Royal Railway Plc, a wholly-owned subsidiary of tycoon Kith Meng’s Royal Group of Companies Ltd, has listed 410,000 bond units with a 10-year maturity on Cambodia Securities Exchange (CSX), raising $10 million for upgrades on the railway line and the purchase of new equipment.
The corporate bond, which has an issue price of 100,000 riel and a coupon rate of 7 percent, is Royal Group’s second subsidiary after Telcotech Ltd, which listed $20 million worth of bonds on the stock exchange in September last year.
Royal Railway’s bonds are split into two, with the second phase issuance expected later this year, with proceeds of $20 million planned.
“The bond [proceeds] will be used to upgrade the railway line, wagons and locomotives [and for investment] in new equipment that will further modernize the railway,” Royal Group chairman Kith Meng said at a bell-ringing event to mark the listing of the bonds, which took place inside a train cab.
According to him, 130 wagons – the first shipment of a total order of 340 wagons – and four locomotives will arrive soon.
The railway company operates freight trains, which transport containers, fuel, cement and rock, as well as passenger trains running daily between Sihanoukville and Battambang.
The first railway line was built between Phnom Penh and Battambang in 1932 and later expanded to Sihanoukville and Poipet. In its 90-year history, it has witnessed the growth and tumultuous years of Cambodia. The railway tracks fell into a state of disrepair over time and operations stopped in 2007.
In 2009, Kith Meng partnered with Australian firm Toll Holdings Ltd in a $140 million joint venture project to rehabilitate and operate the railway service under a 30-year concession awarded by the government
However, Toll pulled out of the partnership in 2014, allegedly leaving Royal Group to complete the restoration works and maintain operation on its own. The track spans 612 kilometers.
“The railway started operating again in 2010. Since then, I have invested over $100 million and [restored] the railway to its current condition. Passenger and freight trains now operate seven days a week on both lines between Phnom Penh and Poipet and Sihanoukville,” Kith Meng said, adding that freights increased 34 percent between 2017 and 2021.
Royal Railway bonds represent the eighth fixed-income securities listed on CSX, with another three bond listings expected by the end of 2022.
Corporate bond issuance has grown steadily recently as companies have access to low-cost, long-term capital and are able to receive tax incentives from the government to boost their market share, said CSX CEO Hong Sok Hour.
However, he hopes that corporations will consider launching initial public offerings on CSX to enable shareholders to take part in company growth.
“It would also create value for the business and attract investors. I hope Kith Meng will bring [his] other subsidiaries to raise capital by listing shares or bonds on CSX,” Sok Hour said.
On the stock market, he said average daily trading volume has increased 138 percent year-on-year to 266,289 shares in the third quarter of 2022, valued at $656,051. Trading accounts increased to 35,000 as of September 30.