PHNOM PENH, Cambodia — Despite the ongoing labor unrest that has dogged the garment sector for the past six months, a Taiwanese-owned apparel manufacturer will be the first private company to list on Cambodia’s nascent stock exchange, with the initial public offering due next month.

Grand Twin International’s IPO has been delayed repeatedly, with underwriter Phnom Penh Securities revealing Thursday, the day of the company’s planned debut, that it would be postponed yet again to June 12. Multiple public holidays in May caused delays in the finalization process, said Sok Chamroeun, advisory manager of PPS.

If successful, Grand Twins’ entry will come more than two years after the IPO in April 2012 of Phnom Penh Water Supply Authority — which remains the only company listed on the Cambodia Securities Exchange (CSX).

Grand Twins has sold 8 million shares, or 20 percent of the company, at $2.41 a share in its IPO, valuing the firm at $19.3 million. The price is below the midpoint of the indicative range of $1.85 to $3.50 a share, which would have valued the group at a maximum of $28 million.

Stanley Shen, a spokesman for the garment maker, said the company was “satisfied” with the price, as generating interest among investors was the ultimate goal.

“As the subscription results show, it is oversubscribed,” Shen said in an e-mail. “In other words, there are great demands in the market at this price. Once GTI is listed in the market for trading, investors will bid up the price…and this is a win-win situation for both GTI and investors.”

Grand Twins is the leading manufacturer in Cambodia for Adidas and has been operating for more than 10 years, said Shen. The factory plans to generate $9 million in profits in 2014, a 25 percent increase compared to $7.2 million last year.

Proceeds from the IPO will go to expanding production lines and building another factory, said Shen, who remains unconcerned about the unstable labor relations currently plaguing the sector.

For the past six months, the apparel industry has experienced frequent demonstrations calling for a raise to the country’s minimum wage. The protests came to a head on Jan. 3 when government security forces opened fire on rioting workers, killing at least five and leaving more than 40 people injured. Since then, major clothing brands and international unions have raised their concerns to the government about its political instability and lack of respect for workers’ rights. Levi Strauss & Co. has reduced its orders in Cambodia because of these issues.

Shen is positive that such a tumultuous setting for the industry will not affect his company’s showing once it is listed on the CSX, due to Grand Twins’ treatment of its workers — whom he said earn more than the country’s current minimum wage of $100 a month.

“GTI [has never had] any strike record and we are not affected by the protest events at all,” Shen said. “Our average wage for workers is over $200, which is way higher than the minimum wage, and our workers are satisfied.”

Others are not so assured, as evidenced by the lower IPO price listing and the numerous delays in launching the listing, which was originally scheduled to debut in March 2013. Sok, the PPS advisory manager, said one of the reasons for the delay was because investors were cowed by the sector’s volatile and frequent demonstrations.

“There are a lot of people, especially Cambodian citizens, who are quite worried about factory situation…so that has some effect to the investors who want to buy this stock,” Sok said, adding that 80 percent of GTI’s investors are foreign, with great interest from China, Japan and Taiwan.

He also believed that the company’s listing could serve as a litmus test of whether the fledging stock market could succeed in Cambodia, a developing country where the business and finance sectors are still making headway.

“I can say that this case is very important and crucial for the Cambodian stock market because other companies and investors will look on it [as an example],” Sok said. “If this case fails, maybe it will be hard for other companies to list as well.”  

Once hailed by the government as a sign of the country’s maturing economy, the CSX offices today could be seen as a symbol of stagnated progress. The trading floor — a modest-looking room where brokers are supposed to spend their day — remains mostly unoccupied as brokerage firms have decided to conduct their work from their parent companies. 

Movement on PPWSA this year slowed following a post-election tumble, but trading has occurred most days in May, with a closing price on Tuesday of 4,820 riel, or about $1.20.

While there are plans for more companies to join PPWSA on the bourse — such as the Taiwanese-owned TY Fashion (Cambodia) factory — momentum on the CSX has faltered due to a lack of interest for potential IPOs. Srey Chanty, an independent economist, attributed this to the locals’ unfamiliarity with how a stock market works and the benefits of listing.

“Cambodia is on a slow learning curve,” Srey said, explaining that the requirements to list are high, and a company must have its finances and accounting fully audited. “I think most local businesses are running their own accounting record and the management is not good enough.”

In addition, the lack of transparency in both private and government institutions’ financial dealings is the rule, not the exception, and local companies may find the need for openness to be counterintuitive to doing business. 

“For Cambodian companies, it is very difficult. If you want to list your company, you have to be more and more open about how you are performing and how your business is performing,” Srey said. “Otherwise, no one would buy.”

Corruption — like the prevalent use of “facilitation fees” —also plays a part in a company’s difficulty in listing, he said.

“Any public institution, I think, they would perhaps have trouble with their accounting management and documentation and so on,” Srey said. “Of course, the government has tried to cut down on corruption, but it is piecemeal.”

Government entities that have aspired to list in the CSX but fallen short include Telecom Cambodia, the state-owned communications company. The reason given by the government for its failure to list was due to nonprofitability. This decision came not long after the company’s director-general resigned in February 2013, amid an investigation into allegations of corruption where staff members claimed that millions of dollars had vanished from the company’s accounts.

Hailed as a model factory and the second largest in the country, Grand Twins could serve as an example of the effectiveness of good management, healthy worker relations and sound financial book-keeping in Cambodia, said John Brinsden, vice chairman of the International Chamber of Commerce.

For example, issues such as having health care or retirement plans for workers could be resolved as companies would be worried that unhappiness among the workforce would affect their standing in the market. 

“I believe a good successful listing here will encourage others to think about transparency and think about taking care of their staff,” Brinsden said, adding that the dividends earned by local investors would be beneficial for the country’s economic development.

“It’s optimistic, but as with everything here, you have to work at it.”

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