After operating in Cambodia for more than two decades, Thai telecommunication company Samart Corporation Plc is looking for opportunities to expand to neighbouring countries to drive future growth of the group's airport navigation business.
The expansion beyond Cambodia is vital for Samart Aviation Solutions (SAV), the group's holding company in the country, which is set to float on the Stock Exchange of Thailand (SET) late next month.
Currently, SAV's main revenue comes from air navigation services in Cambodia via its wholly-owned Cambodia Air Traffic Service Co (CATS), the sole air navigation service provider in the country.
Established in 2001 as a local firm, CATS currently operates air navigation systems at six airports comprising three international airports in Phnom Penh, Siem Reap and Sihanoukville as well as domestic airports in Battambang, Koh Kong and Stung Treng in northeastern Cambodia.
CATS has a 49-year concession (2002-51) from the Cambodian government with 28 years remaining. The company has three sources of revenue from air navigation fees, including international landing and take-off which account for 26% of its total revenue.
Domestic landing and take-off contribute 0.9% of total revenue with 73.3% coming from overflight for all airlines using Cambodia's airspace.
Watchai Vilailuck, executive vice-chairman of Samart Corporation, said the neighbouring countries of Myanmar and Laos represent growth potential for SAV in the future.
"We don't want to do this business only in Cambodia. Later, we'll probably look into Laos and Myanmar where we used to sell navigation systems and the connection might be useful for making inroads into those markets," he told the Bangkok Post.
"We will certainly seek to renew the concession in Cambodia but we don't just look at only this market. Otherwise, we don't want to be on the stock market if we won't find more opportunities for the company in the future," Mr Watchai added.
HIGH-GROWTH BUSINESS
Cambodia introduced the Open Sky policy in 1999 to boost the civil aviation industry and Samart was granted the first licence for a 15-year concession in 2001. The concession was extended by seven years later in the year, 10 more years during 2002-2007, seven more years in December 2017, then another 10 more years in mid-2022 till 2051.
CATS officially started operating in 2002 and SAV was set up in 2017 as a holding company, focusing on air navigation-related business through its 100% ownership of CATS.
SAV has been improving its business performance continuously as a result of economic and tourism expansion in both Cambodia and other Asean countries. Since the first year of operation, the company recorded annualised profit and growth in revenue every year except in 2021, due to the peak in Covid-19 infections, said SAV president Teerachai Phongpanangam.
Last year, SAV posted a total revenue of 1.22 billion baht, up from 761 million a year earlier, with a net profit of 199.5 million baht. The company is aiming for a 40-50% growth in revenue this year.
"We operate in a high-growth industry and there is no competitor," said Mr Teerachai. "The company itself has a strong cashflow and with a clear revenue-sharing agreement with the Cambodian government."
SAV, according to Mr Teerachai, is on course to grow its revenue by double digits annually over the next five years, thanks partly to Cambodia's strong economic and tourism growth along with several infrastructure projects under development.
Cambodia's GDP growth is projected at 5.5% this year, accelerating to 6% in 2024.
There are three more airports under construction in Cambodia, including the new international airport in Phnom Penh, which would serve 10 million tourists when the first phase is operational in 2025.
The new international airport in Siem Reap would be able to service 8 million tourists in the first phase, which would complete construction in the fourth quarter of this year, with the capacity to expand to 20 million tourists in the future.
Dara Sakor International Airport in Koh Kong is also set to operate in the final quarter of this year, aiming to serve the growth in tourist arrivals in the country.
An international research forecast that international tourist arrivals in Cambodia would surpass the pre-Covid level next year with the flight number increasing to 134,000, from 100,000 flights estimated this year.
In 2022, tourist arrivals totalled 2.2 million, and 2.1 million had already landed in the country in the first five months of this year so the growth opportunity is ample, he noted.
IPO PLAN
Thailand's Securities and Exchange Commission (SEC) has already approved the plan for SAV to float its shares on the Thai bourse. The initial public offering (IPO), however, was postponed for three years due to the Covid-19 pandemic.
Now the IPO is set between late August and early September amid the ongoing volatility of the Thai stock market due largely to the domestic political situation.
"We will be definitely listing on the SET. We look at this situation as short lived, lasting a couple of weeks. The government will soon be formed and our business is in Cambodia not Thailand," said Mr Watchai.
Under the plan, no more than 224 million shares, representing no more than 35% of the company's paid-up capital, would be offered to the public. Of the total offered shares, no more than 64 million would be newly issued shares, representing 10% of paid-up capital.
The proceeds will be allocated to repay debts owed to financial institutions and serve business expansion in the future.
SAV currently has total liability of roughly 900 million baht. The company has planned capital expenditure of about US$10 million (340 million baht) this year in air navigation system at the airports in Siem Reap and Koh Kong.
"SAV would be the first of its kind to be listed on the SET and the only one that would realise direct benefits of growing tourism and investment in Asean. The aviation industry itself has high growth potential," said Mr Watchai.
Mr Teerachai said SAV has no competitor in the same industry so business risks are limited.
In this region, SAV is the only private operator while the rest, including the ones in Thailand, Vietnam and Laos are under ministries or state enterprises. "In terms of operations, if there is any new standard introduced in the airline industry, we can comply quickly while our regional peers may take time to do so," he added.