SERC, CSX Review MJQE’s Mainboard IPO Application

Mengly J Quach Education Plc is ready for its debut on CSX after two attempts in the last 10 years. IPO is planned early April, with proceeds of $10 million earmarked for the expansion of education and healthcare centres in every corner of Cambodia
MJQE chairman and CEO Mengly Quach. Kiripost/Siv Channa
MJQE chairman and CEO Mengly Quach. Kiripost/Siv Channa

The Securities Exchange Regulator of Cambodia (SERC) and Cambodia Securities Exchange (CSX) are studying education sector player Mengly J Quach Education Plc (MJQE)’s listing eligibility review and initial public offering (IPO) application.

The Phnom Penh-based company, whose documents have been submitted in stages since January 26, will break the three-year IPO hiatus on the Mainboard, making it the eighth issuer after Malaysian-owned Pestech (Cambodia) Plc in 2020.

The IPO idea for MJQE was first mooted 10 years ago. The listing plan this year is its third attempt to issue shares on CSX and is finally ready to go public in the beginning of the second quarter of 2023.

“We were prepared to launch an IPO around 2019 but the economy was not so good and many Chinese nationals left, after that Covid-19 happened,” MJQE chairman and CEO Mengly Quach said last month.

Predating that, interest to launch an IPO in 2012 waned as the newly-established stock market failed to excite investors.

“Our EBITDA (earnings before interest, taxes, depreciation and amortisation) was also not strong due to rapid expansion in a short span of time,” he said.

“We set up three campuses within a year, which dragged our EBITDA and profit margin. If we had issued an IPO, we would have had to lower our issue price.”

Subject to SERC’s approval, MJQE’s IPO issue price is expected to range between 2,000 and 8,000 riel. It plans to put up to 10 percent of equity in the company for public shareholding. RHB Securities (Cambodia) Plc is acting as its underwriter.

Once listed, MJQE would be CSX’s first IPO for this year. The early stage index’s full market capitalization grew 2.3 percent year-on-year to 16.6 trillion riel (approximately $4.04 billion) in the fourth quarter ended December 31, 2022.

Currently, Mainboard counters consist of Acleda Bank Plc, which was the record largest IPO, Grand Twins International (Cambodia) Plc, Phnom Penh SEZ Plc, Pestech and state-owned entities – Sihanoukville Autonomous Port, Phnom Penh Autonomous Port and Phnom Penh Water Supply Authority.

Founded by Mengly in 2005, MJQE looks to raise approximately $10 million to expand its footprint by setting up schools in “every corner of Cambodia”, as well as diversifying into other segments of education and healthcare.

This includes a university, medical and health institution, international and trade schools, a school for children who are mentally or physically challenged, and several social projects.

One of the major projects is to raise the level of medical education, said Mengly, a US-medically trained doctor, so that Cambodians have access to quality and ethical medical treatment in hospitals.

The group owns and operates the American Intercon School (AIS), Aii Language Centre (Aii), Study Overseas Go Overseas and i-Learn, offering pre-kindergarten education to university preparation programmes.

He said Cambodia is still way behind in terms of education and needs schools, universities and technical trade schools of good standards for youths. “We don’t have enough schools to train them, or conduct internships or fellowships. So, health and education are fundamental sectors for development and growth.”

‘First to launch IPO’

In the pipeline for expansion are 145 integrated campuses, planned in strategic locations in all provinces over the next few years, with 15 campuses already secured.

There is “a lot of education and fields to open up” to provide skills and knowledge to young Cambodians, who make up 70 percent of the population, to prepare them as the country moves into high income status by 2050.

“We have hundreds of locations we are looking at, which were requested by people who asked us to set up schools there. This shows their strong trust and confidence in our company and staff,” Mengly told Kiripost via Telegram.

Accordingly, MJQE aims to offer 10 percent stake in its company to investors, particularly parents of students who study in its schools, in order to participate in the company’s growth.

“Our school is among the largest in Cambodia, with quality education and awards from the Ministry of Education, and Youth and Sports, which is why we believe it would be good for Cambodians to have some ownership over the school.”

He hopes to make education available for children of various income strata and abilities. “We want the schools to be affordable and for them to study comfortably and in a safe and healthy environment. Our schools are not for the rich and famous or for the able-bodied only but for everyone,” he said.

In the 17 years of its establishment, his company has not received any foreign investment or major foreign shareholding, making it a pure Cambodian venture in the education sector to be the first to launch an IPO.

“We are very proud of our accomplishment. We are showing the international world that if we can do it, any small- and medium-enterprise can do it,” he said.

‘Spend, open up, do business’

In the meantime, the company is calling on investors to indicate interest and request for pre-allocation of shares, a process that will end on March 10.

Since last month, Mengly said, demand has been rising, with “many people calling”, including Cambodians in the US and South Korea, to enquire about the IPO and to “pre-book shares”.

“The issue price will be reasonable, so Cambodians can afford it and be part of the company. We hope to finalise the issue price by the third week of January,” he added.

Commenting on the timing of the IPO, he said Cambodians highly value education, where the perception is that “school is a must”, regardless of anything. “They don’t want their kids to miss school. They will do anything or pay for the education for their children to go to school. This is the mentality of Asians. Education is a priority, sometimes beyond their own health,” he said.

Hence, his decision to list in 2023, which falls in line with the government’s mandate to prioritise education and health.

He added that the Cambodian economy will start recovering once Chinese tourists visit the country, citing Prime Minister Hun Sen’s gross domestic product growth projection at 6.6 percent this year.

In addition to the impending general election, he is confident the economy will remain stable, thereby attracting more foreign direct investment.

“Everyone is pessimistic about the global economy, that there is going to be a recession, but I think Cambodia will pull out of it. I don’t think the war will drag on and the Chinese government relaxing Covid-19 restrictions is good news,” he said.

He opined that some countries paid “too much attention” to the recession and are “not spending money”, which can “cause more worry and devastation”.

“People should not worry too much. They should spend, open up and do business as normal. Otherwise you are dragging down the market,” he said.

Though this may result in “lower stock valuation” and reduce the size of the capital market, he said, education, healthcare and finance are sectors that will remain resilient to recession and pandemics. “There cannot be an oversupply or [a] shortage of clients.”

Thus, Cambodia’s focus on education and health fulfills the demand to move forward for the sake of its young generation.

MJQE’s vision to build more schools, medical and technical skills institutions, as well as healthcare centres in provinces are within the ambit of Cambodia’s growth process, he added.