Cambodia's Second IPO May Be Delayed

Grand Twins International's Planned Listing Might Be Held Up By Delays in Regulatory Approval

Wall Street Journal | April 11, 2014  

A female garment worker walks near her home in Chak Angre neighborhood on Monday in Phnom Penh, Cambodia. Getty Images

 

A Taiwanese-owned garment maker's plan to become just the second stock to be listed on the Cambodian stock exchange is set to be pushed back due to delays in getting regulatory approval, a person with knowledge of the deal said Friday.

Grand Twins International (Cambodia) PLC completed taking orders for its up to $28 million IPO last month, and had been planning to list in early May. Cambodia's securities regulator was due to give its final approval for the IPO on Friday but delayed its decision by more than a week, as officials "need some time to review the results of the book-building," the person said.

Officials may give their approval on April 23, which means the listing—initially set for May 8—could be delayed by "a few days," the person added.

Grand Twins, which has production lines in Cambodia, plans to sell eight million shares, or 20% of the company, for between $1.85 and $3.50 apiece, according to its preliminary prospectus. But the book-building, or order-taking process, showed that demand was tepid, and the offering is likely to be priced between $2.40 and $2.50 a share, people with knowledge of the deal said.

Interest in the Grand Twins offering has been hurt by concerns over the prospects of Cambodia's garment industry, which is plagued by labor unrest and rising costs, the people said. Even so, they still expect the deal to go through and add a second stock to the Cambodia Securities Exchange, which hasn't hosted a listing since the Phnom Penh Water Supply Authority's trading debut in April 2012.

An official at the Securities and Exchange Commission of Cambodia declined to comment. Grand Twins didn't immediately respond to a request for comment.

Cambodia's stock market has foundered since hosting its first-ever listing two years ago, the $20 million flotation of state-owned Phnom Penh Water Supply Authority. Two other state-owned enterprises—a telecommunications firm and a port operator—were slated to list by the end of 2012, but those plans have been shelved.

Other IPO candidates have either struggled to meet regulatory requirements or decided to hold off until the market gains depth and liquidity. Grand Twins, for instance, had mulled listing as early as 2012, but delayed its plans over compliance issues and concerns about market liquidity, its IPO underwriter had said.

Grand Twins, whose primary customer is German sportswear firm Adidas AG ADS.XE -1.54% , made $54.9 million in revenue in 2012 mainly by exporting to apparel retailers in Europe and the U.S.

In its prospectus, the company said it would use the IPO proceeds to add two new production lines, grow its head count to 6,000 from about 5,600 currently, fund its working capital needs and repay bank loans.

Analysts have said that Grand Twins—one of hundreds of garment makers in Cambodia—faces a tough time courting investors amid labor unrest in the country's largest export industry.

Tens of thousands of garment workers went on strike from late December to early January to press for higher salaries, and unions have threatened fresh job actions unless labor officials raise the industry minimum wage to $160 a month—$60 more than the government's latest offer.

Several garment-worker unions plan to stage a strike next week, by calling on workers to stay home for five days after the Cambodian New Year holidays end on April 16.

Write to Chun Han Wong at chunhan.wong@wsj.com

 

Corrections & Amplifications

 
Cambodia's second IPO is set to be pushed back due to delays in getting regulatory approval. A previous version of this article, and the initial headline, said that the IPO would be delayed due to regulatory approval.