entertainment project, some incomplete/distressed buildings, and various other proposals. We are constrained by our small fund size, not by our deal flow, which continues to grow as people contact us constantly to pitch deals. Unless we get some more investor inflows this month we anticipate that Leopard Cambodia Fund may be fully invested in the next 3-6 months; LPs please stand by for some additional cash calls early in the new year.

Portfolio Notes

Kingdom Breweries (“KB”): KB has signed on an award-winning German brewmaster with over 20 years experience including starting up small breweries in other developing countries. The factory renovation team is making rapid progress; most of the unneeded former equipment has now been dismantled and removed, part of the roof has been peeled off for replacement, and the waste water treatment system has been thoroughly reconditioned. The renovation designs are now ready and feature a tasting room with a balcony from which visitors can sample Kingdom’s specialty beers while watching the timeless river flow by. The building should be ready to go in 2-3 months, before the plant equipment starts to arrive. Meanwhile, Bates, one of the region’s top branding and marketing consultants, is making progress in developing the brand identity.

Angkor Residences: on our recent visit to Siem Reap we were pleased to see that the first section of the access road upgrading project and first bridge have now been completed, and make a big difference when you approach our site. Other sections and bridges will be tackled next, now that the rainy season is over.

Staff Update

We congratulate our contrarian Chairman, Marc Faber, on being named one of the world’s five wisest investors in a Bloomberg’s October global investor poll, alongside some obscure names like Warren Buffet, Bill Gross, George Soros, and Nouriel Roubini. We trust that Marc’s status as an early investor in Leopard Cambodia Fund helped swing the vote. But if you read Marc’s excellent monthly Gloom Boom Doom Report you will understand why he is so widely respected; we are fortunate to have him at our helm.

We are pleased to announce that two more distinguished Cambodians have joined the Leopard Cambodia Fund Advisory Council. We look forward to benefiting from their guidance and contacts on behalf of the Fund.

H.E. Dr. Sok Siphana, 49, was recently appointed Advisor to the Royal Cambodia Government with rank of Minister, after returning from his post in Geneva as a senior official at WTO/UNTAC’s International Trade Center. From 1999-2005 Dr. Sok was Secretary of State at the Ministry of Commerce where he played a key role in Cambodia’s 2003 accession to the World Trade Organization. He is considered one of Cambodia’s leading authorities on issues related to trade, economic integration, and the development of a commercial legal framework. Dr. Sok holds JD, PhD, and MBA degrees, and has organized some of Cambodia’s top officials into a rock band which jams at his house – we look forward to their world tour.

H.R.H. Pheanuroth Sisowath, 55, is Advisor to the King’s Cabinet with rank of Secretary of State. He serves as Cambodia’s Focal Point for the International Trade Centre (a technical cooperation agency of UNCTAD and WTO), and as Project Coordinator for the Ministry of Commerce’s Sector-wide Silk Project. Prince Pheanuroth formerly served as the Ministry of Rural Development’s Deputy Director General for Administration and Finance, and Deputy Governor of Phnom Penh. After receiving his BA in Paris, he spent 10 years at an IT services and consulting firm in Paris. Prince Pheanuroth supports several NGOs, as Chairman of SMI Cambodia and a Director of Youth Star Cambodia.

In The News 

– A long-awaited law was finally passed allowing foreigners to legally own up to 49% of a condominium project in Cambodia. Visualizing a future avalanche of demand, foreign developers broke ground on several new luxury residential condo projects in Phnom Penh. Posco E&C (Korea)’s mammoth $300 million River Star complex will supply 1,000 units in 3 towers of 42-45 stories each, and Japan’s Arakawa Group will build 143 units in its $30 million, 16 floor Bellevue Apartment. Meanwhile, the restarted, Korea-conceived Gold Tower 42 story condo project has sprouted up 7 floors now.

-The National Assembly passed the first-ever property tax law in Cambodia, taxing property valued over $25,000 a modest 0.1% per year, to the dismay of local speculators. (Hopefully the future Korean condo buyers won’t care.

– After 15 years of careful study and fine-tuning, the Council of Ministers has forwarded the draft Anti-Corruption Law to the National Assembly. The law would require public officials to declare their assets, and would establish an independent anti-corruption council.

– According to a finance ministry official, the Cambodia Stock Exchange might have a “soft opening” in January or February 2010 to receive applications from companies to list, including the four state enterprises that have been instructed to do so. The Exchange signed a contract to build a $6 million headquarters building on 6,000 meters as the cornerstone of an envisioned new “financial center” in CamKo City.

Leopard Sri Lanka Update

We are pleased to report that Leopard Sri Lanka Investment Forum 2009 was a success, drawing investors from Europe, North America, and Asia. Our ever-efficient Leopard Lanka team rolled out a star-studded panel of technocrats and tycoons, who all basically portrayed Sri Lanka as an awakening leopard ready to roar. To view speakers’ presentation, pease click here. We will write more about Sri Lanka in our January newsletter but for now want to highlight that a Presidential election has been called on January 26th, which will colorfully pit the triumphant, popular President against his victorious, retired Military Commander. We’ve lived around Asia long enough to know that canvassing for votes isn’t the usual way generals seek political power; Sri Lanka has more mature institutions than most nations in its income bracket. We also applaud the government’s decision to release the remaining Tamil detainees ahead of the election, and would wager that 2010 brings a bull market in the island’s image index. As every speaker at the Forum said, the timing is perfect to launch our Leopard Sri Lanka funds.

Visit Notes:  Kep, by Douglas Clayton 

This weekend I’m with my family in Kep, 180 kilometers southwest of Phnom Penh, where the Cambodian coastline butts up against Vietnam.  One of Cambodia’s time-warp towns, Kep was established as a French resort a century ago and until the 1970s served as the getaway of choice for Cambodia’s rich and famous when it was known as Kep-sur-Mer. Sadly the swanky villas of that era became war booty in the 1980s, with everything reusable, from the floor tiles to the roof tiles, hacked out and hauled off in departing Vietnam Army trucks, or so the old-timers say. Of most just a few walls remain but even then you can usually spot the mod styling of the “Austin Powers” era. Fortunately Kep’s more natural charms remained intact; its mountain slopes still sport their splendid jungle canopy unlike the hills of rival Sihanoukville.

No longer the region’s Riviera, contemporary Kep contents itself as Cambodia’s crab capital, and a giant statue of a blue crab menaces tourists on the waterfront.  Fittingly, our first stop is the Crab Market, where a few ramshackle wooden restaurants perch precariously on stilts over the water. We order up the local specialty and watch the chef haul a cage out of the sea and extract a few wigglers for the cooking pot. Following our tasty sea-fresh meal we wander across the street to inspect the substantial land plot that our Leopard colleague Scott Lewis has accumulated, and admire the impressive stone walls than now mark its perimeter.

Kep offers nearly a dozen smallish guesthouses, most run by foreign residents, plus an up-market 11 room boutique hotel called Knai Bang Chatt (www.knaibangchatt.com) which tastefully combines several restored modernist pre-war villas,

an infinity pool, and a small sailing club.  We set out on our usual exploration foray to see if anything has changed in Kep since the last time we were here (the answer is usually “no”).  The main coastal road winds between the mountains and the rocky seawall, offering one of Cambodia’s most picturesque drives. Palm trees and ponderous colonial streetlights decorate its sidewalk, creating a vaguely European ambiance.  The route loops around a small mountain and some say that in the Sixties it served as a circuit for a Grand Prix-style motorcar race, which must have been an exciting event and should someday be revived.  But today the only car on the track is ours, and the only crowds are swarms of female food vendors who cheerfully try to persuade us to eat a second lunch at their little roadside stalls.

We pass the old Royal Residence which forlornly sits on a spectacular site on a hillside overlooking the sea.  The driveway entrance is chained, but on an earlier trip it was open, inspiring us to make an impromptu inspection of the empty premises (I recall peering through dusty windows at the dated furnishing inside while my wife munched on a mango plucked from the royal tree.)  While it seems to have avoided the indignity of getting looted, the unpretentious residence nevertheless awaits a needed restoration.  However, the outdoor breakfast table offers a panoramic ocean view that is still fit for a King.

East of the town there stands a second royal property on a spacious lot (see photo below). Local lore says this house belonged to King-Father Sihanouk’s late mother, Queen Kossamak, and that its carefully tended garden is funded via regular payments from her dutiful son. Unfortunately the cash remitted seems insufficient to restore the structure, which was stripped but stands defiantly in stately ruin.  A $1 tip to the grateful caretaker enables me to wander around and photograph the battered mansion, and admire the array of imported gardening equipment stored in the living room.

Another reminder of Kep’s wealthier past is the 4 story French colonial school building around the corner from the Crab Market, which proudly tutored princesses and aristocrats until the Khmer Rouge abruptly ended education in Cambodia.  The school never reopened, and now sits abandoned and deteriorating except for a few rooms occupied by obscure departments of the local municipality.  I discover that the view from the roof is worth the climb up; this is still probably the tallest structure in Kep and it would make a nice boutique hotel if someone wanted to preserve a historical building. 

Unlike sandy Sihanoukville, Kep’s beaches are rocky and short, and the water remains shallow and muddy for a half kilometer or more. Plans have been made to reclaim this part of the sea and extend Kep’s waterfront landmass for massive development, but for now it is still just a plan.  Today the public beach’s main attraction is the buxom topless mermaid statue cast in white concrete which makes a memorable backdrop for photos, and the picnic tables where vendors will bring you a meal.  But sun junkies can catch a half hour boat ride from Kep’s pier to nearby Rabbit Island, and access some first-rate beaches as described in our September newsletter, click here. 

At day’s end we drive up a cliff to the Verandah Resort’s Jungle Bar to watch the sun sink into the sea amidst a surreal spray of neon orange.  Over a leisurely dinner there we talk about what Kep once was and could be. Dismantled yet unspoiled, it could easily be rebuilt into Cambodia’s premier weekend destination, and in time it surely will be.  But we also kind of like it just the way it is now: forgotten, empty, and away from it all.  Bring a good book. 

Picture of the Month:  “Memories of Elegance in Kep”, by Douglas Clayton



This document does not constitute an offer to sell, or a solicitation of an offer to invest in Leopard Cambodia Fund LP and/ or Leopard Cambodia Investments (BVI) Ltd. (collectively, “our Funds”) We will not make such offer or solicitation prior to the delivery of a definitive offering memorandum and other materials relating to the matters herein. Before making an investment decision with respect to our Funds, we advise potential investors to read carefully the respective offering memorandum, the limited partnership agreement or operating agreement, and the related subscription documents, and to consult with their tax, legal, and financial advisors. We have compiled this information from sources we believe to be reliable, but we cannot guarantee its correctness. We present our opinions without warranty. Past performance is no guarantee of future results. © 2009 Leopard Capital LP. All rights reserved.

In this Issue 

Leopard Cambodia Fund Update

Portfolio Notes

Staff Update

In The News

Leopard Sri Lanka Update

Visit Notes

Picture of the Month

Quick Links 

Leopard in the News: Media articles about Leopard’s funds, Cambodia and Sri Lanka are posted on our website; click here. 

The NAV of Leopard Cambodia Investments (BVI) Ltd. was as of 30th November 2009 US$ 1’014.94 (31st October 2009 US$ 1’014.07)

Investing in LCF via a Self Invested Personal Pension Plan (SIPP):

UK taxpayers can invest in LCF via a SIPP and enjoy certain tax advantages.

Hornbuckle Mitchell is our SIPP provider:


Contact their Asia SIPP expert

Stephen Davis at:
[email protected]

Leopard Cambodia Fund, LP

Fund size:

USD 30,940,000





Valoren No:




Lipper ID:


Leopard Cambodia Investments (BVI) Ltd. 

Fund size:

USD 19,215,000





Valoren No:




Lipper ID: