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Leopard Cambodia Fund Monthly Newsletter Issue 9 - January 2009
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Welcome to the 9th Issue of the Leopard Cambodia Fund (LCF) Monthly Newsletter and the first of 2009. We wished you all a Happy New Year in the December newsletter but we'll do so again now in the first month of the new year with crossed fingers and in the fervent hope that 2009 actually will turn out to be both happier than 2008 and also a year in which we will all see a return to at least a modicum of stability in financial markets. As a private equity fund with feeder fund units priced around NAV on the London OTC market by LCF Rothschilds we, and more importantly, our investors, have not had to suffer the wild gyrations of price which other funds have endured: we are thankful for small mercies. Sentiment, of course, knows no borders so the grail of decoupling remains just as hard to find as the Holy version: hence the slaughter in Asian stockmarkets as they react to the catastrophes in the western banking system and the associated destruction of wealth and consequent collapse in demand for Asia's exports. Whilst not immune (garments exports to the US fell dramatically in 4Q '08 and tourism has taken a tumble with 2008 arrivals up only 7% YOY), Cambodia does remain somewhat more isolated than most from the worst of the world's problems with its dollarised economy (and therefore none of the currency risk normally associated with Emerging Markets), and with some cheap valuations. And of course with private sector debt at just 20% of GDP there is little credit to crunch anyway. With cash in the bank and with external demand for assets tailing off, some already attractive asset prices are looking better all the time so we are in no hurry to spend money: quite the opposite in fact. We continue to source good deals and we continue the twin processes of negotiation and due diligence and let the passage of time work to our advantage. Our final close is at midnight New York time on the 2nd April: so if you are still of a mind for a slice of Cambodia via LCF, please remember there are only 9 weeks to go. Monthly closures continue with the next close taking place on the 31st January 2009. Please contact our Chief Operating Officer Thomas Hugger for offering documents, subscription forms and general enquiries at: [email protected].
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Investment Opportunities in Agriculture in Cambodia
Cambodia is blessed with some of the most fertile farmland in South East Asia, particularly in the area around the Tonle Sap, the huge lake lying in the centre of the country. This lake almost doubles in size during the rainy season, flooding and fertilising the land for miles around and we are looking at a number of opportunities to invest in land in this area with the prime aim of growing rice. Here Chan Sophal, one of Cambodia's leading Agricultural Economists and Leopard team member explains why farming in Cambodia can constitute such a uniquely attractive investment.
'Cambodia has a large amount of unproductive land awaiting investment. Millions of hectares of land are left idle due primarily to lack of capital. These lands are not ready for immediate plantations: they need to be cleared of bushes and grasses and a lot of land must be properly irrigated before it can be turned over to useful farming. As a post-conflict, poor nation however, Cambodia lacks the capital to exploit the vast potential of the land. Particularly attractive are the huge plains around the great lake of Cambodia, the Tonle Sap . This area floods to a depth of up to three metres for anything up to 4 months during the annual wet season flooding but is left idle in the dry season when the water has receded. In recent years some local entrepreneurs have seized the opportunity to tap this annual flood and to cultivate the land by constructing small reservoirs (simply by raising dikes) to store the flood water with which to irrigate the land for productive rice farming. As these flooded plains are refreshed every year by the annual flooding and siltation, the soil is highly fertile and rice yields have been very high, standing between 5 to 7 tons per hectare, an excellent yield when compared with the national average yield of 2.5 tons per ha. Annual returns have been recorded at 80 per cent or higher although these figures seem exceptional: 50% or so seems highly possible though. After several years of success however, many of these local entrepreneur farmers are eager to expand their investments further out into the plains and whilst they increasingly have the necessary farming and managerial experience, what they do not have ready access to is capital. Nor is labour an issue: anything up to 200,000 Cambodians travel to Thailand annually to work on rice farms for lack of work in Cambodia. There are good rice markets in Cambodia and overseas and Thai and Vietnamese traders come every year to buy the fresh paddy from the farm gates for processing and re-export. So the opportunities exist in Cambodia -capital and the right local partners are necessary though and we aim to provide the former and find the latter.'
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The Gloom Boom & Doom Report
Last month we mentioned that there was to be an article on Cambodia in Marc Faber's famous Gloom Boom & Doom Report: we had the wrong month-apologies. Marc, who is also Chairman of Leopard Cambodia Partners GP, has kindly given us permission to share with you this month's edition of his report which includes the Cambodia comment; To subscribe to this always interesting newsletter please email Lucie Wang at: [email protected] or visit www.gloomboomdoom.com.
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The Manager of your fund is only as good as the individuals in it so we are fortunate that this project continues to attract quality people with a broad range of skills. Fear not though: we are as cash conscious as the next tight manager-all our staff salaries are 'local' and equity in the management company continues to be the prime remuneration. We welcome two new full-time members to the team, both based in our Phnom Penh office.
Firstly, Scott Lewis, 40, an early day visitor to, and private investor in, Cambodia, who joins us as Leopard Capital's fifth Managing Partner. Scott worked in Merrill Lynch's Global Energy & Power Group for 12 years (1993-1996 and 1999-2008) based in Houston, Calgary and most recently in London providing investment banking services to energy clients globally. From 1996-1999 Scott worked for First Reserve Corporation, a private equity firm specializing in investments in the energy sector globally and the Sterling Group Inc., a Houston based private equity firm specializing in investments in the US petrochemical, agribusiness and basic manufacturing industries. Scott has a B.B.A in accounting with High Honours and a Masters in Professional Accounting from the University of Texas at Austin.
We welcome secondly Chan Sophal, 36, a Cambodian citizen, President of the Cambodian Economics Association and one of the country's leading Agricultural Economists who joins Leopard Cambodia Ltd as Investment Manager for Agriculture projects. Sophal has 11 years agricultural development experience working as a Senior Research manager for the Cambodian Development and Research Institute. He has also held positions with the World Food Programme, the World Bank and with the Prek Leap Agriculture College. Sophal gained an MSc in Agricultural Economics from Imperial College London.
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In the News
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The Kuwaiti government has signed a memorandum of understanding with Cambodia which will lead to the construction of a $350 million hydropower dam and irrigation system in Kompong Thom province, the Foreign Minister Hor Namhong has announced after returning from a state visit to the Persian Gulf state. The dam will be built in Kompong Svay district on the Steng Sen River and produce 40 Megawatts for the surrounding and also provide irrigation for 130,000 hectares of rice land.
- 2008 tourist arrivals topped the 2m figure with total arrivals at 2.15m, however, growth fell to 7% YOY down from 20% in 2007.
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Leopard in the News
Articles containing information and comments 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.
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The NAV of Leopard Cambodia Investments (BVI) Ltd as of 31 Dec 2008 is USD1006-56 (30th Nov 2008 USD1005-42)
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Investing in LCF via a Self Invested Personal Pension Plan (SIPP)
With UK public sector debt now well on the road to reaching truly Zimbabwean levels, UK taxpayers will be delighted to know that they can invest in LCF via a SIPP and enjoy all the tremendous tax advantages (ie, get some of it back from Gordon) which come with SIPPs. Hornbuckle Mitchell are our SIPP provider and more information on the company can be found here:
www.hornbucklemitchell.co.uk
Initial contact should be made with Hornbuckle Mitchell through their Asia SIPP expert Stephen Davis at:
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Leopard Cambodia Investments (BVI) Ltd.
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VGG5458M1005
CUSIP Number
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