Market Report

Royal Railway Back in the Black in Q1’23

Following a dismal 2022, Royal Railway recorded a net profit of $625,049 for the quarter ended March 31, 2023 while experiencing with net negative cash flow
A train station in Phnom Penh, September 19, 2022. Kiripost/Siv Channa
A train station in Phnom Penh, September 19, 2022. Kiripost/Siv Channa

Bond issuer Royal Railway Plc recouped losses to return to the black with $625,049 net profit in the first quarter ended March 31, 2023 (Q1’23), its filing with Cambodia Securities Exchange today showed.

In Q1’22, the sole rail service provider, owned by tycoon Kith Meng’s Inter Logistics (Cambodia) Co Ltd, recorded a net loss of $382,818.

It ended the fiscal year 2022 in the red with a wider net loss of $4.1 million from 2021.

Meanwhile, Q1’23 revenue slipped 9.5 percent to $2.7 million from nearly $3 million a year ago, largely due to seasonality of the freight business.

It also expressed concern over the “significant impact” to its financial conditions and results for the first quarter of 2023.

The company said this was due to the increasing cost of services, particularly fuel costs, as well as the increase of allowance of provisions for expected credit losses on trade receivable and balance at banks.

Its filing also revealed that tax on income was reduced this quarter, calculated on the amount apportioned for the tax loss carried forward in Q1’23, having incurred the loss before income tax last year.

The tax on income expense will be calculated again in the financial year ending December 31, 2023, as such Royal Railway “paid only the minimum tax on revenue”.

In addition, the company received an approval from the General Department of Taxation to waive tax liabilities of $1.8 million from unpaid taxes between July and November 2018, and from January 2019 to February 2020.

The request to waive the taxes was made as part of its eligibility to listing incentives via the Securities and Exchange Regulator of Cambodia.

In the meantime, the company showed that although net profit was recorded in Q1’23, it generated a net negative cash flow from operating activities amounting to $1.01 million as opposed to $151,083 in Q1’22.

As of March 31, 2023, accumulated losses totalled $14.7 million, down from $15.3 million as at end-December, 2022.

On this basis, it said the validity of its going concern rests on the continuity of financial assistance by its ultimate shareholder, to meet its liabilities “as and when they fall to maintain its existence as a going concern in the foreseeable future”.

The company operates passenger and freight railway networks to the northern and southern parts of the country. Its core business involves freight services, such as delivery of fuel, cement, ballast and bulk rice, and containerised freight, warehousing, and customs and excise clearance.

Royal Railway’s first corporate bonds, which raised 41 billion riel (around $10 million), has a 10-year maturity period with a coupon rate of seven percent per annum.

The second bond, broken into two series with differentiating coupon rates and maturity, is guaranteed by GuarantCo Ltd as a private placement bond to qualified investors.