Newsletter Issue 27  –  June 2012 




Economic Update 


Cambodia’s economy continued to post solid growth in the first quarter of 2012. Tourist numbers surged, new garment factories opened, agricultural production expanded, and construction activity picked up. Cambodia hosted the ASEAN Summit, China’s President, and EU Trade Commissioner, while President Obama and Secretary of State Clinton announced plans to visit the Kingdom later this year.


GDP and Inflation

The World Bank, IMF and ADB’s 2012 GDP growth projections range from 6.5-6.6%, slightly below the 6.8-7.0% estimate for 2011. The mild deceleration reflects concerns that the worsening European debt crisis and sluggishness of the US economy will curtail export demand. ADB predicts 2012 industrial activity to grow by 11.4%, services by 5.3% and agriculture by 3.8%. The IMF and World Bank have favorably rerated Cambodia’s debt distress risk from moderate to low. Inflation has also eased, with the consumer price index increasing 5.8% in January and 5.4% in February, both well behind 2011’s peak of 7.1% in July. ADB expects 5% inflation for 2012 and 2013.


Tourism Surge

The tourism sector extended 2011’s strong growth trend with visitors rising 26.8% in the first two months of 2012 to over 670,000. Vietnamese, South Korean and Chinese tourists led the parade. Two thirds of the Kingdom’s visitors heading for the heritage hub of Siem Reap, where Park Hyatt announced their new 107-room hotel will open in Q1 2013. Meanwhile Sokha Hotels held a soft opening of their Bokor Mountain casino resort in late March, bringing a colonial era hill station back to life.


Increased Export Market Access and Diversification

Buoyant garment and rice exports, along with vibrant textile and construction imports, drove 1Q port revenues at Sihanoukville up 22% y-o-y to US$ 8.3 million. The number of garment factories in Cambodia increased from 270 to 320 over the past year as increasing costs in China converged with improving export market access. 1Q garment exports rose 15%, powered by sales to the EU which offers Cambodia duty-free and quota-free access under the Everything But Arms initiative. In agriculture, Cambodia made its first direct shipment of rice to China. Rubber planters, having expanded their land under cultivation by 17% last year, secured a new market in China’s Yunnan Province.


In manufacturing, Cambodia is growing beyond garments. RM Asia began assembling Ford SUVs in Sihanoukville, coinciding with news that vehicle imports surged 40% in value in 1Q 2012. Japan’s Nidec Group announced it will build an electronics plant in the border town of Poi Pet, creating 5,000 jobs. Malaysia’s FTSB SAP Global JV signed a MOU to build a $100 million water treatment plant serving three southwestern provinces in Cambodia. Cambodia’s first life insurance company and first credit bureau opened their doors. Internet penetration more than doubled in 2011 and local Facebook users reached 491,000.


Launch of First IPO on CSX

Cambodia’s bourse attracted high investor interest for its first listing in mid-April. The book-building phase for the Phnom Penh Water Supply’s initial public offering was oversubscribed by 17 times, and the shares were priced at the top end of the range. PPWS soared 60% above the IPO price in the first few days before correcting, but still held up well above the subscription price, unlike Facebook.


Strengthening International Ties

With Cambodia holding the ASEAN chair for 2012, regional and world leaders visited Phnom Penh in Q1 to cement international ties and promote regional economic integration goals. China and Cambodia vowed during a March visit of Chinese President Hu Jintao to raise bilateral trade to US$ 5 billion by 2017, with cooperation agreements signed to widen two national roads, build a bridge in Kandal province and improve irrigation infrastructure. European trade commissioner Karel De Gucht also held talks in the capital to boost EU ties.


Regional Highlight: Myanmar

Political reforms implemented by the Myanmar government are beginning to pay off. Following the suspension of economic sanctions against Myanmar by the European Union, Australia, and Canada in April, the United States followed suit in mid-May. International investors are now flocking in from all directions seeking to capitalize on Myanmar’s low-cost labor force, abundant natural resources, and strategic location. Leopard Capital took 30 recently for a Myanmar Discovery tour and met some interesting local companies (see article below).


Myanmar’s government continues to drive reform. The Myanmar Central Bank signed a MOU with the Tokyo Stock Exchange and Daiwa Institute of Research to establish a local securities exchange. And starting this month, businessmen and conference attendees are able to obtain visas on arrival, eliminating a major inconvenience. The last major hurdle inhibiting FDI is the passage of a new foreign investment law to provide greater rights and protections. A version of the law is circulating through parliament and is expected to be passed later this year.


Myanmar’s opening repositions the Mekong Region and ASEAN as a more significant investment destination and economic hub. Investors interested to learn about Leopard Capital’s plans in Myanmar should write to Mohamed Ahamed, [email protected].




Leopard Cambodia Fund Update      

Portfolio Company Highlights  


Leopard Cambodia Fund ("LCF") is almost fully invested now, with some cash reserved for top-ups.



LCF’s largest investment holding, ACLEDA Bank, is off to another very strong start this year. In 1Q 2012 ACLEDA’s loans surged 37.5% year-on-year to US$ 1.1 billion while deposits grew 25.9% to US$ 1.2 billion. Earnings rocketed 40.4% to US$ 16 million, well ahead of our forecast. The Bank announced a share dividend which will increase LCF’s share position by approximately 30%.

After celebrating its 20th Anniversary in January, ACLEDA opened two new branch offices in Preah Vihear and Oddar Meanchey provinces near the Thai border, where economic activity has surged following road improvements. Subsidiary ACLEDA Securities shined as selling agent in the first public offering in Cambodia, PPWSA. ACLEDA also announced that having successfully expanded into Laos it would next be moving into Myanmar with three new microfinance branches targeted for next year. We note that Myanmar’s population is four times as large as Cambodia’s while its banking and microfinance penetration is much lower, and believe Myanmar represents a significant growth opportunity for ACLEDA.


Intean Poalroath Rongroeurng:

IPR is gaining momentum with 12.8% loan growth and a doubling of profit growth in 1Q 2012. Having operated with low leverage, IPR is now positioned to deploy debt funding to drive further growth. A European lender has agreed to provide a Thai Baht loan, helping reduce IPR’s foreign exchange exposure (some of its loans are denominated in Baht.) The Company is in the process of approaching other potential lenders. Parties interested in financing a microfinance institution that focuses on serving Cambodian farmers may write us for info.

Chenla Seafood:

LCF invested in a new seafood processing venture in late 2011, Chenla Seafood. Chenla recently commenced production in a state-of-the art leased facility located near the Port of Sihanoukville. The Company is on track for HAACP certification and has secured a number of international customers, one of whom ranked Chenla among the top 10% of seafood factories in the region after a recent inspection.


Beverage investments:

Kingdom Breweries has been focusing on distributing its new canned Gold lager into the mass market, resulting in several consecutive months of expanded sales. Meanwhile Kingdom’s award-winning premium beers have secured a foothold in France and will next enter the Land of Smiles, Thailand.


Tropical Beverage re-launched its "Phuket Beer" in 4Q 2011 only to encounter supply chain disorder as Thailand’s massive flood submerged the country’s industrial heartland. Since the water subsided things have been returning to normal, and in March the Company turned profitable after its export sales resumed.


Kulara Water’s factory construction is complete, equipment has begun to arrive, and product packaging is being finalized. Water should be hitting the shelves later this year. 


Electricite Du Laos Generating:

EDL’s strong 2011 results seemed to catch investors’ attention and the stock is now up approximately 13% above its IPO price. EDL paid out the second portion of its 2011 dividend, providing a full year yield of 11.6% for LCF and others who purchased shares at the IPO price.


Phnom Penh Water Supply Authority:

LCF participated in Cambodia Stock Exchange’s historic first IPO, and fully exited with a 42% net gain after PPWSA’s share price sailed past our year-end price target in the post launch excitement.  




Leopard Capital News

Annual Investors Meeting

Leopard Capital hosted its annual investors meeting at Raffles Hotel in Phnom Penh on May 24th and 25th. Attendees received detailed overviews of Leopard Cambodia Fund’s portfolio companies, an update on Leopard’s recently-launched public equities vehicle Leopard Asia Frontier Fund, and presentations on Leopard’s upcoming funds for Cambodia-Laos, Myanmar, Bangladesh, and Haiti. The event concluded with a trip to Kingdom Breweries’ TapRoom in the open-top, double-decker Kingdom party bus.


Myanmar Discovery Trip

Leopard Capital hosted the "Myanmar Discovery Trip" for investors in Yangon from May 20th – 22nd. Over 30 overseas investors and 25 local companies participated in the event. The group visited several businesses and factories including a major housing development, a steel fabrication facility, a consumer products factory, and a seafood-processing group. The tour also included networking events with members of the business community, a visit to the Myanmar Securities Exchange Centre, and presentations from several local business experts, service providers and market research experts. Most attendees reportedly left with a positive impression of Myanmar and its vast opportunities.



Secondary Market

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 at

[email protected].



New Blog

Leopard Capital has created a new Emerging Frontiers Blog to provide investment and economic news and commentary on the world’s most exciting transitional economies. Visit www.emergingfrontiersblog.com.




Travel Notes: "Cambodia’s Koh Rong Archipelago"  

By John Conway Boyd


For several decades Cambodia was "off limits" to travelers exploring Southeast Asia. Over the past decade as the country has regained political stability, foreign investment and workable infrastructure, it has started to share in the region’s impressive tourism boom. Whereas only 50,000 tourists visited Cambodia ten years ago, it now attracts close to 3 million annually. Yet most visitors come for the ancient temples and few for the Cambodia’s beaches, even though neutral reviewers like Forbes rate some as among Asia’s Best.

One region gunning to change perceptions is the Koh Rong Archipelago, a stretch of islands in the Gulf of Thailand reaching 30 km off the coast. Several Leopard team members have decided to explore them for two full days by chartering the Cygnet, a 45-foot sailboat berthed in Sihanoukville. Cygnet’s Captain Ron is a loquacious seaman full of salty tales of sailing expeditions from Fiji to Zanzibar. His Thai wife Jenny serves meals and tasty snacks – her spring rolls in peanut sauce, stir-fried vegetables in oyster sauce, and BBQ ribs are particularly delicious – when she is not out hoisting sails. Passengers are expected to do little but soak up the idyllic tropical scenery. As we sail past islands, the tranquility is palpable; save a handful of fishing boats, it appears we have the archipelago to ourselves.


Our first stop is Koh Rong, Cambodia’s largest island. For years only fishermen inhabited this place, until stories of crabbing opportunities drew an influx of aspiring mainlanders down from Kampot Cham province. Before long, the crabs were over-fished and the local population started to drift away until a new use for the pristine island was conceived: adventure tourism. The island boasts 42 kilometers of empty white sand beaches including one magnificent 8-kilometer stretch. To welcome hardy travelers, Koh Rong offers six rustic resorts, each with 10-15 bungalows and a few hours of electricity a day when the generator is working.


But bigger plans are afoot. Royal Group, a well-connected Cambodian business conglomerate, has secured a 99-year lease and plans to develop the entire island into a multi-billion dollar beach resort community. The master plan calls for a phased development encompassing high-end hotels, condos and villas, golf courses, marinas and casinos. Road construction has started and a section in the middle of the island has been earmarked for an international airport. The long-term plan would accommodate 100,000 visitors at a time and position Koh Rong as an alternative to Thailand’s premier destinations, Phuket and Koh Samui.

Does this make sense? Koh Rong is about the size of Hong Kong Island, and its population size (2,000) and state of development today are similar to Hong Kong’s when the British occupied it in 1842. Today Hong Kong Island has 1.8 million residents and gets 40 million tourists annually. Amazing what can happen in 170 years!


Is there really any demand for luxury hotels on Cambodia’s coastline? We motor over to the area’s first high-end project, Song Saa Private Resort, located on two tiny islands adjacent to Koh Rong called Koh Bong and Koh Ouen. Song Saa, which means "sweethearts" in Khmer, is the brainchild of Rory and Melita Hunter, an Australian couple who previously renovated French colonial apartments in Phnom Penh. Song Saa is now open with the larger island adorned with nine overwater villas, seven beach villas, and 11 jungle villas. Rory somehow lined up all the financing during the global debt crisis while Melita designed the villas to reflect the natural habit, using where possible local materials such as bamboo and twisted vines. However the villas are also kitted out with infinity pools, rainfall shower heads, and flat screen TVs and cost over $1300 a night, making Song Saa Cambodia’s most expensive hotel.

A wooden pathway links the larger island to its smaller companion where plans are being made to create tree houses and a wildlife sanctuary. Upon arrival, we are greeted by a host of Song Saa employees whom provide us with face-towels and refreshing beverages before our tour of the resort. Following the tour we rest in the dining area, built on stilts extending a hundred meters out into the water, and snack on treats prepared by chef Neil Wager, who in the past cooked for various celebrities at six-star resorts. We lounge on comfy couches and beds suspended by ropes as we take in the scenery and become immersed in the ambiance.


What impresses us the most about Song Saa is the project’s dedication to conservation. While tasteful design and good service can always be replicated, Song Saa’s competitive advantage rests in the unspoiled, natural beauty surrounding the resort. The Hunters have thought carefully how to preserve this ecological treasure, and we hope that Koh Rong’s project planners will follow Song Saa’s "triple bottom line" business model. Song Saa’s maintains a team of marine biologists and community officers who coordinate projects with local officials and villagers. The team is negotiating to establish a marine protected area extending 200 meters outward from the coral reefs, which would set a new standard in Cambodia. Song Saa has also helped establish solid-waste management, recycling and composting systems in several villages. Future projects include a coral reef restoration program, and a project to conserve sea grass beds. Since sea grass beds store carbon, eco-oriented hotel guests will be invited to offset their traveling carbon costs through a donation to this project.


As the sun begins to set, we find a calm cove to anchor for the evening. The Cygnet provides comfortable sleeping accommodations in two private cabins with two beds in each, and a number of couches. However the weather is clear and we decide to sleep under the stars on cushions laid out on the deck, and enjoy a good night’s sleep. In the morning before breakfast, we take a morning swim to the nearby beach. There is no other person or boat in sight.


We sail onward to Ko Rong Saloem, another gem in the archipelago, and visit Lazy Beach Resort, whose name says it all. No infinity pools here – guests are housed in rustic bungalows without air conditioning, fan, or hot water – yet Lazy Beach offers a discount ticket to paradise, reflected by the resort’s occupancy rates (often at 100%). After discovering excellent snorkeling over coral reefs at both ends of the beach, we embark on a 20-minute hike on a path through the forest to another secluded beach with waist-high water hundreds of meters out. The more adventurous can seek out a poorly marked trail at the south-end of the beach that leads to a waterfall within the island’s interior. After our hikes around the island, we explore Lazy’s culinary options. Although the resort’s dining atmosphere is not as breathtaking as Song Saa’s, the grilled fresh-caught fish with garlic and Kampot pepper is well received.


Beyond their general emptiness, what make these islands unforgettable are their stunning landscapes with snowy beaches, turquoise waters, and jungle interiors. Also notable are their intact bio-diversity. A late-night swim reveals bioluminescent marine plankton glowing all around. The plankton’s florescent hues are caused by a chemical reaction that emits light; similar to the way a firefly glows. Such bioluminescence indicates a healthy and diverse marine ecosystem, the significance of which cannot be understated. There is no doubt that Koh Rong Archipelago will continue to attract developers as word gets out about the natural treasures it holds. However, only through responsible, sustainable development will visitors be able to continue to enjoy such treasures for generations to come.




Picture of the Month: Approaching Sang Saa Resort  

Sang Saa Resort, Koh Rong Archipelago, Cambodia

Photo by Vara Ho, Leopard Capital 






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 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.

In this Issue

Economic Update

Leopard Cambodia Fund Update

Leopard Capital News

Secondary Market

New Blog

Travel Notes

Picture of the Month




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