Newsletter Issue 25
- December 2011
Economic news in Cambodia in
the 3Q was mixed. Cambodia experienced widespread flooding in the 3Q
affecting an estimated 13% of the country's rice crop. The floods led
the government to lower its GDP growth estimate to 6.0% for 2011
versus 6.8% projected by the ADB and 6.7% by the IMF. In May,
the UN's Food and Agricultural Organization had predicted Cambodia
would enjoy a record rice crop for 2011, with total paddy production
at 8.5 million tons. Yields have risen substantially over the last
decade from 1.5 to 2.5 tons per hectare.
Tourism, garments and real
estate sectors continued to grow in 3Q. The number of foreign
visitors, led by Vietnamese tourists, hit 1.9 million in the first 8
months - up 15% year-on-year - thanks to increasing direct flights
and visa exemption agreements. Garment and textile exports rose 19.6%
to US$ 2.3 billion in the same period, with exports to the US up
13.2% to US$ 1.3 billion and shipments to the EU up 15% to US$ 566
million. Resurgent interest in the slumbering real estate
sector - for housing projects, garment factories and rice mills -
helped spur construction approvals to reach US$ 881 million in the
first 8 months, up 94% year-on-year.
Cambodia is increasingly attracting investment from multi-national
corporations. Hong Kong Land recently acquired JSM Indochina's real
estate holdings in Phnom Penh for US$ 33.7 million, while Japan's
Aeon Group acquired a 6.7 hectare downtown site for an estimated US$
100 million and announced plans to build a 100,000-150,000 square
meter shopping mall. Nine Japanese manufacturers received
approvals to invest a total of US$ 142 million in Cambodia, with
fourteen more projects awaiting approvals. Several major Malaysian
rubber companies are reportedly seeking large rubber concessions in
The Consumer Price Index
dipped in August to 6.4% from July's high of 7.1%. The ADB estimates
inflation will average 5.5% for 2011 and 2012, while the IMF projects
inflation rates of 6.4% and 5.6% respectively.
The election of Yingluck
Shinawatra as Prime Minister of Thailand in 3Q has significantly
eased the border dispute between Cambodia and Thailand, and opened
the door for further negotiations concerning oil and gas concessions
in the Gulf of Thailand.
In the World Economic Forum's
2011 Global Competitive Report, Cambodia's ranking rose 12 spots to
place 97th out of 142 countries. The Kingdom scored well for
competitive tax rates, burden of government regulation, and buyer
sophistication. The US Senate passed a bill in 3Q to extend the
Generalized System of Preferences program until 2013. Note Cambodian
products already benefit from duty-free exports to the EU under its
Everything but Arms initiative.
Leopard Cambodia Fund has now
been fully drawn down and should soon be fully committed. Thus
far the Fund has achieved one full exit and one partial exit, and is
in the process of reinvesting the proceeds since the Fund's
investment period is not yet over. The exited investments
achieved a blended IRR of 37% (excluding the Fund's operational
Electricite Du Laos Generating
EDL, which owns and operates
hydropower plants in Laos, reported strong earnings for 3Q 2011
(Jul-Sep) which exceeded expectations. Net profit was US$ 31.1
million which easily surpassed the combined earnings of the first six
months of 2011 (US$ 23.6 million). The company's nine month profit of
US$ 54.7 million achieved 80% of full year expectations and analysts
have announced an imminent upwards revision to forecasts.
Power production is typically
highest in 3Q due to seasonal factors but the amount of rainfall this
year has been heavier than usual. Operating margins expanded to 82%
in the quarter from 71% in Jan-Jun 2011 and greatly exceeded analyst
As of 15 November 2011, EDL
has a market capitalization of US$ 477 million and trades at 6.9x
forecast 2011 net profit (before revision) and 5.1x 2012 forecast.
Growth in 2012 is underpinned by new capacity coming on line in early
2012. EDL is expected to pay an annual dividend of LAK 500-600 (US$
0.063-0.075) per share, providing a yield of 11.3-13.6%. An
interim dividend payment of LAK 178 was made in late October and a
final dividend is likely to be paid in April 2012.
The long term growth prospects
of EDL are favourable as the company plans to expand its hydropower
assets from 387 MW at present to 1,881 MW by 2016, which is a
compounded annual growth rate of more than 40%. EDL will expand its
capacity by purchasing power plants from its parent company EDL (the
national power utility) at favourable prices, typically at the
historic cost or 'book value' of the plants.
ACLEDA's year-to-date net
profits nearly doubled Year-on-Year to US$ 32.7 million. 3Q net
profit of US$ 11 million represented an impressive Return on Equity
of 28.8%, surely one of the better performances in the world's
beleaguered banking sector. S&P and Moody's nevertheless
downgraded ACLEDA's credit rating, citing its rapid loan growth and
the shift in the bank's shareholder base from development banks to
private sector investors such as Jardine Matheson and Cofibred.
Intean Poalroath Rongroeurng
IPR grew its microfinance loan
portfolio by 9.5% in the third quarter and generated a profit in line
with projections. Rural demand for agricultural loans remains
Kingdom launched its second
premium beer, bottled Kouprey Dark Lager (long a cult favorite in
Kingdom's TapRoom), and its first canned beer, Kingdom Gold, which
targets the local mid-market. Meanwhile, Kingdom's flagship Leopard
Pilsener can now be enjoyed in Draft form at select Phnom Penh venues
such as the Raffles Hotel's Elephant Bar and the Green Vespa
pub. Kingdom can now be found overseas in Hong Kong, UK and
France, and soon in Thailand; write to Kiri if you want to know where
to buy it, email@example.com. Kingdom continues to generate global publicity. Read the
latest story here.
Tropical Beverage relaunched
its "Phuket Beer" with upgraded logo and packaging
created by one of the world's top brand designers; catch a glimpse
here: www.tropbevco.com/About.html. Exports as well as domestic
sales in Thailand have resumed. Mobilizing a fleet of small trucks,
TropBevCo's CEO Khun Jules heroically rescued thousands of cases of
beer before the rising Bangkok floodwaters deluged the
warehouse. Jules moved the stock repeatedly as the flood waters
Nautisco shipped another 8
containers (103 tonnes) of frozen processed shrimp in the third
quarter, mainly to Japan. Demand continues to be robust, although
local operational challenges remain in what is still a new industry
We increased our investment in
Greenside to help fund its development of a biomass power plant
project in Kampong Speu province.
We welcome several new team
members to Leopard Capital:
Thomas Hugger has re-joined the team as
Group CFO and Managing Partner. Thomas spent 27 years in private banking, where
he specialized in managing portfolios of listed and unlisted equity
investments. His last position was Managing Director and
Head of Portfolio Management at LGT Bank in Liechtenstein, Hong Kong.
Earlier he held investment positions at LGT Bank in Zurich and Bank
Julius Baer in Zurich and Hong Kong. Mr. Hugger is a CFIA
- (Federal) Certified Financial Analyst and Investment Adviser -
Switzerland, and a Certified EFFAS (European Federation of Financial Analysts
Societies) Financial Analyst. He is fluent in English and German and
has working knowledge of French
Joseph Lovell has joined Leopard Capital as
Group COO and General Counsel. He has more than two decades of Asia-focused
business, investment and legal experience. Prior to joining Leopard
Capital, he served, among other roles, as Managing Director and
General Counsel for a financial group with offices in New York and
Beijing, Corporate Counsel for an AIM-listed private equity firm,
senior consultant at PricewaterhouseCoopers, and Managing Attorney at
a Honolulu law firm. His expertise include private equity investment,
corporate law, and business management. He is licensed to practice
law in New York, Texas and Hawaii. Joseph has a BS degree from
Georgetown University (Chinese Language), and MA (Asian Studies) and
JD degrees from the University of Hawaii. He is fluent in Mandarin
Chinese and has a working knowledge of Thai, Min Nan and French.
Reshma Alva has joined the team as the
Group ESG Officer, helping develop and manage the Group's
Environmental, Social and Governance policies and social impact
development. She has over eight years of work experience in
maximizing social impact. Reshma has worked in a variety of roles-
consultant, strategic planner, program manager, funder, and
fundraiser- in organizations focused on social finance, social
services, governance and capacity building. She earned a BA from the
University of Michigan, an MBA from MIT Sloan School of Management,
and an MPA from the Kennedy School of Government at Harvard
University. Reshma is fluent in English and has basic knowledge of
French and Tulu.
Marina Pok has
joined the Group as the resident ESG Officer in Cambodia.
She founded Ethical Step, a company that consults clients on environmental
management best practices, and developed the "Green Days"
environmental training and team-building program for HSBC in France.
As a sustainability advisor, Marina conducted a carbon audit for the
Meurice Palace that outlined recommendations to reduce CO2 emissions.
She launched Ecran Vert, a TV program on France's TV5 Monde that
promoted sustainable development education. As the Kingdom of
Cambodia's Under Secretary of State for Foreign Affairs from 1993-98,
Marina sought greater involvement from civil society organizations in
post-war Cambodia. She holds a master's degree in sustainable
development from the University of Paris Dauphine. Marina is fluent
in French, Khmer, English and Japanese.
Leopard Capital attempts to
match buyers and sellers of LCF commitments and shares of LCF's
"feeder fund", Leopard Cambodia Investments (BVI)
Ltd. Potential buyers and sellers should email Mohamed Ahamed
Need a Swiss bank account or
asset management services? Our trusted partner in Zurich can assist.
Please write to Thomas Hugger (firstname.lastname@example.org) for more
"The Crossing", by Don Phan
part of my Leopard internship, I was assigned to travel overland from
Bangkok to Phnom Penh. I had previously spent time living in Tuy H�a,
a small town in central Vietnam where my mother had grown up, and was
now eager to attain a greater understanding of how life in rural
Cambodia compared to that of its neighbors.
the Cambodia Border
670 km journey included a van ride from Bangkok across Eastern
Thailand to the twin border towns of Aranyaprathet and Poipet,
followed by a bus journey to Phnom Penh. I would have preferred to
travel by train, which runs from Bangkok to the border, but Cambodia's
railroad system, built by the French in the 1930s, is unfortunately
closed and undergoing reconstruction for the next two years.
five hour drive through Thailand took place on smooth four-lane
highways. The countryside appeared fairly prosperous; ''iron
buffalos" had long since replaced the leather variety, and the
towns along the way were wired with electricity. The route was once a
favourite for low-end backpacker tourists, Thai casino gamblers, and
unauthorized foreign expatriates making monthly visa-runs to enable
re-entry for another 30 days in the "Land of Smiles".
However, over the past two years the number of travelers had
decreased due to violence caused by land disputes around the Preah
Vihear temple complex, a Khmer Empire masterpiece located just north
of the Thai-Cambodian border. The skirmishes over the current
border, based on a 1907 French-drawn map, ultimately proved not to be
a source of uninterrupted violence; tensions quickly eased following
the reelection of the Cambodia-friendly Shinawatra family, which
regained power in Thailand in August 2011.
the Border into Poipet
entrance into Cambodia via border crossing bore little resemblance to
the organized processes and quiet efficiency I experienced at Phnom Penh's
international airport. In Poipet, I encountered a scene of
near-chaos, a great deal of yelling ... and a lot of pigs. The
local economy seemed to be driven by both cross-border trade and a
string of casinos dotting the Cambodian side of the border that serve
visitors from Thailand, where gambling is as much an obsession as it
is illegal. Within the no-man's land between the Thai and Cambodian
checkpoints, we passed a series of rundown casinos, one of which
advertises a Texas Hold 'Em poker event despite the complete absence
of Western gamblers. The Thai game of choice is baccarat, a high
volume game with slightly better odds.
fellow van passengers were mostly Cambodian women who had recruited a
man to carry our luggage. However, I was soon separated from my
fellow riders when a Cambodian immigration officer pointed out that I
did not yet have a Cambodian visa and directed me back to the border
to purchase one. I quickly did as I was told, but when I finally
returned with visa in hand, the luggage carrier informed me that my
bus had already departed to Phnom Penh. A crowd of tuk-tuk and
motorbike drivers quickly surrounded me and demanded I pay the man
for carrying my belongings. I was relieved when I found a
Vietnamese-speaking motorbike driver who safely took me to the
I waited for the next bus to depart, the motorbike driver shared his
life story as a Vietnamese immigrant living in Cambodia. He grew up
in the Mekong delta region, but has lived along the Cambodian-Thai
border for the last twenty years. He now prefers to live here because
it provides him with a more affordable and leisurely lifestyle.
we casually conversed, the sound of squeals pierced the air as a
large triple-decker truck stacked with pigs hurtled by us. My new
friend explained that at least ten large trucks like this one cross
over from Thailand into Cambodia each day; he added that Cambodia
produces fewer than 30% of its pork requirements and imports the
rest, primarily from Thailand. Shortly before my bus arrived (and
while the driver was recounting a memorable cockfighting match he
once saw), two more trucks full of squealing hogs zoomed by us.
Apparently their visa procedure was much smoother than mine, though
their journey was most likely a one-way trip.
To Phnom Penh
bus to Phnom Penh was unencumbered by luxuries such as air
conditioning, water, snacks, or even the over-amplified video system
which is considered a mandatory feature on every Thai bus. Upon
crossing the border, the four-lane modern Thai highway promptly
morphed into a shoulder-less two-lane Cambodian road. But at least
this road is now paved; absent are the meter- deep potholes that used
to make driving in this part of Cambodia an adventure sport.
Cambodian countryside was lush and green, similar to the landscape on
the Thai side of the border. Chickens, cows, and water buffaloes
wandered everywhere. Most houses did not have the small pickup trucks
that are ubiquitous in the Thai countryside. Motorcycles are much
more affordable and common. Still, signs of progress and development
were abundant. It was not uncommon to spot new houses under
construction alongside antiquated ones. Rural Cambodia suffers from a
dire lack of electricity, yet numerous low voltage power lines could
be seen in towns, presumably strung up by clever entrepreneurs
importing power across the border. I counted three branches of ACLEDA
Bank, which is the largest lender of micro-finance and SME loans in
areas like these. ACLEDA has over 220 rural branches and their
offices are noticeably the nicest buildings in these small towns.
first pit stop in Thailand was a modern 7-11-style convenience store
and gas station. Cambodia does not have 7-11s and the quality of rest
stops decreased the further we traveled away from the border, with
one stop featuring an outhouse amidst quietly grazing cows. The rest
stops enabled us to survey the consumer culture of these country
folk. Small shops are clustered together selling cigarettes and
drinks or phone Sim cards; most local people along this route
appeared to own a mobile phone. Modern marketing has already made
early inroads into rural Cambodia, illustrated by billboards
advertising 'OK Condoms' and using famous footballers like Cristiano
Ronaldo and Lionel Messi to hawk Pepsi Cola and Castrol Motor Oil.
tour confirmed the notion that Cambodia has one of the lowest
population densities in Asia. We passed more temples than towns, and
long stretches of land appeared to have few if any inhabitants. It is
obvious this country has barely scratched the surface of its
fourteen hours of travel, we finally arrived in Phnom Penh. I had not
been there since 2007 and the city has changed greatly and is
noticeably busier now. Before our final stop, the bus passed the
beautifully restored Psah Thom Thmey Central Market. Later I saw
Independence Monument lit up in all its splendor providing a perfect
end to the journey.
Picture of the Month: Kingdom Beer
Ferdinand de Lesseps, in the
number 50 car, features the Kingdom Beer logo at the Paul Ricard Race
in France on 9th October 2011.
document 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$ 991.74 as of 30th
Leopard Cambodia Fund,
Cambodia Investments (BVI) Ltd.