Monthly Newsletter Issue 7 – November 2008

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Leopard Cambodia Fund – Monthly Newsletter Issue 7 – November 2008 


Tough times… but Leopard advances 

These are certainly tough times, as if, indeed, serious market watchers need to be told. For those operating in ‘Frontier’ markets, raising funds can become a significant challenge when even experienced investors worry about holding cash in a bank (lest the bank go the way of Northern Rock/Dexia/Iceland), let alone about holding investments in an emerging and faraway market. Understandably, fear comes to dominate greed and the objective of creating wealth takes a poor second place to the preservation of existing wealth. Of course when the dust settles it all comes down to risk and to valuations and whilst Cambodia is certainly not without its considerable problems, the country’s dollarised economy (who doesn’t feel comfortable with the currency at this time-indeed who hasn’t made some money on the currency translation to date?), political stability, low valuations and almost complete lack of national gearing mean that the risk in the medium term remains very much on the upside, albeit for now, with more perceived country risk and with less immediately obvious upside. Sure, the economy will grow at only 5% or so next year and some of the soft loans extended to the country may not be quite so soft for a while but-on a regional or even on a global basis, 5% looks pretty attractive and cheap is, well, just that: cheap. So despite global market and currency falls and despite general despondency, the tourists still come (perhaps up to 2m by y/e), spending their dollars, pounds, yen and euros, the (superb jasmine) rice still grows and the clamour of the rising middle class for consumables of all kinds tails off only a little: the basic dynamics remain good and investors continue to see this. So ‘Tough Times’ notwithstanding, we are delighted to say that we have made very considerable fundraising progress this month: in fact assets under management have virtually doubled to $23m and we wish to extend both a warm welcome and also our thanks to those investors who have indeed been convinced of the value and who have joined us over the course of this last, turbulent month, probably one of the rockiest in the markets which any of us remember.

Growth and value for the moment to one side, we respect the unalterable reality of that bane of financial analysts: sentiment. And given that external demand even for cheap assets in Cambodia has eased off a shade this last quarter we are in no rush to invest and believe that patience and caution will pay dividends in the months to come in the shape of keener prices for solid investments.

Monthly closures continue with the next close taking place on the 28th November 2008. Please contact our Chief Operating Officer Thomas Hugger for offering documents, subscription forms and general enquiries at:
[email protected].



Leopard Capital Welcomes Varma and AGIFEL

We are pleased to welcome two of our most recent investors: Helsinki based
Varma, Finland’s largest private pension fund and also Hong Kong based and 32% HSBC owned Arabian Gulf Investments (Far East) Ltd (AGIFEL). Both houses come with a wealth of emerging market experience and we are delighted to welcome both, whose commitment raises our fund size to approximately $23 million.



‘Hip’ Cambodia?

As we have said to investors repeatedly, tourism is one of the great growth areas of the Cambodian economy and with tourist arrivals growing at 20% per year for the last five years to a predicted two million for 2008, the investment opportunities are tremendous. This is not backpacker country at $20 per day-Cambodia has become, according to the Financial Times, dread word-‘hip’ and hip just does not come at $20 per day. The tourists are high spenders-just look at the plethora of articles in the quality British Press over the last month: Sunday Times 9th November ‘Beauty, tragedy and jungle adventure…a week in Cambodia’, The Sunday Independent 16th November ‘We only serve Cosmopolitans here’ and even the Weekend Financial Times Smooth Guide 16th November ‘cool art deco, flamboyant fashion….and the eternal allure of Angkor Wat’. Even the ‘strictly no tat under any circumstances’, uber quality travel agent Cox and Kings have run a half page Cambodia advertisement in the ‘Times’. High class, high spend tourism in Cambodia is booming and whilst Phnom Penh grows from strength to strength as boutique hotels housed in beautiful French villas spring up like mushrooms, it is, at least for now, Angkor Wat which most come to Cambodia to see. Rediscovered by Frenchman Henri Mouhot in 1864 and described by him as ‘grander than anything left to us by Greece or Rome’, Angkor Wat-a monumental structure symbolising the Hindu Cosmos-is now rightly described as one of the great archaeological sites of the world. It is Angkor Wat and, lying just beyond, the 12th century Khmer Empire’s last capital Angkor Thom which are the draws. And with 1.5m visitors per year, draw them they very much do. The ‘service’ town for the Angkor complex is Siem Reap which lies just off the great Tonle Sap lake. With over 150 hotels and counting, with a growing number of high quality restaurants and with a tremendous revival in Arts and Crafts via such organisations as Artisans d’Angkor, expatriates with the right skills are in great demand and it is in Siem Reap where Leopard Cambodia Fund has made it’s first investment. Here, our CIO Ken Stevens gives an update on progress:



Angkor Residences … moving forward with confidence

The past two months have been a busy period for the management team of Leopard’s first investment, Cambo Fund Limited (CFL) in which Leopard Cambodia Fund has a 24% interest, and its residential housing project, the ‘Angkor Residences’. Below we provide an update on the property market in Siem Reap and a discussion of the progress made by CFL management.

Siem Reap residential property market is buoyant-driven by fundamental demand.
In contrast to Phnom Penh, where several large, foreign led condo towers and commercial projects may be delayed, the less developed Siem Reap market appears healthy due to a limited supply of high end housing for wealthy Khmers and expatriate managers. The plan of Angkor Residences is modest in its goal to develop and sell 200-250 units over the next 3-4 years at an average price of US$1,400-1,600 per square meter. Management informs us that a competing residential project in Siem Reap has been successfully selling units at a significantly higher price.

Construction costs look reasonable, may soften in 2009.
Recent construction estimates have been consistent with CFL’s estimates and several factors suggest that construction costs will soften in Cambodia in 2009. The prices of building materials (largely imported) in Cambodia are falling alongside declining oil prices and a construction slowdown in the neighbouring countries of Thailand and Vietnam. Moreover, development costs should also benefit by the slowdown or cancellation of some large projects in Phnom Penh. Some previously “unavailable” contractors are now finding themselves with fewer projects in hand and some excess capacity.

Land acquisition for Angkor Residences is nearly complete.
Currently, CFL has acquired 2.6 hectares of land (80% of the planned total) at an average price of US$167 per square meter. This compares favourably with the current market price in this location, which appears to have firmed in the second half of 2008. Management is now negotiating for the acquisition of a few adjacent land plots. If successful, these will be incorporated into the design and upcoming pre-sales launch. If management does not purchase these plots in the near future, then they will keep an eye on these plots and consider their use in a follow on stage of development.

CFL directors meeting sets priorities for next six months
At the first ‘directors meeting’ in late September, the plan for Angkor Residences was reviewed by its directors. The priority tasks were identified as follows:

a) Conclude the final design for Angkor Residences. A prominent list of local and foreign architects have submitted their design concepts for the project and are now under management review.

b) Prepare to launch unit pre-sales in the second or third quarter of 2009. Our Cambodian partners have been discussing the project with their contacts and interest appears to be favourable. Some VIP buyers have expressed an interest to buy units even before the completion of the design and pre-sale documents. A decision will be made in December whether to launch and pre-sell all 200-250 units at once, or whether to build and sell the units in two stages. The latter strategy may be taken in anticipation of even higher land and unit values in 2010 and 2011. Secondly, given the attractive location of the land and its large plot size, some property consultants have enquired as to the possibility of building a high end boutique hotel or serviced apartment on half of the site.

c) Construction of a new access road into the site is to begin in December and should take six months to complete. The directors anticipate that this work will enhance land values further.

d) Select project manager to oversee the build out of Angkor Residences and update final development costs. CFL expects to make its final selection of the main contractor in the first quarter of 2009.




In the News 

  • Finance Minister Keat Chhon announced that the Government has revised Cambodia’s 2009 GDP forecast down to 6.5%. 
  • Société Concessionaire des Aéroports which manages the Sihanoukville airport have announced that the second phase of the airport’s renovation are nearing completion and that the airport should reopen by the end of 2008. 
  • The National Assembly is scheduled to approve two major hydropower dams worth $495 million in Koh Kong province. The proposed 174megawatt and 164-megawatt dams on the Stung Russei Chnun river will supply power to Pursat and Koh Kong provinces and also to Phnom Penh and will be operated by Chinese owned Michelle Corporation on a 30 year BOT concession. 
  • Cambodia and Vietnam have signed a deal to link their railways Cambodia’s foreign minister said last Saturday. Foreign Minister Hor Namhong said China would help Cambodia with the railroad link to Vietnam which will cost more than US$500 million to complete. “China has promised to build the railroad from Phnom Penh to Vietnam as part of the project to create a link from Singapore to Kunming in China” Hor Namhong said on his return from Hanoi. Cross-border trade between Cambodia and Vietnam totalled $1.7 billion in the first eight months of this year. 



Picture of the month 

As the rainy season has now ended, rice harvesting starts:


Picture by Jason Poh 

In this Issue 

Tough times… but Leopard advances

Leopard’s new investors

Tourism in Cambodia

Angkor Residences

In the News



Quick Links 


Leopard in the News   

Articles containing information and comment on both Cambodia and on the Leopard Cambodia Fund appear regularly in various publications and news outlets. To view the page in our website displaying links to these click HERE



The NAV of Leopard Cambodia Investments (BVI) Ltd as of 31st October 2008 is USD1’004.35 (30th September 2008 USD1’003.53)



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Leopard Cambodia Investments (BVI) Ltd.   

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