Market Report

Royal Railway Stays in Red in Q2

Sole railway operator in Cambodia, Royal Railway, records prevailing net loss in the second fiscal quarter amid a slight uptick in revenue
Children run near railway track in Preah Sihanouk province. Kiripost/Siv Channa
Children run near railway track in Preah Sihanouk province. Kiripost/Siv Channa

Bond issuer Royal Railway Plc continues to experience net losses in the second quarter ended June 30, 2023 (Q2’23), according to its delayed filing with Cambodia Securities Exchange yesterday.

Net loss widened to $1.94 million from $1.17 million a year ago, as revenue inched up 2.02 percent year-on-year (YOY) to $2.66 million compared to $2.61 million.

The increase in losses was a result of higher operating and administrative expenses and finance costs that were paid to investors related to debt securities, it said.

The firm issued bonds twice in 2022 to expand the rail services, upgrade wagons and locomotives, and purchase new equipment.

Its 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 - raising $24 million in proceeds - was broken into two series with differentiating coupon rates and maturity. The bonds are guaranteed by GuarantCo Ltd as a private placement bond to qualified investors.

Royal Railway, which is 98 percent-owned by Inter Logistics (Cambodia) Co Ltd, has a 30-year concession agreement to operate Cambodia’s sole railway service.

The remaining one percent is held by tycoon Kith Meng, whose conglomerate Royal Group of Companies Ltd owns Inter Logistics.

The company operates passenger and freight railway networks to the northern and southern parts of the country, it said.

“The core business is freight services, involving the delivery of fuel, cement, ballast and bulk rice and containerised freight, as well as warehousing, customs and excise clearance,” it added.

Meanwhile, its six-month period ended June 30, 2023 showed that net loss grew marginally to $1.59 million from $1.55 million a year ago, while revenue slipped 4.1 percent YOY to $5.36 million compared to $5.59 million.

Royal Railway said the validity of the going concern assumption “fundamentally depends on the ultimate shareholder's continuing to provide financial assistance that is necessary to meet its liabilities as and when they fall”.

The financial assistance would be used to also maintain the company’s “existence as a going concern for the foreseeable future”.

At the date of these condensed interim financial statements, the ultimate shareholder has “confirmed” to continue providing sufficient financial support.

“There is no reason for the company’s management to believe that the ultimate shareholder will not continue his support,” Royal Railway said.

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