The Phnom Penh Autonomous Port (PPAP) is to list on the Cambodian stock market, listing sponsors Yuanta Securities have said via their website.

PPAP will issue 4,136,873 Class A Voting shares at between CR4,405 (US$1.08) and CR6,320 (US$1.55) per share, PPAP’s prospectus added. If all goes according to plan, shares will start trading on the Phnom Penh bourse on December 11.

PPAP is not just a port but alsothe hub of Cambodia’s logistics network, as goods manufactured around Phnom Penh are then barged down the Mekong River to ports in Vietnam. A second trade route supplies Cambodia’s major coastal port at Sihanoukville overland.

What investors are buying is not just this but a business strategy based on three pillars: “improving and strengthening, expanding, and diversifying,” as the prospectus puts it.

This brings with it some impressive future plans among them one to improve the cargo-handling capacity of PPAP’s LM17 port to 300,000 TEUs during Phase II. After that, in Phase III, the goal is for LM17’s cargo-handling capacity to reach 500,000 TEUs. Supplementing this, the prospect adds, is a move to equip ports LM17, TS3, UM2 and Mekong Sentosa Logistics (MSL) with general cargo-handling equipment.

Of the three pillars, the latter two are the more interesting with expansion being planned not only at the New Container Terminal but also in provinces including Kampong Chhnang, Kratie and Kampong Cham.

PPAP plans to increase its reach within Cambodia not just in terms of where its facilities are, but also in terms of what services are offered. “The expansion will cover facilities for container traffic, general cargoes, bulk cargoes as well as tourists,” the prospectus said.

In terms of diversification, PPAP plans to grow by venturing into businesses that “may complement its current business activities.” One the prospectus mentions is an Inland Container Depot (ICD) at the port.

Another one – mentioned but not detailed – is cooperating with shipping companies and barge operators using the Mekong route, Mekong Vam Nao and Bassac or any other applicable multi-modal transport.

This, it acknowledges, will require government support, especially in terms of infrastructure development such as additional access roads and rail network to port facilities.

Balancing these plans and the optimism behind them, the prospectus also flags some risk factors. In fact, rather a lot of these are mentioned, including the suggestion that it is wise for investors to deliberate putting money on infrastructure in an economy which is sometimes more of a frontier than an emerging market.

Risks also include the usual interest rates and exchange rates and two industry risks: the trade volumes of Cambodia, which the prospectus said “are especially susceptible to changes in the economic, political, and social conditions in Cambodia and the wider region,” and being part of a logistics chain. “If PPAP’s hub ports or other ports part of the logistics chain increase tariff, the company may be exposed to the risks of reduced competitiveness and loss of customers to other means of transport,” the prospectus noted.

It also listed 13 operational risks which included such vulnerabilities as heavy consumption of electricity, having no insurance coverage and plans by the Cambodian government to raise the minimum wage to US$160 per month.

Another was port operations at LM17 partly relying on services provided by third-party vendors. “In the event that one or more of the [third]-party vendors cease operations, there may be no assurance that PPAP would be able to substitute such vendors and equipment promptly or under commercially reasonable terms,” the prospectus added.

One element that will need to be watched because of the size of the project is the effects of plans to build a large number of big hydroelectric dams on the upper parts of the Mekong River, which “may lower the water level of the lower-stream countries,” the prospectus warned. “In addition, it may accentuate the effects of seasonality of the Mekong River.”

Market-related risks include PPAP’s business being dependent on a small number of regional shipping lines, the possibility of being unable to raise tariffs in a timely manner to cover increased expenses and competition from Sihanoukville Port and on-land logistics companies.

By Michael Mackey

Southeast Asia Correspondent | Bangkok