Kolao revs up its investment
Revenue rises in Q3 at capital’s water firm
KOLAO Group, a South Korean-owned automaker and distributor, plans to build factories in a proposed industrial park in Cambodia to assemble its proprietary line of automobiles and motorcycles, a company executive said yesterday.
Lee Jae Hoo, country head of Kolao Group (Cambodia) Co Ltd, said the Korean-listed parent company intends to invest $100 million to establish a special economic zone (SEZ) in Bavet near the Vietnamese border. The 112hectare industrial park will include two vehicle assembly plants and a dry port.
“We plan to start operation in September 2017 with $100 million as our initial investment,” he said, adding that the company would soon submit its investment plan to the Council for the Development of Cambodia (CDC) for approval.
Kolao Group manufactures Kolao motorcycles as well as trucks and pickups under its Daehan brand. The company has operated in Laos for nearly 20 years, where it has 20 showrooms and a sales network of nearly 350 dealers.
The group entered the Cambodian market in 2013, operating as KR Motors, and opened a showroom in the capital last year for its motorcycles. At least 500 units have been sold to date, its management claims.
Lee said the decision to invest further in Cambodia came after studying the market for two years. He said the company was impressed with the government’s Industrial Development Policy (IDP), as well as the Kingdom’s social stability and labour pool.
“We decided to invest here as we like the IDP and the government welcomes foreign direct investment,” he said.
Lee said the Kolao’s $100 million investment would be used to establish its own SEZ and two assembly plants for imported complete knock-down (CKD) vehicles.
“We will start car and motorcycle assembly factories as the first step,” he said. “After that, we will start a fullproduction factory.”
The assembly plants will produce 30,000 trucks and 50,000 motorcycles a year, according to Lee.
“We know that Cambodia has no car factories yet, so there is still a lot of opportunity for us here compared to Thailand and Vietnam,” he said.
He added that the launch of the ASEAN Economic Community (AEC) last year would eventually remove all tariff barriers within the region, giving the Cambodian plant duty-free access to a combined population of over 600 million.
According to Mao Kunthea, general manager of Kolao Group Cambodia, the company’s two factories will assemble CKDs of Kolao motorcycles and Daehan trucks, as well as the vehicles of South Korean automaker SsangYong.
“We have a license from SsangYong to assemble their vehicles,” she said.
“And once we improve our technical skills we will have our own production line.”
Sam Serei Rath, undersecretary of state at the Ministry of Commerce, who has toured Kolao Group’s assembly plant in Laos, said the South Korean company has vast experience in vehicle manufacture and sales, and its investment would benefit Cambodia’s economy.
It also makes good business sense for Kolao Group.
“It will help them to achieve profits as Cambodia’s investment law provides tax benefits, such as exemptions on exports,” Serei Rath said. “In addition, we have a younger and more energetic workforce for their industry compared to neighbouring countries.”
South Korea was one of the 10 largest investors in Cambodia last year, and at least one Korean automaker, Hyundai, has invested in an assembly plant here.
Economist Kang Chandararoth said inflows of Korean investment have grown on both the potential of Cambodia’s domestic market, as well as its connections to neighbouring Southeast Asian markets.
“The flow of Korean investment . . . will attract other investors in the same sector,” he said.
“Cambodian workers at the factory will see their incomes rise while acquiring better skills.” THE capital’s listed water utility posted higher revenue against lower earnings during the third quarter of the year in a filing to the Cambodian stock exchange yesterday.
Phnom Penh Water Supply Authority (PPWSA) saw its revenue rise by $1 million, or 8 percent, year-on-year to $13.9 million during the third quarter. Net profit fell by $98,000 to $2.6 million during the period, a 3.7 percent drop compared to its third quarter net earnings in 2015.
Stronger revenue in the third quarter was not enough to lift the company’s weaker year-todate performance.
Total revenue for the nine months through September amounted to $39.5 million, a decrease of $2.2 million or 5.4 percent, compared to the same period in 2015.
Net profit during the first nine months was also down, totalling $7.6 million, a 23 percent decrease compared to the same period a year earlier.
Basic earnings per share for PPWSA’s 86.9 million listed shares amounted to 118 riel during the third quarter with no dilutive potential ordinary shares.
The stock’s dividends are typically distributed in April, with a total dividend of $3.3 million, amounting to 152 riel per share, paid earlier this year.
The company said it expects net profit to rise in the fourth quarter, projecting not less than $2.74 million.
PPWSA, the municipal water utility that serves Phnom Penh and its surrounding area, was Cambodia’s first public-listed company.
The company’s shares on the Cambodia Securities Exchange (CSX) closed down 20 riel yesterday at 4,080 riel in low-volume trading.