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Newsletter Issue 23  -  March 2011 




Economic Update


Cambodia's economic recovery continues to gain momentum.  Ramping up from a flat 2009 to grow by 5.5% in 2010, the Kingdom is projected to grow by 6-7% in 2011.  Core sectors reasserted their strength last year and are posed to build on these gains in 2011: Garment exports surged 26% to a record $3 billion; tourism roared back with 16% growth in arrivals, rising to 2.5 million; Agriculture kicked back in across several sub-sectors with rubber topping growth for the sector at 43%, bringing rubber output to 50,000 tons.  Underscoring growth in tourism, ticket sales for Angkor Wat -rated the world's #1 heritage site on - rose around 20%. The airports are now bustling and airlines are planning new flights.  Agriculture's gains come from outside and within Cambodia -- sustained, non-speculative demand in commodities will keep demand and prices high while, internally, the opening of several new rice mills and integrated sugar projects signal upgrades to infrastructure and efficiency of the Kingdom's agricultural sector..


Cambodia's wide-open banking sector continues to attract newcomers willing to meet the capital requirement ($34.5 million); the latest entrants CIMB, Bank of China, and ICBC have raised the number of issued licenses to 30.  Meanwhile fifteen firms (including our portfolio company ACLEDA Bank) received securities licenses. Two of these firms have already built spacious new securities trading rooms in anticipation of the planned July 2011 launch of the Cambodia stock exchange.  The question to answer: will it open on schedule?  Only time will tell, but if precedents matter, note that neighboring Laos successfully opened its securities market in January with two fruitfulI POs.


Cambodia continues to make strides in the international arena. The EIU (Economist Intelligence Unit) scored Cambodia as having the second best environment for microfinance in all of Southeast Asia. The UN reported that Cambodia achieved Asia's fastest rise in human development - defined as income, life expectancy and years of schooling - over the past two decades. Cambodia ratified the ASEAN Free Trade Zone with Australia and New Zealand, opening the way for full, free trade with these countries by 2015.  Europe extended its "Everything But Arms" tariff free exports for Cambodia, and slashed from 50% to 30% the local content requirement for such exports.


The development of new infrastructure continues and is laying the groundwork for future growth.  The ADB-backed $84 million project to renovate Cambodia's decrepit 650 km line has reopened the first section, 120 km from Phnom Penh southward to Kampot.  Next will come the Kampot to Sihanoukville Port link, and the northwest line from Phnom Penh to the Thailand border.  Separately, China agreed to finance a $700 million new eastern line to connect Phnom Penh to Vietnam, the 250 km "missing link" of the Trans-Asian Railway system.  This five year project would slash transport costs and boost Cambodia's agriculture and mining exports to China.  Cambodia's port revenues rose 31% in 2010 in sync with the garment sector recovery.  The Phnom Penh river port led the growth, as it now feeds Vietnam's new Cai Mep Port, which offers direct connections to the U.S. and Europe.  A second river port with over twice the handling capacity is being financed by China and is now 25% complete.  As for power, construction has started on a Malaysia-backed 100 MW coal-fired power plant in Sihanoukville and several hydro dams financed by China.  In the meantime, new power lines have been strung from Vietnam to Phnom Penh, and blackouts have become rare in our office.



Portfolio Company News


Since our last newsletter, Leopard Cambodia Fund ("LCF") invested in two additional portfolio companies, topped up three existing holdings, achieved one full investment exit and one partial exit.  We hope to complete another investment shortly.


Intean Poalroath Rongroeurng is a microfinance institution focused on lending to rice farmers to buy better seeds, fertilizer and equipment. LCF has acquired a 33% equity stake in IPR, which operates in six provinces.


EDL Generating Co., which owns and operates hydropower dams in Laos, made its debut January 11th as the first listing on the newly launched Laos Securities Market.  LCF is one of the few foreign investors participating in EDL's public offering. The stock performed strongly after listing and LCF sold part of its position into the euphoria, booking a 66% gain.


CamGSM fully repaid to LCF the remaining balance of our $5.0 million bridge loan after obtaining refinancing from the Bank of China. The exit of LCF's largest investment position achieved its targeted return. We send our appreciation and best wishes to CamGSM.


ACLEDA Bank's profits rocketed 160% to a record $25.76 million in 2010.  This year is off to a strong start with January's profit reaching an impressive $3.78 million.  We have added to LCF's equity shareholding in the bank via a second purchase of ASA shares.  


Nautisco Seafood Manufacturing has thus far exported over a dozen containers of processed shrimp to Japan and Korea.  Larger orders are flowing in and LCF has increased its investment in Nautisco via a package of secured debt and equity.


Kingdom Breweries completed a second round of capital raising with LCF taking up its full equity rights. The brewery launched its bottled Clouded Leopard Pilsner beer in October, and was featured globally by Time Magazine:,31542,2020970,00.html and BBC Television:  The beer has captured an enthusiastic following due to its distinctive taste and premium image, and is now available in hundreds of local outlets.  Exports are next - if you would like to distribute the Kingdom's best beer in your country please contact us.  The brewery's splendid Tap Room has been hosting private functions of up to 250 people; you can book it for your next event (  




Team News 


H.E. Sok Siphana and H.R.H. Pheanuroth Sisowath have completed their terms on LCF's Advisory Council and we thank them for their support.  Replacing them as Advisors are Sophal Chan and Steven Meas.  Sophal is one of Cambodia's leading agriculture economists and President of the Cambodian Economists Association.  He holds a MSc in Agriculture Economics from University of London's Imperial College.  Steven spent 25 years as a US-based entrepreneur and businessman before moving back to Cambodia, bringing with him a wealth of practical experience and senior local connections.


Leopard Capital's Investment Team has been expanded with five new hires, all of whom speak Khmer.


Michael Hodgson, General Counsel, was admitted to the roll of solicitors of England & Wales in 1997. He practiced law in the UK for 10 years before becoming Pro-Consul at the British Embassy in Phnom Penh.  Michael holds an MA from Liverpool John Moores University with Law Society Finals qualification from the College of Law as well as a CPE from Staffordshire University, and a BA (Joint Hons) from WLIHE (Brunel University).


Lim Socheat, Financial Controller - Investments, spent 10 years as an audit supervisor at Morison Kak et Associés, a unit of Morison International. Socheat holds a CPA from CPA Australia and a Bachelor in Finance and Banking from the Royal University of Law and Economics. He is an active member of Kampuchea Institute of Certified Public Accountants and Auditors.


Sim Hoy Chhoung, Investment Associate, spent three years at Cambodia's Canadia Bank after working five years as a university lecturer on business topics. Chhoung received an MBA at Brandeis University in the U.S. under the auspices of the competitive Fulbright Scholarship.  He is a certified accountant from the UK's Association of Chartered Certified Accountants (ACCA).


Ussa Seang, Investment Associate, has five years of combined work experience at Aide et Action in Cambodiaand at Institutional Shareholders Services in the U.S. Ussa received an MBA from Cornell University's Johnson School after being competitively selected for a merit-based scholarship there. Prior to that, he was an exchange student at Tsinghua University in Beijing.  He holds a BSc (Engineering) from Concordia University.


Chamroen Sok, Investment Associate, earned a Master of Business Thesis (Finance and Economics) from the University of Technology, Sydney, after receiving a Master of Finance (Investment Banking) and a Bachelor of Commerce (Accounting & Finance) from the University of New South Wales.  He completed a summer internship in the auditing division of KPMG (Cambodia).



Annual Investor Meeting


Limited Partners and prospective investors are invited to attend the third annual Leopard Cambodia Fund investors' meeting in Phnom Penh, to be held on May 20, 2011.  Earlier from 16-18 May we will host an investment exploration trip to Vientiane, Laos, while on 21-22 May there will be an excursion to Sihanoukville to tour Nautisco Seafood Manufacturing's plant and experience Cambodia's beaches.  Members of the General Partner will convene in Phnom Penh on May 19, 2011.  For more information about these events write to Michael Pritchett,




New Domain


We have switched our group URL to, although still works as well.




Secondary Market


Leopard Capital matches buyers and sellers of LCF's feeder fund, Leopard Cambodia Investments (BVI) Ltd.  Let us know if you are looking to invest or exit,



Leopard looks for more investment opportunities in Laos


Following the robust performance of the recently launched Laos Stock Exchange (LSX) in January and February, Leopard headed north to the Lao PDR to take a closer look at the world's newest bourse. We found some promising investment opportunities and introduced ourselves to some upcoming IPO candidates. We will feature the highlights of our trip in the April newsletter, but below is a taste of this interesting and successful excursion. We encourage LPs and potential investors who wish to experience Laos first hand to join us from 16-18 May for our investment trip to Laos.


The LSX is currently one of the world's smallest exchanges with only two listed shares, namely EDL Generation Company (which owns seven hydropower plants in Laos) and BCEL Bank (the largest commercial bank in Laos with a 40% market share of banking sector loans). These enterprises are majority owned by the Lao government, however both are investment grade companies that were selected by the authorities to launch the Laos bourse. The market capitalization of the LSX is presently US$867 million and has risen 56% compared to the IPO value of the offerings.


Leopard was one of the few foreign investors to take up shares during the IPO offering in late December, but foreign interest in the LSX has been growing steadily. Numerous regional investors bought shares through a Thai broker and a Vietnamese broker who are the joint venture partners of the two existing Lao securities companies. We are told by friends in both Thailand and Vietnam that brokers there are encouraging their local customers to invest in the LSX. Investors from North Asia and the West are now taking a closer look at Laos. Leopard has received several calls from fund managers asking us to use our Laos contacts to arrange company meetings for them in Vientiane.


We sat in on several trading sessions at the LSX to soak up the local sentiment toward the bourse. The Lao people are excited about the market, enjoying the gains of January and February, and are hungry for more. The trading process itself is a bit mundane as it is an auction based system with only two trades a day at 10 A.M. and 11:30 A.M. However, this is Laos, which is not often regarded as being flashy or exciting! Nonetheless, the trading rooms are modern facilities with large screen LED monitors and were packed with punters. A brief moment of excitement proceeds each trade as all eyes are glued to the 'buy' and 'sell' cues (which display the top three trade prices and volumes) which fluctuate rapidly before the final trading price is established. The traders then return to their gossip, have another cup of Lao coffee or head out for an early lunch. For the Lao, the experience is as much a social event as it is a quest for profit.


Our meetings with both listed companies were quite informative. It was obvious that the executives have not conducted many investor meetings and their answers were refreshingly straight forward and unrehearsed. EDL informed us that their plan to acquire more hydropower assets is going smoothly and new purchases will be formally announced in the second and third quarters. BCEL explained that the prospects of the Lao banking sector are bright with 20-30% annual loan growth likely in the near term. Lending spreads remain 'capped' by authorities at 500 basis points, providing favorable margins for banks. System wide NPLs were reported at 3% despite the strong growth in recent years.


The successful launch of the LSX has prompted another 5-8 companies to seek a listing in the next 12 months. Most are private companies (ie non-SOEs) in a wide range of sectors. From these candidates, Leopard has identified two promising business groups which we are now reviewing as possible follow on investments in Laos. Dao Heung Group is regarded as a potential blue chip consumer play which  produces branded goods (coffee, tea, juice, water, fruit snacks) for domestic and export sales. The group also operates duty free stores in Lao airports and border crossings into Thailand and Vietnam. The Lao Indochina Group is an experienced agribusiness operator which processes cassava root into tapioca starch for export to large buyers in China. The group is also entering the renewable energy field in building a bio-gas power facility which converts the effluent from its tapioca factory into electricity for its own use and to supply to local users.


Both groups are expanding production to meet the needs of existing customers and will feature prominently in our 16-18 May investment trip to Laos. We hope to introduce these exciting companies to our LPs and prospective investors. See you in Laos!



Patrolling the Frontiers


As a proponent of frontier investing we highlight economies in transition that may present future opportunities.  Today we turn our attention to another part of the world...


CUBA:  Preparing for Perestroika


Dividing Old Havana from Chinatown is Cuba's Capitolio Nacional, a monumental edifice with a fateful past.  El Capitolio was conceived during the "Roaring Twenties", when the island led the world in sugar exports and the future seemed blue-sky.  President Gerardo Machado, who dreamed of turning Cuba into the Switzerland of the Americas, decided that his four million countrymen needed a domed Capitol building even taller and more ornate than the one he toured in Washington.  Cuba's Congress dutifully poured 3% of the country's GDP into their new home (akin to the US Congress spending $42 billion for a new office today, but let's not give them any ideas...) It took 5,000 skilled Cuban laborers just three years to complete El Capitolio, which featured gilt ceilings, a giant diamond embedded into the pristine marble floor, and the world's third-largest indoor statue.  However, the showy project couldn't have been more poorly timed:  while the building rose, America's stock market crashed, the Great Depression unfolded, and the Hawley-Smoot tariffs crushed Cuban sugar prices by 74%.  As El Capitolio's ribbon was cut in 1932 Cuba's economy lay in tatters, with two-thirds of its citizens thrown into destitution.  Machado was forced out of office, and his dream building would perform Congressional service for only 27 years before Fidel Castro's revolutionaries swept into Havana and opted for more austere premises.


Fidel Castro would go on to lead Cuba for almost five decades, doggedly clinging to socialist dogma, even after the Berlin Wall collapsed and other surviving communist states embraced market-based economies.  Castro's achievements included delivering to his people free health care and education, as well aslow cost housing, transportation, sports, culture, and daily essentials.  Cuba is one of the few countries in Latin America free of narcotics gangs and street criminals, and where large contracts are awarded without kickbacks.  Cuban athletes excel at a multitude of sporting activities from boxing to baseball, and Cuban scientists routinely invent new vaccines.   But at the same time, just as single party rule has deprived Cubans of political freedom, Marxist central-planning has starved them of economic advancement and the country finds itself with well-educated and healthy citizens plowing fields with oxen, or driving horse carts down empty highways.


Now,the winds of change are gathering in Cuba, carried by both economic necessity and political transition.  Since Fidel Castro's health nearly failed in 2006, power has passed to his younger brother Raul Castro, who is showing greater assertiveness and organizational prowess as he approaches his 80th birthday.  Raul has quietly reshuffled more than 30 Fidel-appointed cabinet members to prepare his Party and people for a sweeping economic policy overhaul-Perestroika al Cubano. Even the semi-retired Fidel seems to have glumly accepted that change is inevitable, candidly admitting to a visiting US journalist that "the Cuban model doesn't even work for us in Cuba anymore".


For nearly five decades, the United States has been trying to hasten Cuba's need for change by restricting most US nationals from investing in, trading with, or even visiting the island nation just 90 miles away.   While this policy has imposed severe hardship on the Cuban people, it has also provided Cuba's Communist Party with a handy political excuse for policy failures, thereby helping sustain the Party's popularity, which even today appears to be solid.   The US Trade Embargo's visible result is a Cuba that appears frozen in the 1950s: patched up cars, obsolete power plants and factories from that era still in use today.


A masterful crisis manager, Fidel Castro was adept at papering over economic rot with other people's money. Shunned by Washington for nationalizing US assets, Castro's Cuba became a Soviet client state, reaping billions of dollars worth of annual subsidies. After the Berlin Wall fell, Cuba reopened its tourism industry and legalized US dollars to encourage inward remittances.  When leftist Hugo Chavez gained control of Venezuela, Fidel talked him into swapping 100,000 subsidized barrels of oil per day for 20,000 underpaid Cuban medics, generating substantial profits for Cuba.  Castro also took out $4 billion of loans from China to finance purchases of that country's goods.


The global economic crisis whacked Cuba hard, however.  Venezuela  cut back on its largesse as its own economy worsened. Tourism and remittances softened, while nickel export prices tanked.  Furthermore, three severe hurricanes left a wake of destruction in 2008.  Unable to service Cuba's estimated $21 billion foreign debt, and running out of generous leftist patrons to hit up, Raul Castro has apparently decided he has little choice but to pry open Cuba's economy and try to entice the U.S. to normalize relations.  Barack Obama seems tempted.


Castro's wild card is Cuba's oil and gas reserves. The island currently produces 60,000 bbl a day, but its US-facing northern waters are estimated to hold an estimated 5- 20 billion bbl of oil and 20 trillion cf of natural gas.  (Note: this compares with 29 billion bbl of oil reserves in the entire US.)  Accessing this undersea oil requires the sophisticated drilling technology the US excels in, but as long as sanctions remain in place, the US oil majors are excluded from that bonanza.  Amidst the applause of oil industry lobbyists, the dance for reengagement has begun, with both partners taking some unprecedented steps.  


Obama set the stage by publicly admitting the US embargo of Cuba has been a failed policy. He then made it easier for Cuban-Americans to visit or remit money to relatives in Cuba, while improving linkages of internet and television.  The US Congress is discussing a bill to end the travel embargo altogether, and, in the meantime, the ban has just been relaxed for students and other specified groups. There is already considerable interaction between the U.S.and Cuba: US companies export $500 million of food and medicine yearly to Cuba, while charter flights run back and forth between Miami and Havana.  The US and Cuban navies reportedly sit down monthly for cordial meetings.


Cuba has eased tensions by releasing around one third of its political prisoners to Spain via the Catholic Church.  Raul Castro has issued a far-reaching five-year roadmap for Cuba's future economic reform and development, which will be tabled in April 2011 at the upcoming Sixth National Congress of the Communist Party, the first such gathering since 1997.   The proposed changes would put Cuba on a very similar path to that taken by China in the 1980s and Vietnam in the 1990s.  Here are some of the ideas:  permit real estate transactions amongst Cubans, mergethe two-tier currency system, closedown inefficient state enterprises, decentralizestate ownership, facilitate private ownership of businesses, distributeidle land to farmers, open state-owned wholesale markets, and further encourage foreign investment - particularly in tourism.


In recent months, some planned reforms have already been implemented in an effort to delay Cuba's impending insolvency.  Costly subsidies on sugar and personal care products are being scaled back.  The government announced plans to shed 1.3 million state workers (that's more than 25% of the workforce - more than 11% of the entire population!) and guide them somehow into the private sector.  Cubans are being encouraged to grow and sell their own fruits and vegetables.  The government is inviting foreign investors to develop 10 golf course estates in Cuba, with a new law allowing 99-year land leases to foreign buyers of plots in such projects.  In the old days of Fidel's Revolution such policies were unthinkable. 


So what is the potential for a liberalized Cuban economy?  Just look 90 miles across the Straits to Florida, where one million Cuban-Americans call home.  Cuba has 60% of the Florida's population and 80% of its landmass, but greater natural resources and a much longer coastline, so one might conclude that the two are of comparable overall potential., Perhaps to underscore their similarities, remember the fact that England and Spain cleanly swapped the two in 1763.  Today, Florida's economy is 12 times larger than Cuba's.  One reason is that Florida gets 20 times as many tourists as Cuba, plus an inflow of affluent retirees.  When the US Government stops restricting its citizens from traveling to Cuba, the island will become an instant tourist magnet.  Offering short flights, sunny beaches, cool music, "old world" architecture, and cheap surgery. Cuba should have no problem drawing several million American tourists a year as further away destinations like Costa Rica have done.


Should reforms become comprehensive enough, agriculture seems an obvious investment play:  half the land is arable, labor is cheap and rain plentiful.  Cuba's once-vaunted sugar industry stands in disarray with 80% of the old mills shut down, but today's high sugar prices provide ample incentive to revive the sector, along with other traditional crops such as cigar tobacco.  Despite its long coastline, fisheries and aquaculture remain largely overlooked. Cuba is a world-class producer of nickel but other mineral deposits remain underexploited, and then there's the oil.  The entire power system needs to be updated, financial services developed, retailing expanded - the opportunities seem endless.


Cuba's demographics are a cause for concern, however.  With a median age of 40, the population has already peaked at 11 million and faces decline unless immigration is promoted.  Over 70% of Cuba's people have lived their entire lives under paternalistic socialism and lack the training, experience and capital to start private businesses. Supporting Cuba's future retirement population will be a big challenge given the challenge Cubans have to accumulate savings:  85% hold government jobs paying $20 per month, and were not allowed to own their homes.  In addition, Cuba is not a cheap place to live. Beyond the subsidized basics, most consumer goods have to be imported, and imports draw heavy duties.  Telecom services are costly due to government monopolization and inefficiency.  The list goes on.  In this environment it is tough for most Cubans to get by unless they receive remittances, tourist gratuities, or tea money.


All in all, we eagerly await the implementation of Cuba's economic reforms, the gradual normalization of its economy, and the eventual restoration of its relations with America.  As this process unfolds Cuba could transform into one of the world's most attractive frontier investment destinations.  America has a long track record of turning bitter rivals into productive partners (a recent example being Vietnam), and re-engagement with Cuba could be one of Obama's most notable foreign policy legacies.


Some frontier investors are not waiting for that and are already investing in Cuba.  While 100% foreign ownership is permitted, most investors enter joint ventures with Cuban state enterprises which typically contribute land, labor and sometimes capital.   Over 250 such joint ventures exist, mostly for specific sectors or projects.  Investments are made in foreign currency, eliminating exchange rate issues, and there are no restrictions on capital repatriation.  Corporate income tax is 30% for joint ventures, and 35% for wholly-owned foreign companies, but tax holidays of 5-7 years are available to facilitate investment recovery.


A few Cuba-focused investment groups have been established that non-US investors can access.  Canada-listed Sherritt Group is a major player in Cuban nickel mining and, formerly, telecoms.  A private investment group backed by European investors, Coral Capital has restored Havana's historic Saratoga Hotel, which was recently ranked by Conde Nast as the 16th best hotel in the world.  Coral is now planning a number of golf course, marina, housing and hotel projects, as is Leisure Canada, a Canada-listed investment vehicle.



Picture of the Month / El Capitolio: A Reminder of Change





This 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 Sri Lanka Fund LP, Leopard Sri Lanka Private Equity Investment Fund, 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. © 2010 Leopard Capital LP. All rights reserved

In this Issue

Economic Update

Portfolio Company News

Team News

Annual Investor Meeting

New Domain

Secondary Market

Leopard looks for more investment opportunities in Laos

Patrolling the Frontiers

Picture of the Month



Quick Links



Leopard in the News: Media articles about Leopard's funds are posted on our website, please click on the following links: Leopard Cambodia



The NAV of Leopard Cambodia Investments (BVI) Ltd. was US$ 965.27 as of 30th September 2010


Leopard Cambodia Fund, LP 

Fund size: 

USD 34,135,000








Valoren No:






Lipper ID:



Leopard Cambodia Investments (BVI) Ltd. 


Fund size: 

USD 20,610,000








Valoren No:






Lipper ID: