Cambodia Investment Review

Phnom Penh Autonomous Port shareholders request increase in dividend payout

Phnom Penh Autonomous Port shareholders request increase in dividend payout

Harrison White

Shareholders in the publicly traded but majority government owned Phnom Penh Autonomous Port (CSX:PPAP) have voted against the ports annual dividend of KHR 332.8 a share explaining that since listing in 2015, earnings are up 300%, but the dividend is up just 30%.

The company’s 2021 annual dividend for Class A shareholders was KHR 332.8 or 6.5% of the stocks 2015 IPO of KHR 5,120 and was ultimately approved with government shareholders holding 80% of total voting stock.

PPAP posted a strong after tax profit of $12.6 million in 2021 up from $10 million in 2020 and 14% higher than forecasted. The total dividend amounted to KHR 4,376,751,334 or $1.08 million (Class A: KHR 1,376,751,334 and Class B: KHR 3,000,000,000) with a total payout ratio of just 8.46% (Class A: 2.66% and Class B: 5.80%).

To read more about PPAP’s 2021 results click here.

The stock’s current share price is trading around KHR 15,500 a share with the second lowest price-to-earnings (P/E) ratio on the exchange at 6.34. The P/E ratio helps investors determine the market value of a stock as compared to the company’s earnings.

When the stock first listed its IPO came with a minimum guaranteed dividend yield of 5% or more applicable for at least 5 years after listing and only available for the shareholders of Class A shares.

Dividend should grow with profit

Speaking to Cambodia Investment Review after the annual general meeting Stephen Higgins from Mekong Strategic Partners who holds 6.67% of total voting shares expressed his continued frustration with the perceived low dividend yields.

“Like most port operators, PPAP has significant investment needs, which we fully support. However since the IPO, earnings are up 300%, but the dividend is up just 30%, which is an extraordinary difference that just can’t be justified,” Higgins said.

“Even if PPAP reverted to the payout ratio at the time of the IPO, they’d still be retaining over 80% of their earnings for investment purposes. Operationally, PPAP is the standout company on the CSX, but the share price would be more than double what it is today if they had a sensible dividend policy,” he added.

Phnom Penh Autonomous Port listed on the stock market in 2015.

In 2019, Higgins’s advisory firm released a report the stated comparing profit to earnings, PPAP is trading at least 48% discount to its peer, outlining this was a conservative estimate of peer comparison analysis.

“Their payout ratio is way below peers across the region, even though most ports have similar investment needs, and we just don’t understand it. Anyone buying PPAP shares today is getting a dividend yield of just 2%, which is basically putting a cap on the current share price,” Higgins added.

Long-term dividend agenda

In response, Deputy Director-General of PPAP Hei Phanin has previously told Cambodia Investment Review although the five years 5% dividend guarantee has now ended the board of directors has always expressed the hope to maintain or continue the positive growth of the company’s dividend policy.

Han Kyung Tae from brokerage firm Yuanta Securities commented that PPAP’s share price has generated an outstanding capital gains for the shareholders so far and the fundamentals of business as well as its prospects remain solid.

However he added when it comes to the company’s dividend policy, it seems to have not been so clearly explained to public shareholders.    

“The company’s dividend policy is a crucial part of asset allocations decision by the management and board of directors (BOD) on behalf of shareholders. The company management and BOD are responsible for allocating its net profit, which belongs to the shareholders, in a way to maximize the value of the company and in turn make the best use of shareholder’s money,” Han Kyung Tae said.

“So while I fully appreciate the superior performance of PPAP’s stock price, I hope that the company will communicate to the public the rationale of its dividend policy and each year’s dividend payment decisions in a clearer and more effective manner,” he added.

The company which exclusive rights to operate within Phnom Penh’s 166-kilometer Port Commercial Zone and operates under the supervision of the Ministry of Public Works and Transport and the Ministry of Economic and Finance.

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