Cambodia Investment Review

ACLEDA Board Highlights Long-Term Growth Potential Despite 50%+ Price Drop from IPO, Only 1% of Shares Expected to Trade at Current Price

ACLEDA Board Highlights Long-Term Growth Potential Despite 50%+ Price Drop from IPO, Only 1% of Shares Expected to Trade at Current Price

Cambodia Investment Review

Cambodia’s only publicly traded commercial bank, ACLEDA Bank Plc (CSX: ABC), has seen its share price fall to its lowest level since its IPO in 2020. The current share price stands at approximately 7,600 riels, down from the initial 16,200 riels and a record high of over 22,000 riels shortly after the IPO.

The recent decline in ACLEDA’s share price was largely driven by investor reactions to the bank’s decision to distribute only 10 percent of its net profit as dividends for 2023 as well as ongoing concerns of large share selloffs by staff.

Read More: ACLEDA Bank’s Net Profit Down 20% to $138.3M in 2023 Amid Rising NPL Rates

Investors Disappointed With The Lower Dividend Payout Ratio

Kim Sophanita, Director of Market Operations at the Cambodia Securities Exchange (CSX), commented on the situation, telling Kiripost at the time, “Acleda had a 40 percent dividend payout ratio, or an average of 545 riel per share over the past three years. However, this reaction is to be expected as our investors view the dividend stock and the stock market as another source of income for their investment.”

She explained that income investors might be disappointed with the lower dividend payout ratio because it reduces their immediate cash returns. However, she added, “Long-term investors, who prefer strong growth companies, will see Acleda as a good investment as it has more working capital to reinvest in the coming years.”

ACLEDA Bank (CSX:ABC) share price from IPO.

During the General Shareholders’ Meeting on April 25, 2024, ACLEDA Bank’s shareholders voted with a 98.45 percent approval for the distribution of a cash dividend at 10 percent of the 2023 profit attributable to owners of ACLEDA Bank, totaling KHR 60,850,524,327.63 at KHR 140.4795 per share. The remaining balance of the 2023 profit will be transferred to retained earnings, according to a statement from the bank.

Potential To Magnify Returns For Them In The Long Run

“The dividend distribution results in a reduction of the shareholders’ investment in the bank (equity, book value), although the remaining earnings are retained within the bank for ongoing and future business activities,” ACLEDA Bank explained. “Shareholders strongly believe that the bank has comprehensive strategic plans for investing the retained earnings in high-return businesses, which have the potential to magnify returns for them in the long run.”

Read More: Morgan Stanley Firm Buys $43M Of Acleda Bank Shares

Speaking to Cambodia Investment Review Ms. Mar Amara, Group Chief Financial Officer, and Chief Operating Officer of ACLEDA Bank Plc, emphasized the bank’s commitment to excellence and long-term growth.

Ms. Mar Amara, Group Chief Financial Officer, and Chief Operating Officer of ACLEDA Bank Plc

“As expressly stipulated in the vision, mission, and slogan of ACLEDA Bank, we always make a determined and concerted effort with unwavering will and commitment to excellence to provide banking and financial products and services to our customers and to ensure the success, growth, and prosperity with robustness, resilience, and sustainability on the foundation of good corporate governance, customer centricity, and innovation for the best interest of all customers, staff members, shareholders, the general public, and stakeholders,” she said.

1% Of Shares Expected To Be Traded At Current Price

Ms. Mar Amara also highlighted the rationale behind the dividend decision, noting, “Taking into consideration the current contextual landscapes, risks, challenges, opportunities, and strategic directions for the financial year 2023, the bank’s shareholders have approved the dividend distribution of 10 percent of the net profits during the AGM on April 25, 2024, to support the bank’s consistently substantial contributions to Cambodian resilient and sustainable socio-economic development.”

Reflecting on the bank’s IPO, ACLEDA Bank noted, “The underwriter and public investors initially valued the bank’s share at KHR 16,200, equivalent to 1.72 times the share price over its book value (KHR 16,200/KHR 9,414). Trading prices remained above the IPO price until June 15, 2021, when the bank allowed existing shares to be traded on the CSX.”

Ms. Mar Amara added, “We believe that only about 1 percent (4 million) shares would be traded at the current price, as some shareholders may need urgent cash for other purposes, while the other shareholders hold the intrinsic value of the share price based on a share price to book value ratio of 1.72, i.e., KHR 22,500 (1.72*KHR 13,070). They also have strong convictions that the bank will continue to create value and realize the best interest for them and all relevant stakeholders in the long run.”

ACLEDA, the second-largest commercial bank in Cambodia by asset value, experienced an 18 percent decline in net profit in its 2023 financial year, reporting 608.4 billion riel ($150.4 million) compared to its record net profit of 743.1 billion riel ($183.7 million) in 2022.

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