Newsletter Issue 24
- August 2011
In 1H 2011, Cambodia is beginning to see
signs of a return to the robust pre-crisis economic activity after a
retraction in 2009 and modest recovery in 2010. Economic growth
forecasts for the year have been revised upwards to 8.7% by the
Economic Institute of Cambodia, while the IMF and the World Bank
currently predict a more conservative 6.5%. The elevated forecast is
being driven by three of the Kingdom's four economic
pillars-garments, tourism and agriculture-while recovery in real
estate still remains nascent.
Garments benefit from relaxed regulations. The garment industry contributes more than
70% of Cambodia's exports. In H1 2011, garment exports surged 32% YoY
to US$ 1.9 billion as a result of loosened European Union regulations
governing rule of origin and increasing demand from Asian countries.
As of January 1, 2011, under the Everything But Arms (EBA) trade
initiative, least developed countries such as Cambodia could export
to the EU duty- and quota-free if the country manufactures 40% of the
product's value, whereas the previous threshold was 70%.
Tourism increases with more direct flights. Cambodia's second largest source of income
is the tourism industry. In H1 2011, tourism arrivals rose 13% YoY to
1.4 million with Vietnam, Korea and China as the largest sources of
tourists, respectively. Ticket sales at Cambodia's main tourist
attraction, Angkor Wat, rose 33% YoY to US$ 20 million during this
period, and total revenue from the sector is expected to reach US$
1.9 billion in 2011. An increase in direct flights to Cambodia is one
of the principal drivers behind the overall increase in arrivals-Air
France has even relaunched direct flights from Paris to Cambodia in
July after a 37-year hiatus.
Agriculture also benefits from relaxed
regulations. Accounting for a third of the
Kingdom's GDP, the agriculture industry also benefited from the
relaxed EU export regulations, among other factors. In H1 2011,
rubber exports increased 84% YoY to 21,511 tons (US$ 102 million);
milled rice exports increased 369% to 80,442 tons ($46 million); and
cassava exports increased 88% to 212,018 tons (US$ 8.7 million).
Prime Minister Hun Sen has set a target of exporting 1 million tons
of milled rice by 2015-a feat considered attainable if the Kingdom
builds another 25 to 30 rice mills (a US$ 350 million investment) to
expand production from currently just five major mills.
Real estate starts to recover. Cambodia's fourth economic pillar, real
estate, has started to show signs of recovery in 2011. The value of
approved construction projects (i.e., housing developments,
apartments, factories and tourist facilities) increased 94% YoY to
US$ 638 million in H1 2011. While land prices for commercial and
residential properties in Phnom Penh have still remained flat since the
end of 2009, demand and prices are expected to rise over the next two
Banks are also rebounding. With 35 banks, Cambodia's congested banking
sector showed signs of a rebound in H1 2011. Aggregate loans among
the Kingdom's three largest banks increased 9.5% YoY to US$ 2
billion-loan books for ACLEDA, Canadia and Campu grew 11.9%, 10.6%
and 5% YTD, respectively. Banks are expecting a surge in agricultural
investment to continue driving the increasing demand for loans. The
growing agricultural sector has also led to more loans and deposits
at the Kingdom's 27 microfinance institutions (excluding
ACLEDA)-loans among these MFIs increased 6.7% YoY to US$ 505 million
in Q2 2011, while deposits increased 33% to US$ 69 million.
CSX opens with no trading. The long awaited Cambodia Securities
Exchange (CSX) officially launched in July, making Cambodia one of
the last Southeast Asian nations to open a stock market. However, no
companies have been listed yet for trading. Three state-owned
enterprises-Phnom Penh Water Supply Authority, Sihanoukville
Autonomous Port and Telecom Cambodia-are expected to list by year's
Inflation is a rising concern. Driven by rising food and petroleum prices,
the Kingdom's inflation rate rose to a 14-month high of 6.5% in May
2011, exceeding the inflation rate of neighboring Laos and Thailand
but still well below Vietnam's rate of 20%. The Cambodian government
had recently raised its 2011 inflation target by 50 basis points to
5.5%, while the World Bank and the IMF predict 5% and 6.5%,
respectively, for the year. To mitigate inflationary concerns, the
National Bank of Cambodia is considering raising the reserve
requirements of commercial banks from 12% to 16%.
Portfolio Company News
In 1H 2011 Leopard
Cambodia Fund ("LCF") achieved one full investment exit and
one partial exit, completed two new investments, and added to two
CamGSM Company Ltd. ("CamGSM"):
In January CamGSM
fully repaid the remaining principal and all interest and fees due to
LCF and other participants in the US$ 425 million acquisition
facility arranged in November 2009 to facilitate the repurchase of
Millicom's stake in CamGSM. LCF's US$ 5.0 million participation
returned US$ 6.4 million representing an IRR of 26% and a money
multiple of 1.27x.
Electricite Du Laos Generating Co. ("EDL"):
In December 2010 LCF
committed US$ 2.7 million to acquire 5,000,000 common shares of EDL which
owns and operates hydropower plants in Laos. The shares debuted on
the newly launched Laos Securities Exchange (LSX) on 11th
January 2011, and performed strongly in the first couple of months of
trading. LCF sold approximately 30% of its position into the
trading strength, booking an average realized gain exceeding 60%.
Trading was more subdued in the 2Q with the share price approximately
22% above the IPO price as of 30 June 2011.
Regional Law Firm:
In March 2011 LCF
provided an unsecured loan of US$ 1 million to a leading Regional Law
Firm that has operations across Southeast Asia. Proceeds of the loan
will be used to fund the firm's growth. LCF will receive periodic
fixed and variable payments during the life of the loan.
Tropical Beverage Co., Ltd. ("Tropical
In May 2011 LCF
invested US$ 1.6 million in Tropical Beverage, a Thai based sole
proprietorship engaged in the marketing and distribution of its
flagship boutique beer brand "Phuket Beer." The beer is
produced by a third party brewery and marketed and distributed in
Thailand and exported to other SE Asian countries, Japan, USA and the
EU. The investment was in the form of secured term loans and loan
facilities. The loans and facilities which mature over a 3-5 year
period are expected to generate an interest rate attractive relative
to commercial lending rates in the region.
Golden Vault/ASA, Plc./ACLEDA Bank, Plc. ("Golden
In January, following
the impressive performance of ACLEDA Bank, Plc. ("ACLEDA")
in 2010, LCF, through Golden Vault, purchased US$2.0MM of additional
share certificates of ASA, Plc. ("ASA") (the entity holding
shares on behalf of ACLEDA employees and other ASA members). The
purchase increased LCF's total investment in ASA to US$ 5.0
million.In June 2011 ACLEDA paid a 15% share dividend which increased
Golden Vault's total shareholding further. Through Golden Vault, LCF
owns 7.4% of ASA representing 1.4% of ACLEDA. ACLEDA's business
momentum continued in 1H2011 as the Company generated US$ 21.7
million of net profit vs US$ 9.4 million in the first half of
Kingdom Breweries Pte. Ltd. ("Kingdom"):
In 1H2011 Kingdom
entered into an agreement with Fluid Asia Pacific Ltd
("FAP") to provide a secured fixed cash deposit as
collateral to a major Thai commercial bank in order to facilitate a
working capital loan for FAP. LCF funded its pro rata share of the
capital increase needed for Kingdom to make the deposit. FAP is a
leading beer distributor in Thailand distributing Carlsberg,
Kronenbourg, Tetley's and Weston's beers and ciders to over 250
outlets with plans to expand to 1,500 outlets within four years. FAP
has entered into a distribution agreement to distribute Kingdom
products in Thailand. Kingdom will be paid an interest rate
attractive relative to commercial lending rates in the region and FAP
will repay Kingdom within 24 months. Kingdom's management has
reformulated its strategy after slower than expected sales and is
planning on introducing new products, enhancing domestic distribution
and pursuing a targeted export strategy in 2H 2011.
Nautisco Seafood Manufacturing Ltd.
After a slow 1Q2011
in which raw material availability and pricing was not attractive in
2Q2011 the Company resumed purchasing raw materials and shipping
product to customers. The Company's Board and management are
implementing a revised strategy that will reduce the Company's
dependence on Cambodian wild caught shrimp and enable the Company's
factory to operate at a high level of efficiency and utilization year
round. The strategy entails increasing mix of value added products,
adding reprocessing orders and generally increasing efficiency and
discipline in procurement and production.
Cambodia Plantations Pte. Ltd. ("Cambodia
In 2Q 2011 Cambodia
Plantations terminated an agreement to acquire a company with an
economic land concession for dry season rice cultivation as such
company was not able to secure the concession in a timely manner due
to ongoing re-zoning of lands around the Tonle Sap Lake. Such project
may be revisited at a later date when there is less uncertainty.
Cambodia Plantations has continued to evaluate land concession
opportunities for other crops and has identified a concession which
it is currently pursuing.
Intean Poalroath Rongroeurng Ltd. ("IPR"):
performance in 1H2011 improved materially versus 2010 and was
generally in line with expectations. LCF continues to work with IPR
management to improve internal audit and credit approval procedures
and to choose and implement a software package for the Company's new
management information system.
Greenside Holdings Ltd. ("Greenside"):
LCF's US$1.3 million
investment in Greenside continues to perform as expected. As of 31st
July 2011 LCF has received over US$ 500,000 in profit share payments.
Angkor Residences Ltd.:
LCF and its partners
continue to monitor property market conditions and will revisit
development/sale options as the year progresses.
Annual Investor Meeting
This past May LCF held its annual investor
meeting in Phnom Penh, Cambodia with a very impressive turnout of
investors from around the globe. In addition to the meeting in Phnom
Penh investors were given the opportunity to visit Laos and
Sihanoukville; in Laos, investors attended presentations provided by
both government officials and Laotian companies, and they also
visited a number of Lao companies and tourist attractions. In
Sihanoukville, the highlight was a visit to Nautisco Seafood
Mauufacturing Ltd., the first modern seafood processing company in
Cambodia in which LCF is an investor.
The 2012 LCF annual investor meeting is
tentatively scheduled be held in Phnom Penh, Cambodia on 24th
and 25th May 2012. Given the popularity of this year's
excursions to Laos and Sihanoukville, side trips to other
destinations in the region will be planned in conjunction with next
year's annual investor meeting. If you are interested in attending
next year's events please email us at firstname.lastname@example.org.
In the last 6 months several new team
members have been added to the Leopard Capital team.
Lesseps has joined the Board of
Managers of Leopard Capital LP. He is a Director of BlueOrchard
Finance, a Geneva-based lender to microfinance institutions, and
President of two firms making private equity investments in emerging
markets, Coral Capital and Pandaw Investment Holdings. Earlier in his
career he founded two US film production companies, Intertel USA and
Tanit Productions, and a French personal care manufacturer, Les
Laboratoires de l'Atlantique, and was also an angel investor in
California Pizza Kitchen. In 2004 Mr. de Lesseps was awarded the
Fulbright Humanitarian Award.
Garnic has joined Leopard Capital
as an investment Associate. Previously, Chris was a civil
engineer at MWH Global, specializing in renewable energy, water, and
wet infrastructure projects in the United States. He holds a MBA from
the Indian School of Business and the London Business School, and a
BSc (Biological and Environmental Engineering) from Cornell
University. Chris will focus on energy and renewable energy
projects for Leopard Cambodia Fund and future Leopard Capital
Vandy Leng has joined the Leopard Cambodia Fund team
as an Investment Associate. He has written several empirical research
papers relating to currency substitution in Cambodia, economic growth
in Southeast Asia, the International Monetary Fund's responses to
financial crises, and the monetary policy of the US Federal Reserve.
Vandy has a Master's degree in Public Policy (specializing in
Economic Policy) at University of Tokyo, and a Bachelor of Economics
from Kobe University in Japan. He is fluent in Khmer, English and
Kiriroath(Kiri) Chhoeung has joined the Leopard Cambodia Fund team
as an Investment Associate, and brings with him seven years
of operational experience in general management, business
development, sales, marketing and finance. Previously, Kiri
co-founded and managed two proprietary business ventures in Cambodia,
in Tourism and Waste Management, one of which was subsequently
acquired. Before becoming an entrepreneur he served as Procurement
Manager at British American Tobacco Cambodia and Logistics Officer at
World Gas (Cambodia). Kiri was awarded a Fulbright scholarship by the
US Government and completed a MBA in Innovation and Entrepreneurship
from the University of Oregon. Kiri
will initially be seconded to work at Kingdom Breweries.
Matthew Hector has joined the Leopard Cambodia Fund team as
an Investment Associate. Matthew holds
a Honours Bachelor of Commerce degree in Finance and International
Business from Queen's University, Ontario, where he received the
Merrill Lynch Scholarship for Academic Excellence.
received over 400 applicants for internships this year, and,
regretfully, due to space constraints we had to turn away many
exceptional candidates. The following interns were selected for
the Leopard Capital Summer MBA Internship Program:
Melissa Winter, Wharton, MBA, 2012
David Beach, University of Chicago, MBA, 2012
Sok Ung, New York University, MBA, 2012
Alex Ruiz Lee, INSEAD, MBA, 2011
Jenna Bonczewski, University of Chicago, MBA, 2012
Gautam Sawhney, INSEAD, MBA, 2011
We have switched our group URL to http://www.leopardcapital.com, although http://www.leopardasia.com still
works as well.
Leopard Capital matches buyers and sellers
of LCF's feeder fund, Leopard Cambodia Investments (BVI) Ltd.
If you are interested to either invest or exit, please contact
Mohamed Ahamed at, email@example.com.
Visit Note: Champasak, Laos: Salad Bowl of the Mekong
by Kenneth Stevens
As part of our never ending quest to find
compelling investment opportunities in the most exotic locations,
Leopard Capital recently travelled to Champasak, the gateway to
Southern Laos. The landscape of the southern region is dominated by
the Mekong River and the towering Bolaven Plateau, which make it
important for agriculture and tourism.
Champasak is a bustling business center with
a diverse cultural history which is influenced by its numerous ethnic
groups and also the cultures of neighboring Thailand and Vietnam. The
town is nestled along the banks of the majestic Mekong River and
architecturally is a blend of older French Colonial buildings, modest
Lao designs and perhaps too many rows of Chinese style shophouses. In
Southern Laos, the Mekong reaches its widest point (up to 14 km) of
its entire 4,350 km length and serves as a vital highway for
transport and passenger boats of all shapes and sizes and is also a
rich source of fisheries.
The fertile provinces surrounding the town
have become the 'salad bowl' of the Mekong region, providing much of
the produce sold in the hyper-marts and wet markets of Bangkok and
other nearby cities. The morning market in Champasak is one of the
largest and most impressive we have seen in all of Southeast Asia,
overflowing with fresh farm products and huge quantities of live
fish. Given its abundant food resources, ample (and cheap) power, and
easy access to ports in Thailand and Vietnam, the area is a good
location for more food processing and packaging facilities such as
canneries and cold storage plants.
The Bolaven Plateau rises to 1,300 m above
sea level and is the home of numerous minority groups, hill tribes
and other reminders of the region's rich history. Its cool climate,
fertile soil and ample water allow it to produce premium agricultural
goods and its raw beauty draws an increasing number of tourists. The
Plateau also has the unfortunate distinction of being one of the most
heavily bombed zones during the US-Vietnam conflict and international
efforts are underway to clear large quantities of unexploded
Some of the world's best coffee is produced
near the town of Paksong, as the French began cultivating coffee here
in the early 1900s. Coffee lovers in Europe, North America and North
Asia are becoming increasingly aware of the Plateau's fine beans
which include the premium quality Arabica and high octane Robusta
varieties. The secret to the quality of its coffee is the 'terroir'
provided by a unique combination of highly fertile volcanic soil and
the unusually high altitude of the plantations. Leopard is reviewing
a number of opportunities to invest in the Lao coffee industry
including coffee plantations and trading companies. Other high value
products are farmed on the Plateau including tea, avocados, berries
and around its base, bananas, other fruit and rubber.
As we began our 70 km, uphill excursion to
the Plateau, we passed a local branch office of ACLEDA Bank, which
provides micro-finance loans to a growing legion of coffee farmers,
small agricultural groups, and related businesses. ACLEDA is our
largest investment in Cambodia, but the group is quickly expanding
its operations in Laos and reports that its profitability in Laos is
'at least' as good as in Cambodia.
Further up the road, we visited a factory
owned by Dao Heung, the largest business group in Southern Laos,
which intends to list on the Lao Stock Market in the next few years.
The plant produces several consumer products under its own brand name
'Dao' including coffee, tea, dried fruits, bottled water and others.
The Dao brand is commonly seen in the region, particularly in
Thailand and Vietnam, and the group is increasing its exports to
buyers in Japan and other North Asian destinations. A large instant
coffee factory, said to be one of the largest in Asia, is under
construction at the site, which will further expand the group's
During the trip we sampled some of the
delights which make Southern Laos a growing tourism destination,
including spectacular waterfalls (some well over 100 meters tall),
caves, laid back coffee and tea plantations, temples and most of all,
the warm hospitality of the Lao people. The area is also home to an
ancient Khmer temple, Wat Phu, which predates Angkor Wat by several
hundred years and has been designated a World Heritage Site. Other
popular excursions are river trips to the '4000 islands' area near
the Cambodian border, where in the dry season the receding waters
allow access to numerous, small seasonal islands, modest resorts and
on occasion, a glimpse of rare Irrawaddy river dolphins. The remote
and rugged jungles of Attapeu province attract seasoned adventurers
in search of rare wildlife and serious trekking experiences.
Most visitors are surprised to find that
land-locked Laos has some of the finest duty free shops in Asia.
Impressive selections of wine, chocolate and other delicacies are on
offer, courtesy of Dao Heung Group which operates shops at all four
international airports and nearly every border crossing into Thailand
and Vietnam. The border shops are often packed with buyers stocking
up on reasonably price Grand Cru wines (and more modest selections)
that rival or exceed the offerings of most wine shops abroad.
In summary, we were pleased to find numerous
investment grade opportunities in Southern Laos. We will return soon
... and not only to restock our bins of Grand Cru.
Picture of the Month
Traditional Fishing on the
Mekong River, Champasak, Laos,
photo by Kenneth
does not constitute an offer to sell, or a solicitation of an offer
to invest in Leopard Cambodia Fund LP, Leopard Cambodia Investments
(BVI) Ltd., Leopard Cambodia-Laos Fund II LP, or any other funds
sponsored by Leopard Capital LP or its affiliates (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. � Leopard Capital
LP. All rights reserved.
of Leopard Cambodia Investments (BVI) Ltd. was US$ 1,005,77 as of
30th June 2011
Cambodia Fund, LP
Cambodia Investments (BVI) Ltd.