Laos: Numbers add up for inaugural IPOs

Laos: Numbers add up for inaugural IPOs

Laos, according to the IMF, is one of the world's poorest countries. But that hasn't deterred Laos which, in December, officially presented initial public offerings (IPOs) for two state enterprise icons, namely the Bank pour le Commerce Exterieur Lao (BCEL) and the Electricite du Laos (EDL) Electricity Generation Public Company.

The Lao Securities Exchange Commission announced the two enterprises must sell at least 80 percent of their issued shares to be listed and commence trading by January 11.

The successful IPOs for the Lao bourse means Vientiane has leaped ahead of counterparts Cambodia and to a lesser extent Myanmar in the race to establish the last remaining financial centres for Asean members.

Impressively the Lao IPOs were both on time and on track. The Lao Stock Exchange (LSX) opened on October 10 this year and is scheduled to begin trading on January 11, 2011. The past week has exceeded a lot of observers' expectations, with two successful IPO launches, which immediately generated a lot of strong demand through local and international investor support.

Laos is quickly proving it is the quiet achiever in Southeast Asia. Without a lot of fanfare the IPOs were announced with a highly unusual timeframe of only one week to subscribe.

Normally subscriptions last at least a month, but for BCEL it wasn't a problem and its share issue was oversubscribed. EDL found it tougher but is confident of meeting the 80 percent sale figure.

After analysing the IPO prospectuses it is very obvious that both had key strategic partners who would take up major holdings on offer and our bullish sentiment then was that they may be oversubscribed. Also, staff at both organisations were given a generous one-off discount to partake in the IPOs.

First out of the IPO starting blocks was BCEL when the LSX held its historic first-ever bidding for shares. This was led by the underwriter facilitator and broker team at Lane Xang Securities, the Development Bank of Laos and the Sacombank Securities Company of Vietnam. The team certainly did their homework, confirming our expectations, when 34.58 million BCEL shares were over subscribed by a premium 170 percent of the offered shares.

The BCEL share bidding proved erratic and reflected the inexperience of a few investors, with bids ranging from a low of 5,000 kip (US$0.62) through to a massive high of 50,000 kip (US$6.20).

It confirms the general consensus that more public education is needed, but it's early days. In the BCEL bidding process there was very strong interest with over 400 investors and 11 organisations registering and competing in the bidding. On average each share was sold at 5,910 kip (US$0.73). That's an 18.2 percent gain on the opening IPO price, with 372 investors successful in purchasing shares worth 121 billion kip (US$15.02 million).

EDL Electricity Generation Public Company, the national energy producer, meanwhile has had good volume orders but on Friday the company extended its subscription deadline, offering 217 million shares to both Lao and foreign investors at the initial price of 4,300 kip (US$0.54 cents) per share. It is not confirmed, but foreign investors would probably have already snapped up available shares, but there is optimism that the Lao portion of the IPO will surpass the LSX 80 percent requirement. 25 percent of the company's enlarged capital is on offer including employee participation, domestic investors and their foreign strategic and JVP counterparts.

The last regional exchange to open was Vietnam in July 2000, but post-global financial crisis it is having a lean time at the moment although it has been hugely successful in capital raising with some 150 securities now listed, and the securities market makes up around 35 to 40 percent of GDP.

Cambodia is due to open in the middle of 2011 after a slight setback in 2010. The Myanmar stock exchange was closed in the 1960s and a muted reopening was bandied around during 1995 but it never eventuated. It may now be an opportune time for Myanmar to reconsider the establishment of a stock exchange sometime in the future.

vientiane times