Phousy Construction and Development Public Company
Initial Public Offering (IPO) of Total 100,000,000 ordinary shares with par value of LAK 1,000 per share
Offering Price: The public investors for 90,000,000 shares offering price LAK 1,200 per share The executives and employees of the Company for 10,000,000 shares offering price LAK 1,100 per share
Subscription Period: Between 8:30a.m. - 03:30p.m. of During 17th- 21st July 2017
Financial Advisor: APM(LAO) Securities Co., Ltd.
Lead Underwriter : Lanexang Securities Public Company External Auditor : PricewaterhouseCoopers (Lao) Sole Co., Ltd. Legal Advisor : Lao Law & Consultancy Group Sole Co., Ltd.
Warning This prospectus has been conducted to investors for study before making a decision to invest in offering securities. The effectiveness of this prospectus does not representation that the Lao Securities Commission Office (LSCO) or Lao Securities Exchange (LSX) has recommended investment in the securities, nor assured the value or returns on investment of the securities, nor certified the accuracy and completeness of information contained in this prospectus. The liability for certification of the accuracy and completeness of information contained in this prospectus rests with the Company that offers of securities. If the prospectus contains any false or omits to state any material information which should be disclosed, shareholders who purchase the IPO shares and still hold that shares shall be entitled to claim damages from the Company pursuant to the relevant laws and regulations in the Lao PDR.
Warning: Investing in the Company’s shares involves risk. Investors should consider the information herein before making a decision to invest.
Phousy Construction and Development Public Company
Phousy Construction and Development Public Company is offering 100,000,000 newly issued ordinary shares (“Offering Shares”), in accordance with the rules and regulations of LSCO pursuant to the Initial Public Offering (“IPO”).
As part of the IPO, the Offering Shares are being allotted and offered in public to investors in Lao PDR, foreign investors and the executives and employees of the Company by Lanexang Securities Public Company (“LXS” or “Underwriter”) and Lao Development Bank (“LDB”) all branches in Lao PDR as selling agent. The Company has not submitted filing for approval to offering in other countries in reliance on applicable laws except in Lao PDR.
------This prospectus originally written in Lao language (“Lao prospectus”) has been filed with LSCO. The English translation (“English prospectus”) of the Lao prospectus was prepared by the Company and APM(LAO) Securities Co., Ltd. (“FA” or “APMLAO”). Although care was taken to render the translation as reliable as possible, it does not carry any legal authority and no representation is made to its accuracy and the English prospectus is not a prospectus defined under the Securities Law No.21/NA (“SEC Law”). Only the original Lao prospectus has legal force under the SEC law and the Lao law requires the distribution of a prospectus that has become effective under the SEC Law in connection with any public offering of securities in Lao PDR. The offering will be in compliance with the applicable rules and regulations of the LSCO and the Lao prospectus was prepared specifically for the initial public offering of the Offering Shares in Lao PDR. The Offering Shares have not submitted filing for approval to offering in other countries, so this prospectus is not complied for rules and regulations of the other countries. The Lao prospectus and English prospectus should be read together prior to making an investment decision to buy the Offering Shares. This offering is the initial public offering of the Company’s newly issued shares and if the LSX approves the initial listing application of the Company, the Company’s ordinary shares will be listed on the LSX. The LSX is a secondary market which was established in October 2010 in order to be a place to trade and make liquidity of listed securities. The Company expects that payment for the Offering Shares will be occurred within the offering period. The delivery of the Offering Shares to shareholders will be made through the LSX’s depository with the Securities Depository Center. The Company also expects that the Company’s ordinary shares will be approved for listing on the LSX no more than 7 days after submitting the listing application. Prior to investment in the Offering Shares, investors should consider all risks involved by please read the sections titled “Risk Factors” prior to invest in the Offering Shares.
All investment involves risk, Investors should consider the information herein before making a
decision to invest.
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Phousy Construction and Development Public Company
➢ Issuer: ➢ Financial Advisor: Phousy Construction and Development Public APM (LAO) Securities Co., Ltd. Company APMLAO Building, Khounbulom Road, 6th Floor, Vientiane Plaza Hotel, Sailom Road, Hatsady Village, Chanthabouly District, Hatsady Village, Chanthabouly District, Vientiane Vientiane Capital Capital Tel: (+856 21) 2353420 Tel: (+856-21) 265394 Fax: (+856-21) 265394
➢ Legal Advisor: ➢ External Auditor: Lao Law & Consultancy Group Sole Co., PriceWaterhouseCoopers (Lao) Sole Ltd. Co., Ltd. LLC Building, Nongbone Road, ANZ Commercial Building, 4th Fl. Nongbone Village, Saysettha District, Lane Xang Avenue, Hatsady Village, Vientiane Capital Chanthabouly District, Vientiane Capital Tel: (+856 21) 261391, 264866, 264877 Tel: (+856 21) 222718-9 Fax: (+856 21) 264334 Fax: (+856 21) 222723
➢ Underwriter: ➢ Selling Agent: Lanexang Securities Public Company Lao Development Bank (LDB) Lao Securities Exchange Building., 5th Fl. Sihom Village, Chanthabouly District, T4 Road, Phonthan Village Vientiane Capital Saysettha District, Vientiane Capital Tel: (+856 21) 213300 Tel: (+856 21) 265461-4 Fax: (+856 21) 241275 Fax: (+856 21) 265465-6 And all LDB’s branches in Lao PDR (Details in Part 2.0)
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Phousy Construction and Development Public Company
Contents
Defination Part 1 Phousy Construction and Development Public Company 1.0 Executive Summary Part 1.0-1 1.1 Issuing Company Part 1.1-1 1.2 Use of Proceeds Part 1.2-1 1.3 Risk Factors Part 1.3-1 1.4 Current Business Part 1.4-1 1.5 Future Plan Part 1.5-1 1.6 Asset Used in Business Operation Part 1.6-1 1.7 Legal Disputes Part 1.7-1 1.8 Capital Structure Part 1.8-1 1.9 Management and Corporate Governance Part 1.9-1 1.10 Internal Control Part 1.10-1 1.11 Related Party Transactions Part 1.11-1 1.12 Financial and Operating Results Part 1.12-1 Part 2 Information Relating to the Offering 2.1 Description of ordinary shares Part 2-1 2.2 Share Transfer Restriction Part 2-3 2.3 Determination of Offering Price Part 2-3 2.4 Distribution, Subscription and Allocation of IPO Part 2-3 2.5 Delivery of Share Part 2-8 2.6 Offering Plan and Use of Proceeds Part 2-8 2.7 Objective of using fund from IPO Part 2-9 Part 3 Certification of the Accuracy 3.1 Certification by the Company Part 3-1 3.2 Certification by the Financial Advisor Part 3-2 3.3 Certification by the Underwriter Part 3-3
Appendix I Information of Board of Director and Executives Appendix II Financial Statement for the year 2013-2015 and 6 period ended 30th June 2016 Appendix III Subscription Form
Phousy Construction and Development Public Company
Table of Contents Table 1.1.1: Summary of Highlighted Events Part 1.1-1 Table 1.1.2: Related parties Summary Part 1.1-2 Table 1.2.1: Uses of proceeds from IPO Part 1.2-1 Table 1.4.1: Details of the registration form enterprises. Part 1.4-1 Table 1.4.2: Highlighted Projects Part 1.4-3 Table 1.4.3: Table of projects that have been signed and continued for Part 1.4-7 Construction or project that has not been handed-over on the Date of 30-Jun-2016 Table 1.4.4: Table of projects under design phase to prepare for the bidding Part 1.4-8 And contract signing in 2016 Table 1.4.5: Investment Indicator Part 1.4-18 Table 1.5.1: The use of proceeds from IPO Part 1.5-1 Table 1.6.1: Net Book Value as in Financial Statement Year 2015 Part 1.6-1 Table 1.6.2: Details of Lands own by the Company Part 1.6-1 Table 1.6.3: Contract of the road upgrading project on the route number 3503 Part 1.6-2 Table 1.6.4: Contract of Road 2 – levels asphalt paving on the route Part 1.6-3 Number 2501 Table 1.6.5: Road construction project along the borders of Part 1.6-4 Laos-Vietnam-Cambodia Table 1.6.6: Contract of loan from ST Bank, Luang Prabang Province branch Part 1.6-6 Table 1.6.7: Contract of loan from ST Bank, Luang Prabang Province branch Part 1.6-6 Table 1.8.1: The Company’s shareholding structure before and after IPO Part 1.8-1 Table 1.9.1: Name lists of Board of Directors Part 1.9-2 Table 1.9.2: Remuneration of Board of Directors and the Committee of Part 1.9-8 Board of Directors Table 1.9.3: Number of Employee from 2014 to 30th June 2016 Part 1.9-8 Table 1.11.1: List of connected persons Part 1.11-1 Table 1.11.2: Summary of Related Parties’ Transaction Part 1.11-2 Table 1.12.1: Summary of Audited Financial Report Part 1.12-1 Table 1.12.2: Balance Sheet Part 1.12-2 Table 1.12.3: Income Statement Part 1.12-3 Table 1.12.4: Cash flow statement Part 1.12-3 Table 1.12.5: Financial Ratio Part 1.12-4 Table 1.12.6: Revenue Structure based on Construction Project Part 1.12-5 Table 1.12.7: Amount of Trade and other receivables Part 1.12-7 Table 1.12.8: Land, building, and equipment at the end of 31st December 2015 Part 1.12-7 Table 2.3.1 : The comparing of P/E rate Part 2-3 Table 2.4.1 : The distribution of IPO Part 2-4
Phousy Construction and Development Public Company
Picture of Contents Picture 1.4.1: 2- Levels asphalt paving project, Luang Prabang province Part 1.4-5 Picture 1.4.2: Backlog under Construction Part 1.4-6 Picture 1.4.3: Economic Expansion in Lao PDR and Nearby Countries Part 1.4-16 Picture 1.4.4: Segmented Economic Expansion in Lao PDR Part 1.4-16 Picture 1.4.5: Industrial Sector Expansion in Lao PDR Part 1.4-17 Picture 1.4.6: The working process from design to delivers the project to the Part 1.4-21 Project owner Picture 1.9.1: Organization Chart Part 1.9-1
Phousy Construction and Development Public Company
Definitions and Abbreviations Term Definition Company or PCD Phousy Construction and Development Public Company Financial Advisor or APMLAO or APM (LAO) Securities Co., Ltd. FA PWC PriceWaterhouseCoopers (Lao) Sole Co., Ltd. LLC Lao Law & Consultancy Group Sole Co., Ltd. LSCO Lao Securities Commission Office LSX Lao Securities Exchange Initial Public Offering: IPO Initial Public Offering by the regulation of Lao Securities Commission Office Par Value The Stated Value or Face Value Underwriter Lanexang Securities Public Company (“LXS”) Lao PDR The Lao People’s Democratic Republic LAK The Lao Kip, which is the legal tender currency of Lao PDR USD United Stated Dollar GDP Gross Domestic Product GMS Greater Mekong Sub-region Asian Highway Asian Highway East West Corridor East West Corridor North-South Economic Corridor North-South Economic Corridor BOQ Bill of Quantity Invoice Invoice Shop Drawing Shop Drawing As Built Drawing As Built Drawing Bidd Bond The certify from Bank for biding the project Performance Bond The certify from Bank for following the condition in contract Km Kilometer m Meter Ministry of PWT Ministry of Public Works and Transportation PWT department in province Public Works and Transportation in province
Phousy Construction and Development Public Company
Executive Summary
Executive Summary is a part in the prospectus, which is the information summary of the offering details, types and risk of the securities issuer (“Company”). Thus, investors should carefully pay attention to study in the prospectus filed to Lao Securities Commission Office (“LSCO”) in the Lao Securities Exchange website (http://www.lsx.com.la).
Executive Summary of the Initial Public Offering (“IPO”) and listing in Lao Securities Exchange (“LSX”) Subscription Period: 17th – 21st July 2017
Offering Details: Issuer: Phousy Construction and Development Public Company Website: www.pcdlao.com Par value: LAK 1,000 per share Registered Capital: LAK 500,000,000,000 (Prior IPO) No. of offering shares: 100,000,000 shares Offering Price: - Public LAK 1,200 per share - Executives and Employees LAK 1,100 per share The Offering: - Public: 90,000,000 shares or equivalent to 90% of total offering - Executives and Employees: 10,000,000 shares or equivalent to 10% of total offering Business License: 576/Jor Thor Vor dated on 27th June 2017 Business Type: Construction and Real Estate development
Future Plan and Proceeds of Funds: Proceed of Fund from Estimated Period of Objectives IPO* Investment 1. To invest in construction machines and Approximately 2017 equipment LAK 20,000 million Approximately 2. Research and Development 2017-2018 LAK 5,000 million Approximately 3. Working capital for construction 2017-2018 LAK 30,000 million Approximately 4. Working capital for operation 2017-2018 LAK 28,000 million 5. Payback the bank’s loan on behalf of Approximately 2017-2018 the Company and/or related party LAK 36,000 million Total Approximately LAK 119,000 million* Remark: *Approximate fund from IPO is prior deducted from IPO’s cost.
Dividend Policy: The Company will pay the dividend to the shareholders not less than 50% of net profit after the deduction of legal reserve and other reserves (if any). The Company has a policy to pay dividend to the existing shareholders equals to 50% of dividend payment announced to pay to general shareholders. This condition become effective for the period of 2 years after listed in LSX. The shareholders’ meeting resolution for the dividend payment approval is for (1) annual dividend payment and (2) interim dividend payment. The interim dividend payment must be approved by Shareholders’ meeting resolution or Shareholders’ meeting entitles to Board of
Part 1.0 - 1 Phousy Construction and Development Public Company
Directors in order to approve interim dividend payment. The interim dividend payment can be paid, considering current financial condition and appropriateness, but it must accord with related regulation. The dividend payment might be amended upon the consideration and approval from the shareholders’ meeting which will depend on the economic situation, cash flow, investment plan, conditions and the Company’s obligation as well as the law and the capital adequacy for business expansion in the future. The dividend shall be paid in LAK (kip) currency and will be subject to tax exemption as dividend that paid from net profit from being listed company date in Lao Securities Exchange.
Details of Issuer: Phousy Construction and Development Public Company (referred to as “Company” or “PCD”) is one of the service providers in Design and Engineering, Procurement and Construction (Design and EPC) management. These include: design engineering, prototype engineering, procurement of materials for engineering works, and constructions. The Company aims to provide construction services focusing in infrastructure projects, namely: road construction, erosion protection and other related infrastructure works. In year 1997, “Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited”, was established by Mr. Siphone Outhoumphone (Mr.Siphone) with registered capital of LAK 10,000 million. At that time, the Company targeted to be the construction service provider especially in infrastructure projects in order to support and facilitate the transportation system in northern part of Lao PDR. The Company has experienced the exponential growth which has made it to become the leader in construction engineering services firm of the northern part of Lao PDR. In 2009, Mr. Sithong Phommachith (Mr. Sithong) who is a young businessman with vision that acts as the Company’s successor from Mr. Siphone which had the achieved outstanding infrastructure projects, such as 2-levels asphalt paving in the northern areas, urban by-pass of Luang Prabang province, earthmoving project for building the road along Lao PDR-Viet Nam-Cambodia borders, conducted the road maintenance work damaged by natural disasters and others. The Company has the potential and therefore has become a leader in infrastructure development due to the fact the Company possesses number of professional with high level of competency, state-of-the-art in construction engineering and technology, maintain consistent quality and standards, on-time for project hand over, as well as the ability to build trust to the customers who are the project owner. At present, the Company name has been changed to Phousy Construction and Development Public Company to enable the expansion of service scope in comprehensive construction engineering services and act as a project developer in the future.
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Shareholding Structure:
Before IPO After IPO Shareholders No. of shares % No. of shares % 1. Existing Shareholders 500,000,000 100.00% 500,000,000 83.33% 1.1 Mr. Sithong Phommachith 415,000,000 83.00% 415,000,000 69.19% 1.2 Ms. Pienkham Phommachith 50,000,000 10.00% 50,000,000 8.33% 1.3 Mr. Siphone Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 1.4 Ms. Bouaphanh Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 1.5 Mr. Sitha Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.6 Ms. Hithong Phommachit 5,000,000 1.00% 5,000,000 0.83% 1.7 Ms. Amphone Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.8 Ms. Touybouasy Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.9 Ms. Phetmany Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 2. Investors from IPO - - 100,000,000 16.67% Total 500,000,000 100.00% 600,000,000 100.00%
Board of Directors: No Name list Position 1 Mr. Sithong Phommachith Chairman 2 Mr. Khanthavong Dalavong Vice Chairman / Independent Director 3 Mr. Nanthalath Thilakoun Director / Independent Director 4 Ms. Philaiphone Vongpraseuth Director / Chief Executive Officer 5 Mr. Sitha Phommachith Director
Audit Committee: No Name list Position 1 Mr. Nanthalath Thilakoun Chairman of Audit Committee 2 Mr. Khanthavong Dalavong Audit Committee 3 Mr. Sitha Phommachith Audit Committee
Part 1.0 - 3 Phousy Construction and Development Public Company
Risk Factors: 1. Business Risk 1.1. Risk from unstable income and business performance 1.2. Risk from lack of labor forces 1.3. Risk from the fluctuation of construction materials prices and lack of construction materials 1.4. Risk of delay on project hand over to the clients (Overdue) 1.5. Risk from reliance on government projects 2. Financial Risk 2.1. Risk from delay on payment of project owner 2.2. Foreign exchange rate risk 2.3. Risk from shortage of working capital 3. Management Risk 3.1. Risk from controlling interest by the existing major shareholders 3.2. Lawsuits risk from project’s obstacle 4. Offering Risk 4.1 Liquidity risk from regulatory process of IPO and listing in the LSX
Revenue Structure of the Company: Table: Revenue Structure based on Construction Project 2013 2014 2015 1H /2016 (Approved) (Approved) (Audited) (Reviewed) Detail Amount Amount Amount Amount % (LAK % (LAK % (LAK % (LAK millions) millions) millions) millions) 1. Project type 1 (construction 72,478 61.37% 86,356 92.59% 133,012 91.97% 89,014 90.86% Project) 2. Project type 2 (repair and 45,623 38.63% 6,910 7.41% 11,617 8.03% 8,950 9.14% maintenance project) Total Revenue 118,101 100.00% 93,266 100.00% 144,629 100.00% 97,964 100.00%
Summary of financial statement and performance:
Detail 2013 2014 2015 1H/ 2016 Total Assets (LAK: million) 799,029 811,941 974,731 1,028,639 Total Liabilities (LAK: million) 94,999 35,226 129,937 106,581 Total Shareholders’ equity (LAK: million) 704,030 776,715 844,794 922,058 Revenue from services (LAK: million) 118,101 93,266 144,629 97,964 Cost of services (LAK: million) (71,997) (14,098) (64,126) (10,847) Gross Profit (LAK: million) 46,104 79,168 80,503 87,117 Net Profit (LAK: million) 38,559 72,685 68,079 77,264 Earnings per share: (LAK/share) 3,856 7,268 6,808 7,726 Par Value: (LAK/share): (LAK/share)/1 1,000 1,000 1,000 1,000 No. of shares: (million shares)/1 10 10 10 10 Debt to Equity Ratio (D/E): 0.13 0.05 0.15 0.12 Return on Assets (ROA): 4.83% 9.02% 7.62% 15.43% Return on Equity (ROE): 5.48% 9.82% 8.40% 17.49% Remark: /1 - Calculation based on the current par value at LAK 1,000 per share and no.of shares after IPO for comparison
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Management Discussion and Analysis on financial statement for the year 2013-2015 and 1H/2016: Operating result: Considering the earlier performance and base on financial statement 2013, 2014 and 2015, the Company received its revenues from the construction contracts having the total amount of LAK 118,101 million, LAK 93,266 million, and LAK 144,629 million, respectively. In 2015, the Company earned the highest revenue among from 3 years which resulted mainly from the revenue recognition from project type 1 (construction project) for 3 projects. For the half-year 2016, the Company had revenue from construction equal to LAK 97,964 million of total 6 projects. 2 projects from project type 1 (continuously 1 project from 2015 and 1 new project) or equivalent to 89.86% of total revenue and 4 projects from project type 2 or equivalent to 9.14% of total revenue.
Financial Position: Total Assets As at 31st December 2013, 2014, 2015 and for the half year ended 30th June 2016, the Company has total assets of LAK 799,029 million, LAK 811,941 million, LAK 974,731 million and LAK 1,028,639 million, respectively. Total Liabilities As at 31st December 2013, 2014, 2015 and for the half year ended 30th June 2016, the Company has total liabilities of LAK 94,999 million, LAK 35,226 million, LAK 129,937 million and LAK 106,581 million, respectively. Shareholders’ equity As at 31st December 2013, 2014, 2015 and for the half year ended 30th June 2016, the total Shareholders’ equity has increased continuously to LAK 704,030 million, LAK 776,714 million, 844,794 million and LAK 922,058 million, respectively. Liquidity analysis The Company has current ratio in 2013, 2014, 2015 and half- year 2016 at 2.38 times, 5.55 times, 2.74 times and 4.27 times, respectively. For the past 3 years, current ratio of the Company was higher than 1 times, which has expressed that the Company had low risk of short term default. The Company has cash cycle in 2013, 2014, 2015 and half-year 2016 equal to 552 days, 477 days, 305 days and 280 days, respectively. Cash cycle ratio was quite high which was according to high average collection period, while the Company must have normally paid to trade payable. But the cash cycle has been better, due to effectively management. The Company has net cash flow in 2014, 2015 and half - year 2016 equal to LAK 1,113 million, LAK (957) million and LAK 303 million, respectively. Financial structure analysis The Company has debt to equity ratio in 2013, 2014, 2015 and half – year 2016 at 0.13 times, 0.05 times, 0.15 times and 0.12 times, respectively. This has expressed that the Company has low financial risk.
Investor Relation: Mr. Khonesavanh Thamvongsith Tel: (+856-21) 265394 Email: [email protected]
Part 1.0 - 5 Phousy Constuction and Development Public Company
1.1 Issuing Company
Phousy Construction and Development Public Company (referred to as “the Company” or “PCD”) is one of the service providers in Design and Engineering, Procurement and Construction (Design and EPC) management. These include: design engineering, prototype engineering, procurement of materials for engineering works, and constructions. The Company aims to provide construction services focusing in infrastructure projects, namely: road construction, erosion protection and other related infrastructure work. The Company, “Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited”, was established by Mr. Siphone Outhoumphone (Mr. Siphone) in 1997 with registered capital of LAK 10,000 million, at that time, the Company targeted to be the construction service provider especially in infrastructure project in order to support and facilitate the transportation in northern part of Lao PDR. The Company has experienced the exponential growth which has made it to become the leader in construction engineering services firm of the northern part of Lao PDR. In 2009, Mr. Sithong Phommachith (Mr. Sithong), a young businessman with a vision, became the Company’s successor from Mr. Siphone which had achieved exceptional infrastructure projects, such as 2- levels asphalt paving in the northern areas, urban by-pass of Luang Prabang province, earthmoving project for building the road along Lao PDR-Viet Nam-Cambodia borders, conducted the road maintenance work damaged by natural disasters and others. The Company has the potential and therefore has become a leader in infrastructure development due to the fact the Company possesses number of personnel with high level of competency, state-of-the- art in construction engineering and technology, maintain consistent quality and standards, on- time for project hand over, as well as the ability to build trust to the customers who are the project owner. At present, the Company name has been changed to Phousy Construction and Development Public Company to enable the expansion of service scope in comprehensive construction engineering services and act as a project developer in the future.
Table 1.1.1: Summary of Highlighted Events
Year Sumary Company Outstanding Event
1997 : ❖ Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited were established by Mr. Siphone Outhoumphone (Mr. Siphone) with the registered capital LAK 10,000 million to operate the construction business by attend the bidding from the government or the Ministry of Public Works and Transportation (MPWT) or PWT division, Luang Prabang Province. Mr. Siphone see the difficulty of the transportation, or ground logistic due to inconvenience and dangerous road and with his vision to expand construction business by focus on infrastructure construction in northern part of the country. 2004 - 2005 : ❖ From the country’s economic growth and expansion spreading through small and large city, the in-land logistic has become more important. Mr. Siphone had expanded construction business to Xayaburi and Bokeo District but still focus on infrastructure construction such as Road and
Part 1.1 - 1 Phousy Constuction and Development Public Company
Bridge. At that time, Mr. Sithong responded for an Administrative and Site Manager. 2009 : ❖ Mr. Sithong is a young business man with vision, he was successor to run the construction business by transferred from Mr. Siphone to Mr. Sithong and still use the same name as “Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited” 2011 : ❖ Mr. Sithong saw the rapid growth of Luang Prabang Province in crowded area so he advised the Board of Directors to present a project to PWT division of Luang Prabang province to build the by-pass road No.13 north from Kokngiew Village to Phonexay Village and concrete bridge crossing Nam Khan river by total project cost of LAK 209,907 million, which Company use its own working capital to be an advance investment on the construction. th 2016 : ❖ According to Annual General Meeting of shareholders on 18 October 2016, the Company has approved to amend the par value to LAK 2,000 per share, increased the registered capital from LAK 10,000 million to LAK 700,000 million and transformed itself from Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited to “Phousy Construction and Development Public Company” ❖ According to Extraordinary General Meeting on 18th November 2016, the Company has approved to increase registered capital in amount of LAK 300,000 million by issuing initial public offering in amount of 150 million shares with par value LAK 2,000 per share in order to initial public offering (IPO) to be listed in Lao Securities Exchange (LSX) which increased the Company’s registered capital to LAK 1,000,000 million after IPO. 2017 ❖ According to the discussion with related parties, the Company had the th Extraordinary General Meeting dated on 24 April 2017 to approved the changing of par value from LAK 2,000 to LAK 1,000 per share, approved on decreasing from previous registered capital in amount LAK 700,000 million to LAK 500,000 million, approved on changing funds from IPO from LAK 300,000 million to LAK 100,000 million by issuing public offering with amount 100 million shares which affect the Company has total registered capital in amount LAK 600,000 million and total share 600 million shares after IPO.
Related Companies.
Table 1.1.2: Related parties Summary 1. Related company in LAO P.D.R Phousy Group Sole Co.,Ltd Established Date : 28th October 2013 Headquarter : Sailom Road, Hatsady Village, Chanthabouly District, Vientiane Capital, Lao PDR. Business type : Agriculture, forest and fisheries, construction, wholesale and retail trading; Auto repair, and management services. Paid up Registered Capital : LAK 20,000 million Director : Mr. Sithong Phommachith
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Relationship : Mr. Sithong Phommachith (Major Shareholder/ Directors)
Phousy Lao Petroleum Sole Co.,Ltd Established Date : 17th January 2014 Headquarter : Sailom Road, Hatsady Village, Chanthabouly District, Vientiane Capital Business type : Wholesale and retail, fuel, solid, latex and related products Paid up Registered Capital : 400,000 million Director : Mr. Sithong Phommachith Relationship : Mr. Sithong Phommachith (Major Shareholder/ Directors)
Meuang Ngoy Development Mining Co., Ltd Established Date : 30th July 2012 Headquarter : Sailom Road, Hatsady Village, Chanthabouly District, Vientiane Capital Business type : Find and survey iron ore. Paid up Registered Capital : LAK 12,000 million Investor : Phousy Luang Prabang Road & Bridge Construction Sole Company Limited (Currently name Phousy Group Sole Company Limited which is in the process of changing the concession certificate) Director : Mr. Sithong Phommachith Relationship : Phousy Group Sole Company Limited (the same largest shareholder) Remark: Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (currently name Phousy Construction and Development Public Company) who was submission and have signed a contract with Lao government dated on 8th June 2012 in order to give permission for find and survey iron ore in the area of Huaylex and Phatoub Village, Ngoi District, Luang Prabang Province. Mr. Sithong Phommachith has estlabished Meuang Ngoy Development Mining Co., Ltd in order to ask for concession certificate. At present, according to financial statement half – year 2016, that certificate have already distributed to Phousy Group Sole Company Limited. (after survey completing, Mr. Sithong will file to change investor’s name to Phousy Group Sole Company Limited)
Phonthong Mining Co., Ltd Established Date : 26th July 2012 Headquarter : Sailom Road, Hatsady Village, Chanthabouly District, Vientiane Capital, Lao PDR. Business type : Find and survey asntimon ore Paid up Registered Capital : LAK 12,000 million Investor : Phousy Luang Prabang Road & Bridge Construction Sole Company Limited (Currently name Phousy Group
Part 1.1 - 3 Phousy Constuction and Development Public Company
Sole Company Limited which is in the process of changing the concession certificate) Director : Mr. Sithong PHOMMACHITH Relationship : Mr. Sithong PHOMMACHITH (the same largest shareholder) Remark: Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (currently name Phousy Construction and Development Public Company) who was submission and have signed a contract with Lao government dated on 8th July 2012 in order to give permission for find and survey Antimon ore in the area of Hueb Village, Phonthong District, Luang Prabang Province. Mr. Sithong Phommachith has established Phonthong Mining Co., Ltd in order to ask for concession certificate. At present, according to financial statement half – year 2016, that certificate have already distributed to Phousy Group Sole Company Limited. (after survey completing, Mr. Sithong will file to change investor’s name to Phousy Group Sole Company Limited).
Diamond Head Joint Development Co., Ltd Established Date : On process of setting which currently have already signed a contract with Lao National Committee to protect the Sepicial and Specific Economic Zone. Headquarter : On process Business type : Full-ranged build and develop new town Paid up Registered Capital : USD 400 million* (equipvalent to LAK 3,248,800 million) Investor : Phousy Group Sole Company Limited invest and hold shares in figure of 70%, government sector is representative by finance devision of Luang Prabang province hold shares in figure of 30%. Director : On process Relationship : Phousy Group Sole Co., Ltd. (the same largest shareholder) * Remark: Refer to exchange rate of BCEL Bank dated on 29th September 2016: LAK 8,122 /USD
2. Related Company in Abroad
Luang Prabang Laos Holding Pte.Ltd. (Fromer name is I&E Singapore Trading Pte.Ltd.) Established Date : 27th September 2013 ID Company : 201326226H Head Office : Singapore Business type : Retail and wholesale and the agent for monitoring oil price in internation market Director : Mr. Sithong Phommachith Relationship : Mr. Sithong Phommachith (Major Shareholder/ Directors)
Part 1.1 - 4 Phousy Constuction and Development Public Company
Petro Smart Trading Company Limited Established Date : 26th May 2015 Head Office : 1420/1 Phaholyothin Road, Ladyao Subdistrict, Chatuchak District, Bangkok 10900, Thailand Business type : Wholesale fuel trading and tranportation Registered and Paid up : THB 2.00 million* (equipvalent to LAK 470 million) Capital Director : Mr. Maitree Sombutareepanich Relationship : Mr. Sithong PPhommachith – shareholder 49% Remark: * Refer to exchange rate of BCEL Bank dated on 26th May 2015: LAK 243.42/ THB
Part 1.1 - 5 Phousy Construction and Development Public Company
1.2 Use of Proceeds
The Company has increased the registered capital through the initial public offering (IPO) for 100,000,000 newly issued ordinary shares with par value at LAK 1,000 per share and the Company estimate to obtain fund from IPO with approximately of LAK 119,000 million. The details of investment plan and the use of proceeds are as the table below:
Table 1.2.1: Use of proceeds from IPO
Estimated Proceed of Fund from Objectives Period of IPO Investment 1. To invest in construction machines and Approximately 2017 equipment LAK 20,000 million Approximately 2. Research and Development 2017-2018 LAK 5,000 million Approximately 3. Working capital for construction 2017-2018 LAK 30,000 million Approximately 4. Working capital for operation 2017-2018 LAK 28,000 million 5. Payback the bank’s loan on behalf of the Approximately 2017-2018 Company and/or related party LAK 36,000 million Approximately Total LAK 119,000 million* Remark: *Approximate fund from IPO is prior deducted from IPO’s cost
In additional, if there is insufficient fund from IPO for the investment plan and working capital as mentioned above, the Company is able to gather the loan from financial institution(s) at a normal interest rate, and the repayment period will be consistent with the Company’s cash flow. Moreover, the Company can also use its internal cash flow to invest in the investment plan as mentioned above.
Part 1.2 - 1 Phousy Construction and Development Public Company
1.3 Risk Factors Investing in the ordinary shares of the Company in this Offering entails risk, prior to making any decision to invest, and with regard to the risk described below, investors should carefully review all of the information in this prospectus. The following sections describe a number of the possible risk that might affect the Company and the share value of the Company. There may be other risk which the Company is unaware and some risk that might be significant in the future which is currently understood to be not significant. Additional risk not presently known to the Company and other risk currently believed to be immaterial may also impair the Company’s business operations, financial condition, results of operations and prospects, liquidity, source of funds and business opportunity. Moreover, information in this prospectus is in accordance with the government and government’s policy where the Company locates and runs business. Investors should study additional information regarding regulation, taxation, liquidity and transaction costs in investment in LSX.
1. Business Risk 1.1 Risk from unstable income and business performance All of the Company’s construction projects over the past 3-5 years were state-owned projects with a variety in details such as: earthmoving project for construction of strategic roads, upgrading road construction, conducted the road maintenance work damaged by natural disasters, and other normal road works. The Company recognizes the revenues when issuing the invoice. Therefore, the Company has risk from unstable income due to the Company will be unable to recognize the revenues if the contruction process based on the contract is not achieved then the Company cannot send the invoice, or there is a delay from the projects inspection although the work process was completed or the inspection committee has not certified the inspection approval. Also, if the Company is unable to find new project while facing fixed financial obligations, such as salary payments, management costs, interests, depreciation costs for instance. These have made the Company lacks of continuous revenues and may results in poor performance results or face losses in any accounting period. In order to prevent the mentioned risk, the Company has a management plan in regards to the continuous revenues and performance results by establishing monthly, quarterly, and annually budget plans. So, the management is able to access information for analysis and planning the projects and attend the projects bidding process which should be consistent with the nearly completed projects. In order to recognize the continuous revenues and also to reduce the risk of unstable revenues, the Company plans to increase more investments, such as property developments for sell or lease which will generate constant income and cash flow, so the risk associated with the unstable of income in the future can be reduced.
1.2 Risk from lack of labour forces Lack of labour forces, especially supervising engineers and workers affect the construction business due to the fact that each project requires considerable amount of labour forces, so that the project can be finished as planned and be able to hand-over the work based on the Contract. Sometime, the Company may lack of the supervising engineers and workers during the festival seasons which people are usually return back to their hometown or the employees may change the jobs to the competitor’s company due to a better incentive which have affected to the delay of the project or unable to finished as planned.
Part 1.3 - 1 Phousy Construction and Development Public Company
The Company emphasizes on the above risk. Therefore, the Company has management policy of supervising engineers and workers according to the actual circumstances of each project in order to balance the number of labour forces and workloads. The Company look after the supervising engineers and workers by offering good benefits that they are entitled to receive, on-time salary payments, appropriate welfare. For labors that are not the Company’s employees, the Company seek for labour forces through the employment agency in the area where the construction project is located. So, the employment can be created in that area. Importantly, the Company has built good relationship with the employment agencies. Over the past couple of years, the Company never experienced the lacking of supervising engineers and workers.
1.3 Risk from the fluctuation of construction material prices and lack of construction materials The construction materials are comprised of: soil, sand, cement, steel, and asphalt which are the main materials of the construction. In some projects, the Company needs to purchase the construction materials on their own. Therefore, the Company faces the fluctuation of construction material prices in each project; if the construction material prices increased, they will directly affect the project costs and profits. The Company may lack of construction materials of some type if there is no proper management scheme in place, such as: the natural disaster that affects the manufacturer of construction materials where the operation has been halted. Therefore, the Company is unable to locate the construction materials needed for the project which has caused delays in the project plan or the Company shall seek those materials from overseas which have higher prices due to the construction costs and charges on customs tariff. To avoid those risks, the Company has a management policy of construction materials for each project by signing advance purchase contract with suppliers at a fixed price as stated in the BOQ for the short-term project or sign the purchase order for raw materials in advance which the prices have not been set, but using the market price on the purchase day and some projects need to purchase the materials on their own; in this case, the Company shall add extra expenses in the construction contract value or in some project, the public authority who is the project owner shall seek for materials to be use in the project that include: soil, sand (from the natural sources). For the long-term project, the Company may negotiate with the public authority who is the project owner by means of amending the contract value if there are fluctuation in construction material prices more than the rate stipulated in the contract, but shall not exceed 15% of the total contract value. The Company shall submit the proposal to the public authority who is the project owner.
1.4 Risk of delay on project hand over to the clients (Overdue) The Company may face the risk in the project hand-over to the clients (out of contract scope) which may be occurred in the state-owned project, such as: the hand-over of area under the consideration and the state-owned project has been temporarily suspend the project due to some changes in the project, direction of the economic promotion plan in another area which can have an impact on the state expenditure. In this case, the state-owned project shall be approved the time extension. However, there may be cause from the construction contractor, such as: lack of construction materials, insufficient number of personnel, low experienced personnel or the plan specified by the project owner has not been approved by the state-owned project in regards to the hand-over. The construction contractor shall solve the issue and
Part 1.3 - 2 Phousy Construction and Development Public Company improve the quality as planned. Problems can cost higher expenses and more time needed to solve which has made the project delay. In addition, unexpected event may be occurred such as: natural disaster which requires insurance for the project by the construction contractor. To prevent the above risks, the Company has the process and time management of the construction of each phase and progress monitoring periodically, so that the management can recognize the progress and be able to solve the problem effectively and on-time. Also, the Company always cooperates with the projects’ owner. Previously, the Company has handed- over the project on-time which has resulted from competent engineering team. In addition, the Company has the working plans to the control the working process. In case of, there are additional work which is an additional to the work specified in the Contract, the owner of the project may extend the time based on the quantiy of work and negotiation of the construction costs; the Company has a policy to calculate this additional work from the first profit ratio with the existing project.
1.5 Risk from reliance on government projects Previously, the Company's revenue from the construction services are 100% from the government, due to all of the road and bridge construction projects were government’s projects such as: Projects of PWT Ministry, project of province’ PWT division. The Company may have the risk from reliance on government projects, if, In the future, government has reduced or temporarily suspended the projects due to the change of the government's policy. To reduce those risks, the Company plans to increase the work from the private sector project such as: Road construction project in Industrial Estate, Special Economic Zone, mining area and building construction project.
2. Financial risks 2.1 Risk from delay on payment of project owner The majority of our customer is the state-owned project which typically set the hand- over date in the contract and payment terms based on the work completed of each phase, the payment is in the form of case by case which may face the delay which caused by the allocation of annual budget of the related sector. Although the account payable from the government is considered as a low risk, because of the government’s stabilization which expected to be paid with no bad debt. For other payment that is not in a form of cash (turning asset into capital), the Company may have the obligation in the capital and other expenses in the form of cash which can affect the financial stability of the Company and thus decrease in the amount of cash flow. The state-owned project has suspended the turning asset into capital in pursuant to the Prime Minister of Lao PDR’s Order, No. 15/PM, dated on 13-May-2016 on the increase of strict control and inspection management of timber exploration, timber movement and wood business paragraph 4.3. To prevent the above risks, the Company has policies on the project selection or bidding competition participation. The Company emphasizes on receiving the project that has funding from other sources in collaboration with the state funding. The Company has cash flow management for each construction project to ensure that each phase of the project is completed based on the contract duration. The Company has a policy to increase the customer target to state-own projects that include the construction of buildings, hotels, accommodation in parallel with high-rised building. Typically, the project owner will seek the funding and make on-time payment based on the contract condition or the Company may negotiate for direct-transfer from
Part 1.3 - 3 Phousy Construction and Development Public Company the bank that the customer has been supported by the loan of the project. Moreover, for the risk of delay for payback loan, the Company will use the cash management policy by forecast the income and expense on the cash basis to get the best benefit. It will lead to the decreasing of cash cycle day from 522 days as in 2013 to 280 days as of 30th June 2016 that the Company could reduce the risk from delay for payback loan.
2.2 Foreign exchange rate risk The Company may face risk from currency exchange rates when import goods from overseas or if the Company need to order construction materials from overseas in which the Company shall make payments in the currency of the country of the origin. The Company has its revenue in LAK currency, thus there are risks associated with the currency exchange rates which affect the Company’s profits. However, the Company faces low risk of the fluctuation of currency exchange rates due to the fact that the Company do not import goods from overseas regularly or may be there are some import orders which are small amount compared to the total material construction costs.
2.3 Risk from shortage of working capital Due to the fact that the majority of the construction contract is in the form of advanced payment by the contractor. Therefore, the Company needs to prepare large amount of cashflow to fund the project expenses. Also, the payment from the state is more likely to be delay. Therefore, the Company faces risk from shortage of working capital which may cause the Company unable to finish the project on time and the Company will be fined as specified in the contract or lack of sufficient cash flow to attend additional bidding competition. To prevent the above risks, the Company has policy to establish the annual budget to seek and utilize the use of cash flow for each project through the spending in order to prevent the financial instability problem cause by over spending in each project. Moreover, for the risk of delay for payback loan, the Company will use the cash management policy by forecast the income and expense on the cash basis to get the best benefit. It will lead to the decreasing of cash cycle day from 522 days as in 2013 to 280 days as of 30th June 2016 that the Company could reduce the risk from delay for payback loan. In case that the Company needs addition cash flow, loans from the bank are required. After the Initial Public Offering (IPO), the Company shall have addition working capital for the construction which can reduce the above risks.
3. Management Risk 3.1 Risk from controlling interest by the existing major shareholders After the IPO, the Company shall have shareholder structure by the family of Mr. Sithong Phommachith that holds 83.33% of the total shares which is considered as a major shareholder and has the authority in the shareholder’s meeting resolution by the majority of the votes. Therefore, the other minor shareholders may face the risk of not having enough votes to veto the votes of the major shareholders during the shareholder’s meeting. In order to reduce the risk in the management of shares by major shareholder, the Company has the management council that balances the power of its members that represent the major shareholder and have independent member not less than one-third of the management council to contribute comments and consider important issues. Also, the member of the management council that benefits from any resolution is unable to vote or the major shareholder will propose the (Related Party Transaction); the Company shall conform to the Part 1.3 - 4 Phousy Construction and Development Public Company
Agreement on Related Description as being enforced by the Securities and Exchange Commission which is an independent member and the minor shareholder shall then have the rights to attend as the approver of the description.
3.2 Lawsuits risk from project’s obstacle In case that, there are damages in the construction project, such as: flaws in design or sub-standard construction which affect the external stakeholders and caused the loss of lives and assets; the Company may face a prosecution on the damages occurred. However, during each project hand-over, the Company shall release a Project Security Letter to guarantee the project quality and in case there are damages to the project, a detail investigation of the damage shall be conducted on whether the Company should responsible for the damage occurred or not. However, historically the damages have never caused by the Company and never being prosecuted.
4 Risk from the selling of asset 4.1 Liquidity risk from regulatory process of IPO and listing in the Lao Securities Exchange. The Company intends to increase capital through IPO scheme and filing submission to listing in LSX which were prepared by APM(LAO) Securities Co., Ltd. (APMLAO), a financial advisor, that reviewed the qualification of listed company and resulted in completed qualification to listing in LSX except the result of IPO allocation and the minority shareholers’ distribution. Accordingly, the Company still may face the uncertainty to obtain the approval from LSX in order to listing in LSX which may incur the liquidity risk of ordinary shares of the Company in secondary market to investors. In case the Company is unable to completely fulfill the required law and regulation especially the number of shareholders at least 100 shareholders and distribution more than 10% of total registered shares, consequently, the ordinary shares of the Company may not be obtained the approval to list in LSX.
Part 1.3 - 5 Phousy Construction and Development Public Company
1.4 Current Business
Phousy Construction and Development Public Company (referred to as “Company” or “PCD”) is one of the service providers in Design and Engineering, Procurement and Construction (Design and EPC) management. These include: design engineering, prototype engineering, procurement of materials for engineering works, and constructions. The Company aims to provide infrastructure services, namely: road construction, erosion protection and other related infrastructure work. These include: bridge, erosion and other infrastructure projects, which most of the project owner is goverment. The Company is a well-known construction company which serves the government units and organizations such as Ministry of Public Works and Transport (“PWT”) or PWT division at Luang Prabang Province, Attapeu Province, Xayyabury Province and Bokeo Province which is the infranstructure construction service such as: 1) Urban by-pass in Luang Prabang, 2) Road Upgrading Project at Kiew Jia Village to Muang Hueb Village, Phonthong District, Luang Prabang Province, 3) 2- Levels asphalt paving project at Ou Village, (Luang Prabang District) to Sibounhueang Village (Nan District), Luang Prabang Province, 4) Road repair and renovation project (from KM4 Radio Station to Sibounheung Village), Road No. 2501, Luang Prabang Province, 5) Emergency road repair and renovation project from Phutidpheung Village (Ngoy Distict) to – Borders, Luang Prabang Province. And diferent Province, these include: Earthmoving project for building the road along Lao PDR-Viet Nam-Cambodia borders, Attapeu Province. The Company has potential to be a in infranstructure constrcution with high value of working team, good engeneering and modern construction technology, high quality of work, finish work on time that make clients and project owner trust on the Company. The Company also focusing on work quality and good result of work which help the Company works efficiently.
Table 1.4.1 Details of the registration form enterprises. Phousy Construction and Development Public Company No. : 576/Jor Thor Vor dated 27th June 2017 Enterprise form : Public Company Headquarter : Sailom Road, 6th Floor, Vientiane Plaza Hotel, Hatsady Village, Chanthaboury District, Vientiane Lao PDR Paid up Registered Capital : LAK 500,000 million (Prior IPO) (After IPO will be LAK 600,000 million) Business type 1. Construction* : Road and Bridge Construction 2. Real estate development ** : Real estate development i.e. land, building for rent. 3. Technical and : Consulting services for road bridge and building professional services* projects.
Remark: * Current operating business **Business for operating in the future
Part 1.4 - 1 Phousy Construction and Development Public Company
1. Slogan : Pioneering the Development
2. Trademark : “PCD” Phousy Construction and Development Color meaning : Yellow: Lighting, Blue: Stability and Spirit of young ages Green: Sustainable Growth 3. Vision : Phousy Construction and Development strives to pioneer the construction, technology and development in Lao PDR and expand our business to ASEAN countries. 4. Mission : Our mission is to provide the best services with international standards in all areas such as high quality, timely delivery, attention to details, honesty and fairness to our partners and customers.
1.4.1 Products and services
Construction Business The Company offers comprehensive construction engineering services that include the infrastructure construction projects such as: road and bridge construction which are state- project auction, the projects located in the northern area and other provinces. The Company acts as the leader in construction contractor of various divisions or sectors such as: act as the 1st business class of PWT Ministry, the Company got the contract through bidding or direct contract from the project owner using the reliability and reputation of the Company. The outstanding achievements have enabled the Company to win multiple auctions of various construction-type projects such as: road & bridge construction or maintenance. The project type is divided into 3 classifications as followed:
1. Road & bridge construction type: is the contract-based type of various roads from the project owner through auction participation, such as: 2- Levels asphalt paving project, urban by-pass road construction, and the bridge construction project for instance;
2. Road & bridge construction and maintenance/road network upgrading type: is the construction project performed in the post-rainy season or after the natural disaster, emergency work along the road under maintenance; and road network upgrading project;
3. Other construction projects: are the construction in various type of projects including: earthmoving project, erosion protection, and airport construction.
Part 1.4 - 2 Phousy Construction and Development Public Company
Table 1.4.2 Highlighted Projects Name of previous projects Project owner Detail of Project Project Value Period / Parties from Contract of Time (LAK million) 1. Road & bridge construction 1 2- Levels asphalt paving project in PWT Division, 2-level Asphalt paving project, Luangprabang Province, Route no. 6,122 2010 urban Luang Prabang City Luangprabang 2502 The route: Three section Phonphao temple to Phanom Province Village and Hongseangthip to Naluang Village: Km 0+000-2+318 and Km 00+00-0+371 Total length 2,328 M. and 371 M. 2 Urban by-pass construction in Luang PWT Division, Urban detours construction in Luangprabang City, Route no.13 209,907 2013 Prabang City + 1 concrete bridge Luangprabang The route: Korkngiw Village to Phonexay Village, Total length Province 18.4 Km. width 11.00 M. + 1 concrete bridge: Total length 202.00 M. width 10 M. 2. Road & bridge construction and maintenance/road network upgrading 3 Emergency road repair and renovation PWT Division, Emergency road repair and renovation project (from Pakmong 4,823 2012 project (from Pakmong Village – Luangprabang Village – Borders) Oudomxay Province, Km 496+000 - Km Borders) Oudomxay Province Province 531+000, Total length 35 Km. 4 Emergency handling project (from PWT Division, Emergency handling project; Route no.4 B The route: from 2,500 2012 Xiengman to Borders) Hongsa Luangprabang Xiengman to Borders, Km 0+000 Km 72+000, Total length 72 District, Luang Prabang Province Province Km. 5 Emergency road repair (affected by a PWT Division, Emergency road repair (affected by a disaster) 2012; Route 2,550 2013 disaster) project in Phonexay District, Luangprabang no.2504, from Huayloungtherng Village to Parkvang Village, Luang Prabang Province Province Phonxay District, Luangphabang Province, Total length 84 Km. 6 Emergency handling by machinery PWT Division, Emergency handling by machinery local roads 2012 – 2013; Route 2,796 2013 project in Phonexay District, Luang Luangprabang no.2504, from Huayloungtherng Village to Parkvang Village, Prabang Province Province Phonxay District, Luangphabang Province, Km 48 + 000 - Km 132 +000 Total length 84 Km. 7 Emergency handling project in Nam PWT Division, Emergency handling project Route no.13 North, The route from 3,808 2013 Bark District, Luang Prabang Luangprabang Naxiengdy Village to Oudomxay border, Nambark District, Province. Province Luangprabang Province, Km 476+000 – Km 531+000 Total length 55 Km.
Part 1.4 - 3 Phousy Construction and Development Public Company
Name of previous projects Project owner Detail of Project Project Value Period / Parties from Contract of Time (LAK million) 8 Emergency handling for damage roads PWT Division, Emergency road repair (affected by a disaster) 2012; Route 9,350 2013 project in ChomPhet District, Luang Luangprabang no.2651, 2652, 3119, 3116, 3111 and 3121 from Huaytham Prabang Province. Province Village, Xiengman Village, Buamrao Village, Jok Village, Keangkhan Village, Huaypong Village, Chomphet District, Luangprabang Province, Total length 75 Km. 9 Emergency road repair and renovation PWT Division, Emergency road repair and renovation project Route no.2501, 6,983 2014 project (from KM4 Radio Station to Luangprabang project (from KM4 Radio Station to Sibounheung Village) Sibounheung Village) Luang Prabang Province Luangprabang Province. Total length 85 Km. width 6 M. Province. 10 Road upgrade project in Phonexay PWT Division, Road upgrade project, Route no. 2504 Phonexay District to 27,972 2014 District, Luang Prabang Province Luangprabang Phonthong Village, Phonthong Village to Parkvang Village and Province Phonthong Village to Hardjong Village, Luangprabang Province, Total length 56 Km. 9 Km. and 43 Km. 11 Emergency road repair and renovation PWT Division, Emergency road repair and renovation project, Route no.2508 5,796 2015 project (from Phutidpheung Village - Luangprabang from Phutidpheung Village (Ngoy District) to Vietnam border Borders) Luang Prabang Province. Province (Phonthong Dristrict) Luangprabang Province, Total length 107 Km. width 6 M. 12 Emergency road repair and renovation PWT Division, Emergency road repair and renovation after the rainy season 1,921 2016 after the rainy season project, Luangprabang project Route no.3053 and 3137 from Kiewjia Village to Hueb Phonethong District, Luang Prabang Province District to Navat Village and Vangxieng Village to Nabeng Province. Village, Phonthong District, Luangprabang Province. Total length 96 Km. width 6 M and 5 M. 3. Other construction projects ▪ On process
Part 1.4 - 4 Phousy Construction and Development Public Company
Picture 1.4.1 2- Levels asphalt paving project, Luang Prabang province
2- Levels asphalt paving project by pass, Luang Prabang District, Luang Prabang Province
Construction project Phontong village to Dongdok village, Vientiane Capital
Part 1.4 - 5 Phousy Construction and Development Public Company
Picture 1.4.2 Backlog under Construction
2- Levels asphalt paving project, Ou village to Sibounhueang village, Luang Prabang Province
Earthmoving project for building the road along Lao PDR-Viet Nam-Cambodia borders, Attapeu
Province
Part 1.4 - 6 Phousy Construction and Development Public Company
1.4.2 Backlog under Construction Table 1.4.3 Table of projects that have been signed and continued for construction or project that has not been handed-over on the date of 30-Jun-2016 Period of Project Value from Project Time (Due- % of Remaining Value Name of Project Detail of Project Contract Owner/Parties End Date of Completion (LAK million) (LAK million) Contract) 2- Levels asphalt Total length 50.20 KM, 2013 – 2016 paving project, width 9 meters (7 KM road PWT division, (renew Luang Prabang surface) and reinforce 343,615 231,768 Luang Prabang contract to 38.02%* Province concrete with total length Province 31st March 200 meters, width 10 3019)/1 meters Road Upgrading 2013-2015 Project on the route PWT division, (renew 80,881 41,694 number 3503, Luang Luang Prabang Total length 50.20 KM contract to 38.50%*
Prabang Province Province 31st March 2018)/1 Earthmoving project for building the road Phase 1 Ministry of along Lao PDR-Viet 415,625 2014-2016/2 completed 120,074 National Total length 225 KM Nam-Cambodia about Defense borders, Attapeu 71.11%) Province Total Amount 840,121 393,536
Remark: The above information has been updated on 30th June 2016 which is the Company’s information /1 The project has delayed because of slowly handing over the project area from the project owner to the Company. /2 The project is under process of transfer the project control sector from Ministry of National Defence to MPWT which the Company is in progess of continued contact.
Part 1.4 - 7 Phousy Construction and Development Public Company
1.4.3 Future and during survey – design project Table 1.4.4 Table of projects under design phase to prepare for the bidding and contract signing in 2016* Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) 3 national road repair MPWT MPWT The Company has bidded 3 projects as 2017 5 months 15,961 projects (National below: funding budget) 1. Number 17A road repair project with total length 70.10KM at Luangnamtha province with projet value LAK 4,485 million. 2. Number R3 road repair project with total length 42KM at Bokeo province with project value LAK 9,224 million. 3. Number 1C road repair project with total length 20KM at Luang Prabang province with project value LAK 2,252 million. Erosion protection PWT division On process of The project is under auction plan which 2017 3 years 85,860 project at Champasak finding main the Company has expected to be the sub- province contractor as Korea contract the project in proportion of 20% Economic company which the of total project value around LAK Development Company has 429,300 million. Co-operation expected that being fund: EDCF of the sub-contractor of Korea the project. governemen who are sponsor budget in the project in addition of main contractor
Part 1.4 - 8 Phousy Construction and Development Public Company
Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) is Korea company Real estate (Land) Phousy Group - The land is located along the by-pass 2017 1 year 40,500 Sole Co., Ltd / road at Luang Prabang city, Kokngiew related village, Xianglom village and Hadhien company villag, Luang Prabang province.
National road repair MPWT MPWT Every year, there are national funding 2018 1 year 600,000 project (national fuding budget in amount LAK 600,000 million budget) of National road repair project which the Company has expected to win the auction around 10% of total project value every year.
Erosion protection PWT division at On process of The project is under auction plan which 2018 3 years 81,000 project Vientiane finding main the Company has expected to be the sub- capital contractor as Korea contract the project in proportion of 20% Economic company which the of total project value around LAK Development Company has 405,000 million. Co-operation expected that being fund: EDCF of the sub-contractor of Korea the project. governemen who are sponsor budget in the project in addition of main contractor
Part 1.4 - 9 Phousy Construction and Development Public Company
Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) is Korea company Mekon bridge MPWT On process of On process of negotiation the detail of 2018 3 years 55,080 construction project discussion investment estimate. investment model with the project owner between concession as build operate transfer (BOT) or public private partnership (PPP)
Real estate (flat) Phousy - The flat will construct total of 80 rooms 2018 3 years 59,460 Construction with total area 4m*30m of each room. It and is located along the by-pass road at Development Kokngiew village, Xianglom village and Public Hadhien village, Luang Prabang Company province. The Company has expected to (PCD) sell the flat around 30% in 2018 and 50% in 2019.
Part 1.4 - 10 Phousy Construction and Development Public Company
Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) Special Economic Special On process of On process of feasibility study of the 2019 4 years 194,400 Zone, Luang Prabang economic zone allocation budget project in order to let the project owner province committee, from the project allocate budget or valuate totoal project Luang Prabang owner value. Investment estimated 20%. The province result of investment estimated in infrastructure such as: electric and water-supply around USD 120 million of investment and the primary result is around 20%.
Erosion protection PWT division On process of The project is under auction plan which 2019 3 years 81,000 project at Luang finding main the Company has expected to be the sub- Prabang contractor as Korea contract the project in proportion of 20% province company which the of total project value around LAK Economic Company has 405,000 million. Development expected that being Co-operation the sub-contractor of fund: EDCF of the project. Korea
governemen who are sponsor budget in the project in addition of main contractor is Korea company
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Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) Repair by-pass road PWT division, - On process of feasibility study of the 2018 1 year 5,790 project, Hadhien Luang Prabang project in order to let the project owner village, Luang Prabang Province which allocate budget to operate the project. district, Luang Prabang is on process of province survey-design
2 level asphalt paving PWT division, The Company has On process of discussion with the After 2019 3 years 657,072 construction project Bokeo province already surveyed- project owner in order to allocate the with total length 118 designed and peoject budget. KM at Bokeo Province operated. And currently it is in the process of budget allocation from government Survey-design for Tat PWT division, The Company has On process of discussion with the After 2019 3 years 154,095 Kuangxi road Luang Prabang already surveyed- project owner in order to allocate the construction with total province designed and peoject budget. length 24KM, Luang The Company operated. And Prabang province has already currently it is in the surveyed. process of budget allocation from government
Survey-design for 4 PWT division, The Company has On process of discussion with the After 2019 3 years 128,981 lanes road construction Luang Prabang already surveyed- project owner in order to allocate the at Huayxaiy district province designed and peoject budget. with total length The Company operated. And 8.5KM, Bokeo province has already currently it is in the surveyed process of budget
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Expected Project Value Estimated period Name of Project*** Project Owner Contract Parties Status Project (LAK of project Start million) allocation from government Total amount 1,619,199 Remark: * The factors that make the project delayed because there ar high competition and there are more construction companies involve in the project auction and the change in government policy ** In the past, if the Company got the feasibility study of the project job, the Company would get that project. However, there is some risk that the Company would not win the project auction.
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1.4.4 Marketing and Competition Situation 1.4.4.1 Marketing As a service provider of comprehensive engineering by emphasizing on infrastructure developments services which the majority of the project owners are the government sector. Therefore, our marketing strategy focus on the government sector by transferring the projects on a quality and on-time basis which is an important factor for the project owner that will trust on a quality provided by the Company which create an opportunity to get more jobs in the future. In addition, the Company has built good relationship with the government sector by provide and exchange the construction information along with the studies, exploration of addition areas for road project developments which creates a better chance of winning the auctions.
1.4.4.2 Characteristic of Target Customers Our target customers are divided into the government and private sectors especially on the infrastructure development projects in the northern part of the country covering the whole country. Over the past 5 years (from 2012-2016), the Company has been received 100% of its total revenues from the government sector. In the future, the Company plans to add extra projects (micro, medium, and mega sizes) from the private sectors and the Company plans to develop properties project to supply the increasing demands of major urban cities of the country.
1.4.4.3 Distribution and Distribution Channel The distribution channel of the Company is getting contracts from the government by submitting the bidding documents to quote the prices and negotiate the works with the project owner. The Company then receives the project bidding documents to evaluate the quotation. From time to time, the Company propose the project directly to the project owner to get an approval of the project. However, the project owner shall inspect the possibility of that road construction or project; the feasibility study is needed to mitigate the competition risk in the bidding.
1.4.4.4 Competitive Strategy The Company has a policy to increase the work in construction from the government and private sectors. To achieve our target to be a leader in construction and country’s development, the Company has planned to expand the business in the ASEAN Community. In order to have a competitive advantage and achieve the target, the Company has developed competitive strategies as followed:
A. Comprehensive construction service company
The Company is a comprehensive construction provider which are prompt to submit the project proposal or enter the bidding competition of both government and private project that have put readiness to the Company to be a leading industrial developer of the country, the Company plans to invest in infrastructure development projects and property development projects with personnel with experienced in construction engineering, use of modern technology, and aim for bigger and more complex projects. The abundance of construction materials and experienced workers have contributed a success to the Company.
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B. Quality and standard of the work
Maintaining the quality and standard of work is the reason that the Company has been successful. From the beginning history of the Company, the Company managed to complete the work on time, with reliability and quality of work based on the contract, serves the customers with sincerity, detailed, and honestly.
The Company focuses on the state-funded infrastructure development project at the provincial, district and division levels. The strengths are high experienced and high level of competency of the personnel. The Company believes that, with these strengths, the Company is able to perform the infrastructure development project efficiently by utilizing effective human resources and engineering management; these affect the increasing in revenues and profits. In addition, mega projects have been supported by customers and public sector, which lower the risk of income collection. However, the infrastructure development work is the most important area. The Company focus on the quality inspection throughout the construction process and having engineers monitoring each project in order to solve the issue instantly.
C. Subminitting the work on time
The infrastructure development work, especially on the road construction is a time- consuming project. Therefore, the Company must hand over the works on time as planned. The Company is well known for the subminitting the work on time which is an important factor for the Company’s success that requires long-term responsibility.
The Company has a systematic management by planning in each phase with continuous personnel empowerment to ensure effective implementation of work to finish on time.
D. Pays attention on the detail of the project
The Company pays the attention on the details in all projects with high experienced managers and engineers, expert in the road, bridge and other construction projects in order to monitoring all project activities which have contributed to the improvement continuously and therefore the decrease the construction costs in various ways. Moreover, the Company aims to achieve that target by developing management concept, use of modern technology to improve the performance as well as to decrease the construction costs.
E. Being honest and fair to our colleagues
As being honest, sincere, and fair for all related stakeholders including the project owner, designer, and supervisor. Due to the fact that the designer knows the project in details. From the principles of being honest and sincere, these have led us to become a well known company, with a good relationship among the supervisors, designers, and colleagues.
F. Being reliable and trusted by our customers
From the Company’s previous success, the Company is reliable and trusted by the customers and the project owner. Since then, the Company has been regularly contacted by the government sector to attend the bidding competition.
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1.4.5 The Industry and Competition Overview
Overview of construction industries in Lao PDR Lao PDR is located in South-East Asia which has the borders with 5 neighboring countries and not close to the sea. Mostly, the transportation and trading are on the land. Therefore, the strenuous infrastructure development in Lao PDR and nearby borders is utmost important factor to create business opportunities for both public and private sectors, which help attracts foreign investments and international tourists visiting in Lao PDR, and expand the opportunity to international trading with neighboring countries and being the member of ASEAN Community closely. It can generate revenues for the country, enable trade surplus, increase a government budget from revenue collections in terms of taxation as well as release Lao PDR from the list of underdeveloped country by 2020 according to the policy of the state and government. Over the past 3 years, the economic growth in Laos from 2013-2015 was found that the Gross Domestic Product (GDP) has decreasing equal to 8%, 7.8% and 7.4%, respectively (reference from the 2015 economics report from the National Economics Institute). However, the economic growth is growing incessantly and rapidly compared to the neighboring countries in the South-East Asia region. Especially agriculture, industry and services. Factors the contribute to the economic growth are illustrated in the graph below.
Picture 1.4.3 Economic Expansion in Lao PDR and Nearby Countries
Source: Lao Statistic Bureau, and International Monetary Fund (IMF)
Picture 1.4.4 Segmented Economic Expansion in Lao PDR
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Source: Lao Statistic Bureau, Ministry of Planning and Investment
Over the past 3 years, the overall industrial sector in Lao PDR from 2013 – 2015 has been expanding continuously, especially the construction sector has been growing equivalent to 9.70%, 12.00%, and 12.80%, respectively. Due to the fact that, there are several projects under construction and approval from government such as power plant projects (Hongsa Solar Power in Xayaboury Province), Lam Phan Yai Hydropower Project, Nam Kan 2 Hydropower Project, Nam Ngiep 2 Hydropower Project, Nam San 3B Hydropower Project, Nam Beang Hydropower Project, and Nam Sa Na Hydropower Project). The strategic road construction and upgrading projects such as Laos-China Railway Project with total distance of 427.20 KM consist of 5 main stations namely: Nateuy Station (Luangnamtha Province), Meuangxay Station (Oudomxay Province), Luang Prabang Station (Luang Prabang Province), VangVieng Station and Vientiane Capital Station. Detail of industrial sector growth is as follow:
Picture 1.4.5 Industrial Sector Expansion in Lao PDR
Source: Lao Statistic Bureau, Ministry of Planning and Investment
Meanwhile, the domestic investments in Lao PDR has increased constantly with total investment values approximately LAK 35,462,000 million in 2015. Government investments are equivalent to 26.10% of total investment values and private investments are equivalent to 73.90% of total investment values which has increased slightly compared to the previous year. The approval of concession investment projects has likely to increase. In 2015, there were the approval of 31 concession investment projects with total project values of USD 1,280 million (approximately LAK 10,350,080 million, based on the exchange rate dated 28th September 2016). It has increased equivalent to 13.50% compared to the previous year. The Special Economic Zone investment projects has increased as well. In 2015, there were 92 companies investing in the Special Economic Zone with total registered capital of USD 1,690.90 million (approximately LAK 13,671,617 million, based on the exchange rate dated 28th September 2016). It has increased equivalent to 166% compared to the previous year. The majority of investments were at Golden Triangle Special Economic Zone, Thakek Specific Economic Zone, Savan-Xeno Special Economic Zone, Saysettha Development Zone, and Vientiane Trade Industrialization Zone.
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Table 1.4.5 Investment Indicator 2013 2014 2015 Total investment value (LAK billion) 29,916 35,238 35,462 Import of goods for private investment projects 1,352.50 2,051.90 1,533.50 (USD millions) Import of capital through banking (USD millions) 404.80 777.30 907.60 Loan facilities to the private sector (LAK billion) 8,182.80 4,021.00 6,397.20 Government investment (LAK billion) 7,906.80 8,515.60 9,260.30 Approval of concession investment projects (USD 3,205.80 1,128.10 1,280.00 millions) Enterprise registered capital (USD millions) 3.331.00 4,415.5 3,004.10 Approval of Special/Specific Economic Zone 2,091.00 6,34.30 1,690.90 investment (USD millions) Total quantity of cement distribution (Ton 2.27 2.31 2.34 millions) Index of private business’s view 105.50 110.90 104.90 Source: Ministry of Finance, Bank of Lao PDR, Ministry of Industry and Commerce, Secretariat of SEZ, Department of Investment Promotion/MPI and Economics Research Institute/MPI.
As shown in the numbers above, investment sector in Lao PDR has been increasing continuously. Policy of Laos Government and Number 8th of the 5 years National Social – Economic Development Plan (2016 – 2020) had set the implementation policy and achieve targets especially industrial sector that help moving the economic growth such as the strenuous infrastructure development in Lao PDR, hydropower projects, mining and mineral exploring which are important steps in development and expanding economic growth in the long term.
Trends and Significant Parameters From the significant expectation regarding economic growth in Lao PDR has been likely to grow continuously. Base on the Number 8th of the 5 years National Social – Economic Development Plan (2016 – 2020), the projected economic growth was set to be not less than 7.50% per year. The key factor is the industrial sector, especially the construction that related to real estate and infrastructure both of government and private investment projects which has been increasing through bank loan facilities government and foreign investments. The key factors indicate the construction growth is from the Number 8th of the 5 years National Social – Economic Development Plan (2016 – 2020). It represents that the policy of government on the strategic planning and the important guidelines of development in many sectors such as infrastructure, transportation, facilities, mineral processing, information technology and supporting rapid growth with neighboring countries in the South-East Asian closely. The key facts are as follow:
Planning of infrastructure projects are approved in the Number 8th of the 5 years National Social – Economic Development Plan (2016 – 2020) - Upgrade of connecting roads with neighboring countries along with the alignment of the GMS, ASEAN Highway, East-West Economic Corridor, and North-South Economic Corridor. - Upgrade of strategic logistic roads to accommodate the transport traffics due to modernization and industrialization. - Construct the railway from Boten – Vientiane and conduct the survey of Savannakhet – LaoBao railway; Vientiane Capital to Thakek – Napao to connect with Muya and others.
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- Establish a comprehensive logistic system by focusing on 2 areas, such as Nateuy, Luangnamtha; Xeno, Savannakhet; Thanalaeng, Vientiane Capital; and Wang Tao, Phonethong, Champassak Province. - Conduct the survey and design of Vientiane International Airport, Xaiyabouri Airport, and Champassak Airport where it can be utilized by 3 provinces namely Champassak, Saravan, and Xekong to accommodate 3 million passengers per year.
Planning of infrastructure projects are approved in the Number 8th of the 5 years National Social – Economic Development Plan (2016 – 2020) are divided into areas of the country to support international connectivity and core competency. 1. Northern Areas Road Infrastructure Development - Upgrade No. 13 North National Road (Pakmong – Oudomxay) to connect with 1B. - Upgrade No. 19 National Road to Hadxa – Paka (Laos-China Borders) - Road construction from Ad District, Houanphanh Province (Laos-Viet Nam Border) to Thathom District, Xiengkhuang Province. - Road construction from Xing District, Luangnamtha Province (Laos-China Borders) passing through Bokeo District to Kane Tao District, Xayaboury Province (Laos- Thailand Borders). - Upgrade and construct the connecting roads with national road, such as upgrade the road from Huayxai – Paktha – Phaoudom – Pakbaeng, Oudomxay province. - Huayxai District Development Project, Bokeo Province (Establish the tourist destination of Nongthan Lake, Mekong River bank erosion protection, and renonvate Khon Keo Port) with ADB funding. th - Road construction and upgrade of 2-layer asphalt from KM 59 of Roan No.13 North to Poulakkham Checkpoint, Namor District (Chinese Borders). River Infrastructure Development - Improve the sailing route along Mekong River and protect the river bank erosion, setting the standard of 500 tons of weight for vessels from Huayxai-Luangprabang having the total distance of 300 Km. - Construction of related facilities to accommodate the transportation between Lao PDR- Thailand-Myanmar and PR China to upgrade into international sailing routes. Airport Infrastructure Development - Build new airports in Huayxai District, Bokeo Province, Nongkha Airport, Houaphanh Province to contribute to the development of Special Economic Zone. - Conduct the studies of Xeno Airport Construction, conduct the feasibility study of Bounneua Airport Project, Phongsaly Province; air traffic controllers and others, as well as upgrade the border checkpoints to become the international checkpoints. 2. Central Areas
- Improve and upgrade of infrastructure in the connectivity along the East-West Corridor and to be used with the roads among different provinces, such as Road No. 8, 9, 12 and 13 South; whereas Road No. 13 North will be upgraded to the highway from Luangprabang – Vientiane Capital to accommodate the transportation, to act as the connectivity between the North and South economies and tourist roads along the East- West Corridor that connects with neighboring countries. - 2-Layer asphalt construction project No. 8534 intersection of Road No. 13 South (Khampoun – Kaengpe, Xebangfai District, Khammoune Province). - 18 concrete bridges construction projects along Road No. 11E from the urban city of Kesone – Heunhin. - In addition, there are also the Official Development Assistance Projects (ODA).
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- Asphalt road construction from Sikhai 3-way intersection road to Sikeuth 3-way intersection road. - 4 concrete bridges construction projects from Thanemixay 4-way intersection to Sikeuth 3-way intersection road. - Strategic road construction from Hinheup – Xanakharm. 3. Southern Areas - Road construction of passing roads to Laos-Viet Nam borders; Laos-China Borders. - Provincial and district road constructions to ensure 100% road access to surrounded districts all-year-round. - Increase small and medium size irrigation construction projects, as well as build the lake eco system of various districts. - 2-District development project of Phoudoiy District along Viet Nam borders and Kalum District. - Asphalt road construction project with concrete bridge of the Road No. 3.69.9 from Road No.20 Temebaeng Village – intersection of Road No. 15 of Nong Bua Village (Saravan Province). - In addition, there are also the Official Development Assistance Projects (ODA). - Xekong River bridge construction project.
Competition The competition on construction business operation will be mostly emphasized in the quality of works, create satisfaction to the clients on hand-over the project on time, experience and competency of management and engineers along with quality labors; reliance of construction project owner to the business unit presence. Therefore, that was the key factors to the construction companies in auction competition to grant a project.
4 main competitors of the Company include: 1. Duangchalern Construction Co., Ltd 2. DM Construction Co., Ltd 3. Khampaisana Group. 4. Phonesack Construction Group
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1.4.6 Project-based processes
Picture 1.4.6 the working process from design to delivers the project to the project owner
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1. Project proposal A. Project owner or Government or PWT division When the government planned the construction projects and seeking for the project contractor, there are various government sectors involved such as PWT Ministry, Department of Road & Bridge, Provincial Public Works and Transport Division. Direct contact will be made to the registered construction companies through putting the advertisement on the newspaper or television. In the construction industry sector, the team will conduct a meeting and make a discussion deciding the projects that the Company should consider participating in the bidding, the considerations are based on various factors, namely: size of the project, duration, readiness of the personnel, total project costs, the Company’s strengths and weaknesses, previous experience, representatives or project owners, sources of funding of the project and project location.
B. Phousy Construction and Development Public Company (PCD) Formerly the Company survey new roads to develop and present to the relate governance unit for the approval or feasibilities study the project and if they agree there would have an agreement from the governor to the province’s PWT division (as project owner). Province PWT division shall deliver project and sign survey contract for the Company to do the feasibilities studies. The Company shall spend all cost during the survey procedure, manage personnel into project area. If the Company see an opportunity that the project is possible to reconstruction, planning the construction and forecast construction volume to meet the engineering standard, and present the feasibilities studies about the benefit to the PWT division. Later, if the governance agreed that the project is feasible, they shall give the permission to authorized officer to survey the landscape and calculate the volume and project cost and forecast project cost to present the project owner for approval. Governance shall combine this feasibility expensed to the project’s budget by average 1-2 percent of total project cost. Today, the constraction company is unable to do the feasibilities to present to the governance unit, except only Province PWT division would have an agreement paper to the company to do so. Or the project owner shall do the bidding for survey and design to select the potential contractor to survey the project. In case of, if the governance has budget, the construction shall perform the selection of project contractor as part A above.
2. Bidding and contract signing A. Receiving the construction specifications
Once the Company has purchased bidding documents from PWT division of the related province in accordance with the terms under the duration; the Company shall submit the Bid Bond letter issued by the bank based on the quantity as stipulated in the bidding document. If the Company is selected or became the bidding winner, but the Company intend not to create the contract, then, the project owner can take the payment from the bid bond.
For the bidding, state project owner is the Ministry of PWT or PWT division of the related provinces shall act as the inviter for the bidding competition. The documents needed for the bidding should include: project drawing, technical specification, corporate profile for the contractor, and other related documents.
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Normally governance has specification the feature of the Company to attend the bidding. Governance shall specify the attendance as juristic entity, evaluate the qualification and etc. notify to summit financial statement, background experience, readiness of human resource and machinery and clarify the source of fund to spend on the project.
B. Conduct the study and survey, planning, machinery, work process and price evaluation
Once the Company received the project drawing, the management sector shall then conduct the feasibility study of the project in accordance with the bidding documents, followed by actual field inspection and conduct initial plan regarding the Company’s personnel, machinery, tools, equipment, and work process in order to evaluate the cost of each task, description of materials and amount of labors needed for the construction (which is referred to as ‘Bill of Quantity’ or BOQ) to evaluate the project cost and added profit to create the cost evaluation sheet needed for the submitting of a quotation to the bidding competition.
Project cost evaluation is the main factor which effect to project profit. The Company shall evaluate project cost in details before summit the bidding, which cost evaluation is accordance to material, number of engineer and worker needed, term of construction, and financial cost. However, the Company must carefully analyze the cost in all aspect of the project term to protect the Company from the cost overrun. The Company has its process to evaluate cost as detail below:
1. Review job plan and project detail carefully, summary each type of works and volume of relate work, determine project term or working schedule and focusing to each project in detail and forecast potential risks that might occur. 2. Evaluate cost and readiness of human resource, material, machinery and equipment of the Company which necessary to the construction process of the project to finish on time as planned. 3. Review final evaluation by professional department carefully which include of finance forecasting, the process of work and performing, benefit and risk factors that might occur. C. Submission of a quotation to the project owner for bidding or price comparison
The Company shall submit a quotation of the cost evaluation sheet to the public authority who is the project owner with bidding documents for the consideration.
D. Notification of bidding results or price comparison
Once the project owner considered the technical specification and the cost evaluation sheets of all bidding participants. The project owner shall have the notification of bidding result declaring the winner to the construction company that supply the completed information in accordance with the bidding documents, passed of technical specification assuming that the bidding participants are qualified for the implementation based on the bidding document and those who offered lowest prices shall be declared as the winner.
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E. Price negotiation
Proceeding stage is when the project owner negotiates the price with the bidding winner once the price summary has been concluded, the memorandum of price negotiation and negotiation sheet with the bidding winner will be created.
F. Signing of the Contract
The contract will be prepared as a conventional construction contracts which is a standard of the construction work of the Ministry of PWT. The contract shall stipulate payment terms in accordance with the annual government budget based on actual payment except some projects that are subjected to changing in price of payment based on the contract in case of there are fluctuations in the prices of construction materials which normally applied to long- term project.
Generally, the construction contract and the payment by government budget will be used in governance construction. Assigning the contractor to provide the tools, materials, personnel and etc. which necessary to the project. Some construction contract shall provide the calculated formula. The project owner shall make the payment for the construction by cash according to the annual budget or by timber or other assets. From now on, the state-owned project has suspended the turning asset into capital (According to the Prime Minister of Lao PDR’s Order, No. 15/PM, dated on 13-May-2016 on the increase of strict control and inspection management of timber exploration, timber movement and wood business para 4.3.).
Normally the construction contract shall assign the bidder to prepare the performance bond to the project owner during the project’s life time.
The project owner must send all contracts and related documents number in the contract to the bidding winner within 21 days. The Company must sign the contract with the name and the date of signing, and send it back to the project owner in order to finish the process.
The payment must be paid in LAK and most of the construction contract shall stated the payment condition according to the agreement by provincial governor such as a payment in advance and progress payment in periodically which fully undertake by the inspection committee and project owner or governance team or PWT division.
3. Construction process A. Team planning, machinery and work schedule The Company divides the project into small subsets in detail by imposing the structure of implementation and delegate the work to the related sectors to implement by considering the characteristic of each task. The Company has planned in detail in the preparation of personnel where additional workforce will be sought after from the project area which create the employment opportunities and generate income to them. The Company has solved the lack of workforce issue and pays attention to the workforce by allocating them to work in the field where they are being looked after by the project director or project manager.
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B. Use of Shop Drawing for actual construction The manager of each project shall make create the project plan in details as follow: ➢ Determine the personnel of each sector that matches the level of competency and amount of personnel to be stationed in each unit or task, such as: progress monitoring and construction plan of each day in detail; ➢ Construction of temporary office or actual location of the work in each project, each area, accommodations and facilities for the personnel or field work teams, such as: construction uniforms for engineers, helmets, accommodation, food, beverages, telephone and medicines for instance. ➢ Conduct of other work related to the construction preparation
C. The employer or project owner that approves the shop drawing The project owner shall delegate the related authorities to monitor the actual shop drawings and approve the construction prior the next construction phase.
D. Purchasing of Equipment and Tools according to specific plan
The material procuring, the Company does not purchase from a specific group of suppliers such as: cements, metal and etc. That could facilitate the Company to manage the purchasing and be able to control the volume or negotiate the best price and it is also the best way to maintain the quality. The Fuel shall be purchased from the nearby supplier in order to save the cost of transportation. And some material, the project owner may facilitate the Company by providing them such as soil in order to upgrade the surface, the governance would allow to use the soil nearby the site as material
The Company has equipment purchasing procedure through reliable supplier with a reasonable price. The Company control and review the purchasing accordance to the use in order to manage the cash flow efficiently. Alongside, the Company tracks the price trend of the construction material parallel with managing of working capital and project cost.
E. Moving of Machinery and Equipment into construction field
When the Company is ready in term of the personnel and machinery. The project manager shall move the tools, machineries and equipment to construction field in order to be ready for the construction.
F. Carry out the construction as planned The Company shall conduct the construction based on the proposal submitted to the project owner and shop drawings, whereas the project manager shall monitor the progress regularly.
G. Hand-over of work in each phase, issue of invoices as stipulated in the Contract The Company has clearly identified the construction plan including construction steps in the next 24 hours and must report to inspection committee or project owner to monitor the works. Inspection committee would received the work progress reports daily and shall summarized the monthly result.
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Once the project is completed as specified in the contract, the Company will notify the inspection committee to do the inspection on the completed work in accordance with the contract terms. Then, the inspection committee shall sign the inspecting documents. Then the Company will send the invoice to the project owner as agreed in the contract. Once the Company issued the invoice, the Company can recognize the revenue.
H. Summary of (As Built Drawing) Once the Company has completed each phase of the construction work. The Company shall summarize the actual construction result (As Built Drawing) to the project owner.
4. Work transfer process A. Hand-over of work to the project owner Once the construction work is completed, the construction contractor company shall hand-over the work to the project owner.
B. The project owner approves the completed work The project owner shall delegate the inspection committee to inspect the handed- over work from the construction contractor company.
C. Receiving of temporary hand-over certificate The Company shall receive the temporary hand-over certificate from the project owner. While waiting for the permanent hand-over certificate, the Company shall responsible for project guarantee by means of conforming to the conditions and duration as stipulated in the contract. For the last payment, the project owner shall deduct 10% of the total construction costs as a guarantee fee and as a funding for maintenance during the guarantee period which typically takes 12 months from the date of issuing the temporary hand-over certificate.
D. Receiving of permanent hand-over certificate and request for final payment Once the guarantee period is expired, the inspection committee from the project owner will conduct the inspection for the last time in order to certify the approval of the project, then the inspection committee shall notify the project owner to issue the permanent hand-over certificate for the construction contractor company, so they can request the last payment or the remaining amount (if any) from the project owner.
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1.5 Future plan
The future plans of the Company during the next few years are as follow:
Table 1.5.1: The use of proceeds from IPO Proceed of Fund from Estimated Period Objectives IPO of Investment 1. To invest in construction machines Approximately 2017 and equipment LAK 20,000 million Approximately 2. Research and Development 2017-2018 LAK 5,000 million Approximately 3. Working capital for construction 2017-2018 LAK 30,000 million Approximately 4. Working capital for operation 2017-2018 LAK 28,000 million 5. Payback the bank’s loan on behalf Approximately 2017-2018 of the Company and/or related party LAK 36,000 million Approximately Total LAK 119,000 million* Remark: *Approximate fund from IPO is prior deducted from IPO’s cost.
1. To invest in construction machines and equipment
In order to expand scope of project in the future and gain more productivity, the Company plans to invest in the innovative machines and equipment to replace the old machines and equipment. The Company also plans to increase income from private projects, and most of the private projects are offices, hotels, low-rise and high-rise buildings, therefore, the Company plans to invest in the special machines and equipment such as: the excavator car, the road measuring system and etc. which the total investment in construction machines and equipment is approximately LAK 20,000 million from IPO’s funding.
2. Research and Development
Nowadays, the technology on construction sector is rapidly improved, thus, the research and development is important in order to increase the quality of work, the convenience of working process, and could reduce the cost of construction. Thus, the Company plans to work on the research and development such as, the using of high technology tools on paving the road making it more durable, satisfying the client, reduce the maintenance expenses, reduce the cost of construction, and increase the profit of the Company. The Company will do the research and development in asphalt formula which is the important material for paving the road. The Company will corporate with the expert strategic partner on doing the feasibility study for the research and development, and will establish the asphalt factory in LAO P.D.R to build more income to the Company. The Company plans to use fund from IPO around LAK 5,000 million to invest in research and development.
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3. Working capital for construction
The construction of the infrastructure, such as, road, erosion protection and other related infrastructure works, most of the projects’ owner are government sector. Most of the projects required advanced investment from the Company. Eventually, the Company could send an invoice to the projects’ owner according to the term stated in the contract as per percentage of completion. However, the payment may be delayed because it must rely on the government spending budget each fiscal year. Therefore, the Company need to prepare the working capital in order to complete the work on time according to the contract. The Company plans to use around LAK 30,000 million from IPO funding as a working capital for construction.
4. Working capital for operation
The Company plans to expand the business to conform to the plans aiming to receive more projects in each year, especially projects from private sector. The Company plans to increase the number of engineers and workers. Thus, the Company would have to spend more money for the operation such as employee expenses, administrative expenses, and so forth. The Company plans to use approximately LAK 28,000 million from IPO funding as a working capital for the operation.
5. Payback the bank’s loan on behalf of the Company and/or related party
The Company was supported by the financial institutions on the fund using for working capital. The supports are both on behalf of the Company and/or the related party. For the record, the Company has constantly paid the money as the interest and principal to the bank on time. As of 31st March 2017, the Company has the remaining loan from the bank on behalf of the Company and/ or the related party LAK 54,300 million. The Company plan to IPO and listed in Lao Securities Exchange in order to raise fund to use for business operation. The Company plans to use the partial money from the IPO with approximately LAK 36,000 million to pay back the bank’s loan on behalf of the Company and/or related party.
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1.6 Assets used in Business Operations
Phousy Construction and Development Public Company has fixed assets which are divided into many categories: Lands, Building and Office equipment, Furniture and Fixtures, Vehicle. The details are provided as follow:
Table 1.6.1: Net Book Value as in Financial Statement Year 2015 Net Book Value Fixed Assets Ownership (LAK Million) Lands/1 The Company 666,000 Building and Office epuipment The Company 138 Furiniture and Fixtures The Company 598 Vehicle The Company 18,798 Total 685,534 Remark: /1 - The Company got the lands ownership from the government which have been compensated as a payment for the construction. Recently, those assets do not generate revenue in short term. The Company plans to develop the lands itself and sell to those who interested in the future. - Some of the lands are used as the collateral assets for the banks’ loan on behalf of the Company and related parties, the Company has recorded the borrowings transaction as long-term loan from the bank and long-term loan from related parties.
Table 1.6.2: Details of Lands own by the Company Book Value List of lands Location Obligation (LAK million) Phanom village, Luang Total of 7 title deeds Prabang district, Luang 47,432 none Prabang province Hadhien village, Luang 1 land was used as Total of 21 title deeds Prabang district, Luang 183,770 collateral Prabang Province Donekeo village, Luang 9 lands were used as Total of 27 title deeds Prabang district, Luang 113,032 collateral Prabang Province Kokngiew village, 12 lands were used as Total of 76 title deeds Luang Prabang district, 313,398 collateral Luang Prabang Province Nounsavath village, 1 land was use as Total of 6 title deeds Luang Prabang district, 8,368 collateral Luang Prabang Province Total of 137 title deeds 666,000
Part 1.6 - 1 Phousy Construction and Development Public Company
1.6.1 Important Contracts relating to business operation 1. Contract under the construction process 1.1 Road upgrading project on the route number 3503 from Kiewjia village to Huep village with total distance of 32.565 KM., Phonthong district, Luang Prabang Province. Table 1.6.3: Contract of the road upgrading project on the route number 3503 Parties • PWT department in Luang Prabang Province (as Project owner) • Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (as Contractor) (Currently name Phousy Construction and Development Public Company) Contract Date 5th September 2013 Project Value LAK 80,881 million Detail of Project Road upgrading on the route 3503 from Kiewjia village to Huep village, Phonthong district, Luang Prabang Province with total distance of 32.565 KM Period of Project 22 months (from 1st August 2013 to 30th May 2015) Renewal Contract 1st June 2015 – 30th March 2018 Type of Investment 100 % of advance investment by the Contractor Termination • The Project owner can terminate the contract, if the Contractor fails to comply with the contract. • The Contractor encounters financial crisis that leading to bankruptcy. • The Contractor did not comply with construction drawings or consulting engineer’s advice. • Either parties modify or change the contents of the contract. Payment • The Project owner shall pay upon the percentage of completion works which have been certified by consulting engineer and inspection committee. • The Project owner shall pay for the project in accordance with the price that the Contractor has proposed or noticed in price evaluation. The remaining project value at the end of 30th June 2016 equals to 51.55% of the total contract value and forecasted revenue recognition as follow; 6 months ended of (Unit: LAK million) 2017 2018 the year 2016 Revenue recognition 4,044 32,353 5,297 Percent of project value 5.00% 40.00% 6.55% from the contract Source: The Company’s estimation. The project hand • After the work has completed, the Contractor shall report to the Project over and the owner and inspection committee in advance for 2 weeks before the guarantee inspection and certifying the progress of the project. • The Contractor has agreed to the Project owner on 10% deduction from the project value in order to guarantee the works for one year after the Contractor has delivered the project.
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• If the Contractor decline to do the repairment, the Project owner has the right to keep the 10% deduction from the project value in order to do the repairment with other company. • After a year of guarantee period, if all of works is still normal. The Project owner shall re-pay 10% deduction of project value to the Contractor and issue the permanent taking over certificate to the Contractor. Obligation Both parties shall perform their obligations as specified in the contract. Remarks: - The project is on process and the work has completed for 48.45% of total project value. At the end of 30 June 2016, the remaining value of the project equal to LAK 41,694 million. - The extension of the contract refers to Public Works and Transportation (PWT) division in Luang Prabang Province No. 46/Jor Khor LPB dated 19th July 2016.
1.2 Road 2 – levels asphalt paving project from Ou village (Luang Prabang District) to Sibounheuang village (Nan District), Luang Prabang Province
Table 1.6.4: Contract of Road 2 – levels asphalt paving on the route number 2501 Parties • PWT department in Luang Prabang Province (as Project owner) • Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (as Contractor) (Currently name Phousy Construction and Development Public Company) Contract Date 16th September 2013 Project Value LAK 343,614 million Detail of Project Road 2 – levels asphalt paving on the route number 2501 from Ou village (Luang Prabang District) to Sibounheuang village (Nan District), Luang Prabang Province with total distance of 50.20 KM, width 9 meters (7 meters roadway) with 6 locations concrete bridge total length 200 meters, width 10 meter (including sidewalk). Period of Project 34 months (from 1st October 2013 to 30th July 2016) Renewal Contract 1st August 2016 – 30th March 2019 Type of Investment 100 percent of advance investment by the Contractor Termination • The contents of contract can be modified base on agreement of both parties. • If the constrution does not begin within 30 days from signing date, the contract will be terminated automatically. • The contract has ended when both parties performed its obligations as specified in the contract. Payment • The Project owner shall pay upon the percentage of completion works which have been certified by consulting engineer and inspection committee. • The payment shall be divided to 4 periods, beginning year 2013-2014 and will completed in year 2017. The details of payment are as follow: - Year 2013 – 2014 pay LAK 68,722 million (20% of project value) - Year 2014 – 2015 pay LAK 103,084 million (30% of project value) - Year 2015 – 2016 pay LAK 103,084 million (30% of project value) - Year 2016 – 2017 pay LAK 68,722 million (20% of project value)
Part 1.6 - 3 Phousy Construction and Development Public Company
• No modification on price of unit, it will be modifed only when the construction materials price (price adjustment) has increased more than 15% compare to the contruction materials price on the signing date. The remaining project value at the end of 30th June 2016 equal to 67.45% of total contract value and forecasted revenue recognition as follow; 6 months ended of (Unit: LAK million) 2017 2018 the year 2016 Forecast Revenue 34,361 137,446 59,961 recognition Percent of project value from 10.00% 40.00% 17.45% the contract Source: The Company’s estimation. Project Guarantee The Contractor must have guaranteed the quality of construction project for a year from taking over certificate day. Obligation Both parties shall perform their obligations as specify in the contract. Remark: - The project is on process and the work has completed for 32.55% of total project value. At the end of 30 June 2016, the remaining value of the project equal to LAK 231,768 million. - The extension of the contract refers to letter of Public Works and transportation (PWT) division in Luang Prabang Province No. 45/Jor Khor LPB dated 19th July 2016.
1.3 Memorandum of road construction project along the borders of Laos-Vietnam-Cambodia, Attapue Province
Table 1.6.5: Road construction project along the borders of Laos-Vietnam-Cambodia Parties • Ministry of Defence (as Project owner) • Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (as Contractor) (Currently name Phousy Construction and Development Public Company) Contract Date 9th August 2013 Objective Road construction along the borders of Laos-Vetnam-Cambodia with total distance of 225 KM. Location Along the borders, Laos-Vietnam-Cambodia, Attapue Province total distance of 2 phase is 225 KM. Project value This memorandum has not specified the project value, the survey & design team of Civil Engineering Department shall survey, design and calculate the project value. Type of 100 percent of advance investment by the Contractor investment Period of Project 24 months (from 9th August 2013 to 9th August 2015) Payment • The Project owner shall pay upon the percentage of completion works which have been certified by consulting engineer and inspection committee. The remaining project value at the end of 30th June 2016 equal to 28.29% of total project value from the contract and forecasted revenue recognition.
Part 1.6 - 4 Phousy Construction and Development Public Company
6 months ended (Unit: LAK million) 2017 of the year 2016 Forecast revenue recognition -- 120,074 Percent of project value from the contract -- 28.29% Source: The Company’s estimation. Obligation Both parties shall perform their obligations as specify in the memorandum. Remark: At present, the Company are proceeding the road construction project along the borders Laos- Vietnam-Cambodia for the phase 1 beginning Km.099 to Km.146 (Laos-Vietnam-Cambodia) with total project value amount of LAK 415,624 million and the work has completed for 71.71% of total project value. At the end of 30th June 2016, the remaining project value as revenue recognition equal to LAK 120,074 million. The extending of road contruction memorandum is accordance with the letter from the project owner for extending the construction period.
Part 1.6 - 5 Phousy Construction and Development Public Company
2. Contract of loan from financial institution 2.1 Contract of loan from ST Bank, Luang Prabang Province branch
Table 1.6.6: Contract of loan from ST Bank, Luang Prabang Province branch Parties • ST Bank, Luang Prabang Province branch (as Lender) • Phousy Luang Prabang Road & Bridge Construction and Maintenance Sole Company Limited (as Borrower) (Currently name Phousy Construction and Development Public Company) Contract 29th May 2015 Date (memo of loan extending contract on 23th June 2016) Duration 20th June 2015 – 20th June 2018 Credit Line LAK 36,000 million / Debt dated on 31st March 2017 with amount LAK 36,000 million. Purpose of loan Use as working capital in construction project Collateral The Borrower use its own asset(s) or related party’s asset(s) as a collateral which is/are: lands. Interest rate 17% per annum Principle and • To pay the interest on the date of 25th of every month. Interest • To payback the principle to the Lender as follow: Repayment st th - 1 period pay within 20 June 2016 with toal amount LAK 7,000 million. nd th - 2 period pay within 20 June 2017 with total amount LAK 14,000 million. rd th - 3 period pay within 20 June 2018 with total amount LAK 15,000 million or the total remaining amount. In accordance with the memo of loan extending contract, the Lender has approved the postpone of the 1st and 2nd period of principle repayment with total amount LAK 21,000 million to pay with the 3rd period within 20th June 2018 with total amount LAK 36,000 million.
2.2 Contract of loan from ST Bank, Luang Prabang Province branch
Table 1.6.7: Contract of loan from ST Bank, Luang Prabang Province branch Parties • ST Bank, Luang Prabang Province branch (as Lender) • Phousy Luang Prabang Road & Bridge Construction Sole Company Limited (as Borrower) (Currently name Phousy Construction and Development Public Company) Contract Date 25th May 2016 Duration 15th June 2016 – 15th June 2019 Credit Line LAK 5,000 million / Debt dated on 31st March 2017 with amount LAK 5,000 million. Purpose of loan Use as working capital in construction project Collateral The Borrower use its own asset(s) or related party’s asset(s) as a collateral which is/are: lands. Interest rate 13% per annum Principle and • To pay the interest on the date of 25th of every month. Interest • To pay the principle to the Lender as follow: Repayment th - Pay the total amount LAK 5,000 million within 15 June 2019.
Part 1.6 - 6 Phousy Construction and Development Public Company
1.7 Legal Disputes
❖ Legal, Decree and Protection construction business Agreements Phousy Construction and Development Public Company operates the business under the Enterprise Law and the Notification and decision from Ministry of Industry and Commerce. The details are as follow: 1. Phousy Construction and Development Public Company with enterprise license No. th 576/Jor Jhor Vor dated on 27 June 2017. th − According to the Enterprise Law No. 46/NA dated 26 December 2013. 2. Business license on road & bridge sector No. 0095/PWT-LPB dated 15th January 2015. th Currently, the Company has transformed to Public Company on 11 November 2016. So, a new business license is under process for apply permission as specified in business operations objectives of enterprise license of Phousy Construction and Development Public Company.
❖ Legal Disputes Currently, the Company and the Company’s directors are not involved in criminal proceedings or other disputes that would have affected negative impact to the Company. The Company has received a certify letters from the Vientiane Capital People’s Court, confirming that there are no legal proceedings at the Vientiane Capital People’s Court as follow: - The Certify letter from the Vientiane Capital People’s Court No 09/PC.VTE dated 14th November 2016.
Part 1.7 - 1 Phousy Construction and Development Public Company
1.8 Capital Structure
The Company’s paid up capital is LAK 500,000 million. After IPO, the Company’s paid up capital shall be increased to LAK 600,000 million consist of 600,000,000 ordinary shares with par value of LAK 1,000 per share.
1.8.1 Shareholers
Table 1.8.1: The Company’s shareholding structure before and after IPO
Before IPO After IPO Shareholders No. of shares % No. of shares % 1. Existing Shareholders 500,000,000 100.00% 500,000,000 83.33% 1.1 Mr. Sithong Phommachith 415,000,000 83.00% 415,000,000 69.19% 1.2 Ms. Pienkham Phommachith 50,000,000 10.00% 50,000,000 8.33% 1.3 Mr. Siphone Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 1.4 Ms. Bouaphanh Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 1.5 Mr. Sitha Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.6 Ms. Hithong Phommachit 5,000,000 1.00% 5,000,000 0.83% 1.7 Ms. Amphone Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.8 Ms. Touybouasy Phommachith 5,000,000 1.00% 5,000,000 0.83% 1.9 Ms. Phetmany Outhoumphone 5,000,000 1.00% 5,000,000 0.83% 2. Investors from IPO - - 100,000,000 16.67% Total 500,000,000 100.00% 600,000,000 100.00%
As the date indicated in the prospectus, the nine existing shareholders has full controlling interest in the Company by holding 100% of the Company’s total issued and outstanding of 500,000,000 shares.
After IPO, the proportion of the shareholder of the Company shall be changed as follow: - Existing Shareholders: 83.33% of total shares - Investors from IPO: 16.67% of total shares
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Phousy Construction and Development Public Company
1.8.2 Dividend Policy The Company will pay the dividend to the shareholders not less than 50% of net profit after the deduction of legal reserve and other reserves (if any). The Company has a policy to pay dividend to the existing shareholders equals to 50% of dividend payment announced to pay to general shareholders. This condition become effective for the period of 2 years after listed in LSX. The shareholders’ meeting resolution for the dividend payment approval is for (1) annual dividend payment and (2) interim dividend payment. The interim dividend payment must be approved by Shareholders’ meeting resolution or Shareholders’ meeting entitles to Board of Directors in order to approve interim dividend payment. The interim dividend payment can be paid, considering current financial condition and appropriateness, but it must accord with related regulation. The dividend payment might be amended upon the consideration and approval from the shareholders’ meeting which will depend on the economic situation, cash flow, investment plan, conditions and the Company’s obligation as well as the law and the capital adequacy for business expansion in the future. The dividend shall be paid in LAK (kip) currency and will be subject to tax exemption as dividend that paid from net profit from being listed company date in Lao Securities Exchange.
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Phousy Construction and Development Public Company
1.9 Management and Corporate Governance 1.9.1 Organization chart Picture 1.9.1: Organization Chart
Organization chart of the Company was adjusted in accordance with the growth of the business and to become public company, which consists of Board of Directors and 4 sub- committees.
1.9.2 Shareholders’ Meeting a. Shareholders’ Meeting Shareholders’ meeting of the Company shall be organized as follow: 1. Annual General Meeting of Shareholders (AGM): shall be held at least once a year. The listed Company in LSX must execute rely on the related regulations of LSCO, LSX and other related regulation. 2. Extraordinary General Meeting of Shareholders (EGM): the meeting shall be held when any resolution needs to be approved or on the required scope of work, following to the Company’s regulation or related law. b. Quorum of shareholders’ meeting Quorum of shareholders’ meeting of Company is organized as follow: − Annual General Meeting of Shareholders (AGM): the quorum shall be at least two shareholders representing more than half of total paid-up shares. − Extraordinary General Meeting of Shareholders (EGM): the quorum shall be at least two shareholders representing more than half of total paid-up shares.
Noted: The invalid shares resulting from transfer’s activity will not be counted in the quorum even though the shareholders attended the meeting.
Part 1.9 - 1 Phousy Construction and Development Public Company
c. Voting rights A shareholder is generally entitled to one vote per share. A resolution may be adopted at general shareholders’ meeting by simple majority vote. Thus, the special resolutions shall be approved by a vote of at least two-third of shareholders or their proxies attend the meeting; and more than 80% of total shares contributed. The following matters relating to the Company require a special resolution of the shareholders: − Voting on matters specified by the Enterprise Law − Amending the Articles of Association (AOA) or Memorandum of Association (MOA). − Increasing or decreasing the capital of the Company − The merger or dissolution of the Company − The sale or transfer of all or substantial part of the Company’s business to another person. − The purchase or acceptance of the business of other enterprise.
Pursuant to the Enterprise law, a shareholder may be restricted from voting on matter in which they are involved and through this involvement may receive a direct benefit or gain. The members present at the shareholders’ meeting shall determine whether a shareholder falls within this scope.
1.9.3 Board of Directors and Executives.
Table 1.9.1: Name list of Board of Directors No Name list Position 1 Mr. Sithong Phommachith Chairman 2 Mr. Khanthavong Dalavong Vice Chairman / Independent Director 3 Ms. Philaiphone Vongpraseuth Director / Chief Executive Officer 4 Mr. Sitha Phommachith Director 5 Mr. Nanthalath Thilakoun Director / Independent Director
a. The authorized signatory on behalf of the Company The Chief Executive Officer (CEO) are authorized signatory along with the Company’s seal affixed in order to operate on behalf of Phousy Construction and Development Public Company.
1.9.4 The scope and responsibilities of the Board of the Directors 1. Board of Directors 1.1 The qualification of Board of Directors The Board of Directors of the Company includes at least 5 members, and must include at least one third of the independent directors out of total members of the Board. Directors and independent directors shall have attributes according to the qualifications as specified in the related rules as following: 1. Shall have knowledge, skills, experience, diversity of gender and age; 2. Chairman and vice chairman of the listed company shall not be CEO of the listed company; 3. Shall not be Deputy Managing Director of the listed company; 4. Never been dismissed from the Board of Directors of other companies; 5. Never been adjudged bankrupt by the court, never been sentenced by a court for offenses such as theft, fraud, stock theft, falsifying documents, or bribery, corruption or money laundering or pending for the criminal prosecution;
Part 1.9 - 2 Phousy Construction and Development Public Company
6. The Director who is the CEO of the listed company must not be a member of the Board of Directors more than two companies; 7. Shall not be member of the Board of Directors over four companies; 8. Must be conscious, not insane; 9. Other conditions as specified in the regulation of Lao Securities Commission Office.
Members of the Board of Directors who hold positions as independent director, besides the conditions mentioned above, shall have the following additional conditions: 1. Shall not hold the share more than 1% of total shares of the listed company; 2. Shall not be the CEO or Deputy Managing Director of sole company limited and not holding the shares of any company exceed 50% of the total shares except approved from the shareholders’ meeting. In the case of used to be the CEO or Deputy Managing Director of sole company limited or holding the shares of any company exceed 50% of the total shares, they must be exempt from the position more than 2 years; 3. Not hold position of Board of Directors in any company which offer advisory services of accounting, financing, investing, law and others, which cause the independent director not to be able to give the independent opinion to the Company. 4. Shall not be a major client or supplier of the listed company and other subsidiary companies which the listed company hold the share exceeding 50% of total shares; 5. Shall not be individual or juristic entity which relates to the Company otherwise if there is a related transaction, it must follow the regulations; 6. Shall follow other condition according to the regulation of Lao Securities Commission Office.
1.2 Rights and duties of Board of Directors 1. Consider and create strategies, action plan, annual budget plan, annual business operation, risk management policy and business plan to present in a shareholders’ meeting to consider approval; 2. Monitor and evaluate the implementation of strategies, action plan, annual budget plan, annual business operation and risk management policy, with high responsibility; 3. Monitor and evaluate the high value investment, and related party transaction and the acquisition and disposal of the asset; 4. Create the risk management mechanisms and systems including the monitoring and evaluation process; 5. Separate the roles, rights and responsibilities between the Board of Directors and the director committee clearly; 6. study and specify the policy on Corporate Governance; 7. Ensure the operation of the accounting system, the reporting, and the internal audit as defined in the related regulations; 8. Develop and implement the resolutions of shareholders’ meetings faithfully, carefully, with responsibility and fairness to shareholders equally; 9. Appoint the member of the Board of Directors of the listed company such as, Audit Committee, Risk Management Committee, Compensation Committee, Nomination Committee and other necessary committee; 10. Assign responsibilities to each executive and the secretary of the listed company; 11. Appoint, rotate or dismiss the Chief Executive Officer (CEO) of the listed company according to the shareholders’ meeting resolution; 12. Consider the appointment or elimination of the Deputy Managing Director according to the request of the Chief Executive Officer (CEO) of listed company;
Part 1.9 - 3 Phousy Construction and Development Public Company
13. Appoint a secretary of the listed company responsible to the assigned task of listed company or Board of Directors; 14. study and consider compensation of the Chairman, Vice Chairman, Directors, Committees of the Board of Directors, Chief Executive Officer (CEO) and Deputy Managing Director in order to presenting to the shareholders’ meeting to approve according to the request of the Compensation Committee, based on the maximum benefit of listed company and shareholders; 15. Propose the reserves of net profit, dividend and policies of the employee in the shareholders’ meeting to consider for an approval; 16. Identify, monitor, study the solution of conflicts which related to the benefit of the listed company; 17. Present the annual report and financial statement in the shareholders’ meeting to consider for an approval; 18. Explain, answer, and provide details to the company's shareholders’ meeting; 19. Report important activities of the listed company in the shareholders’ meeting; 20. Disclose the shareholding proportion in any subsidiary company and shareholding proportion of other company who hold the listed company’s share exceeding 5%, and inform the changing proportion during the fiscal year; 21. Monitor the operation of Board of Directors; 22. Disclose to public about the name of Chairman, Vice Chairman, Members of the Board of Directors, the number of meetings, number of attending the meetings of the Chairman, Vice Chairman, all members of the Board of Directors, and the recent performance of the Board of Directors in the annual report; 23. Monitor the appropriate disclosure and communication with shareholders; 24. Perform other duties and rights as defined in the related regulations; 25. The tenure is 2 years.
2. The Committees of the Board of Directors 2.1 The component of the Committees of the Board of Directors Board of Directors has appointed the member of the Board of Directors to be the member of 4 sub-committees responsible for each specific duties: Audit Committee, Risk Management Committee, Compensation Committee and Nomination Committee. The sub-committees of the Board of Directors have the duty to report the result to the Board of Directors. The committees have the right and duties in the related regulations. The committees of Board of Directors as follow:
2.1.1 Audit Committee A. The member of Audit Committee No Name list Position 1 Mr. Nanthalath Thilakoun Chairman of Audit Committee 2 Mr. Khanthavong Dalavong Audit Committee 3 Mr. Sitha Phommachith Audit Committee
B. The rights and duties of the Audit Committee 1. Rights and duties on financial statements and disclosures - To verify the financial statement of the listed company which shall be completed, accurate, and consistent with financial reporting standards; - To question the auditing company or auditor on important issues, which may affect the reliability of financial statement of the listed company;
Part 1.9 - 4 Phousy Construction and Development Public Company
- To verify the related party transaction or related issue which may related to the conflict of interest in order to implement the process according to the related regulations; - To question about the report and information disclosure of the listed company in accordance with relevant regulations.
2 Rights and duties on internal control - To ensure that the system of internal control is effective, the internal auditor must assess the internal control system at least once a year.
3 Rights and duties on the external auditor - To ensure the independence of the external auditor, quality, and any relationship to the external auditor which auditing the listed company; - To specify the scope of auditing, consider the selection of external auditor, auditing fee of the external auditor, and propose the termination of the external auditor contract to the Board of Directors in order to get an approval from the shareholders’ meeting; - To track and monitor the progress of resolving the remaining issue in the audit report; - To question the scope of work of the external auditor and internal auditor in order to avoid the replication of tasks.
4 Rights and duties on the internal auditor - To ensure the independence of internal auditor; - To guide directly to the internal auditor, but daily operations are subject to the supervision of the management; - To question and review the internal control mechanism and system constantly; - To question the internal audit report and hold a secret meeting with whoever responsible for the internal control in order to inquire about the intervention of the executives and other departments, which might affect the independence, and judgment of the internal auditor; - To question and consider along with the executive committee, and other committee that related to the detected major deficiencies and find the solutions; - To evaluate the performance of the head of internal control department; - To question the head of internal control department about the efficiency of the assets of listed company according to the rules of listed company, the Board of Directors’ resolution and the shareholders’ meeting resolution.
5 Rights and duties on Compliance - To monitor the implementation of law on securities, related laws and other related legal binding; - To question the Board of Directors and the sub-committees of the listed company as regarded to the significant risk and operational risk.
6 Rights and duties on performance assessment - To evaluate the performance of the Annual Audit Committee; - To disclosure annual report related to Audit Committee, the number of meetings of Audit Committee, the number of meetings attended by each of the Audit Committee and assessment result of the Audit Committee, and the briefly movement contents of Audit Committee. 7 Other rights and duties
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- To consider and give opinion for the appointment and removal of the head of audit department; - To report their actions to Board of Directors and a shareholders’ meeting; - To attend Board of Directors Meeting every time, to give opinion on the related transaction, acquisition and disposal of assets, considering and determining allowance of external auditors; - To give opinion on financial statement and other issues according to the request of the director or executive committee; - To perform the right and duties as assigned by the Board of Directors.
2.1.2 Risk Management Committee A. The member of Risk Management Committee
No Name list Position 1 Mr. Nanthalath Thilakoun Chairman of Risk Management Committee 2 Mr. Khanthavong Dalavong Risk Management Committee 3 Mr. Sitha Phommachith Risk Management Committee
B. Right and duties on Risk Management Committee
1. To study the policy on risk management such as: the risk management strategies, economic - finance, market, liquidity, performance etc. may affect directly - indirectly, the Company in order to submit to Board of Directors for consideration; 2. To study policy on risk management and control over the risks of business groups, including the control, monitoring and evaluation of the risk of business group; 3. To make its action plan in consistent with risk management policy to ensure the implementation, control, monitor and evaluate the risk management at appropriate level; 4. To review, modify or update risk management policy effectively to reduce potential risks will occur to the listed company; 5. To require information related to risk management and arrange meeting with stakeholders in the listed company; 6. To report the first operations results to the Audit Committee and the Board of Directors monthly or quarterly or as needed; 7. To disclosure annual report related to list of Risk Management Committee, the number of meetings of the Risk Management Committee , the number of meetings attended by each of the Risk Management Committee and assessment result of the Risk Management Committee , and the briefly movement contents of Risk Management Committee ; 8. To perform other rights and duties as assigned by the Board of Directors.
2.1.3 Compensation Committee A. Member of Compensation Committee
No Name list Position 1 Mr. Nanthalath Thilakoun Chairman of Compensation Committee 2 Mr. Sithong Phommachith Compensation Committee 3 Ms. Philaiphone Vongpraseuth Compensation Committee
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B. Right and duties on Compensation Committee 1. To identify the principles and detail of compensation; 2. To study the compensation for the Board of Directors and Executive Director to submit to the Board of Directors to present in the shareholders’ meeting for approval; 3. To study compensation for head of department and deputy of departments to present the Board of Directors for approval; 4. To report its activities to the Board of Directors and shareholders’ meeting; 5. To disclosure annual report related to list of Compensation Committee, the number of meetings of the Compensation Committee, the number of meetings attended by each of the Compensation Committee and assessment result of the Compensation Committee, and the briefly movement contents of Compensation Committee; 6. To perform other rights and duties as assigned by the Board of Directors.
2.1.4 Nomination Committee A. Member of Nomination Committee
No Name list Position 1 Mr. Khanthavong Dalavong Chairman of Nomination Committee 2 Mr. Nanthalath Thilakoun Nomination Committee 3 Mr. Sitha Phommachith Nomination Committee
B. Right and duties on Nomination Committee 1. To define the principles and procedures regarding the nomination of personnel to hold positions in the Board of Directors, the principles and the procedures must be transparent and verifiable; 2. To study qualifications, knowledge, experience and suitability criteria according to the agreement on Board of Directors of the listed company; 3. To inform the nominated individuals to the Board of Directors to consider and propose to the shareholders’ meeting for approval; 4. To report its activities to the Board of Directors; 5. To disclosure annual report related to list of Nomination Committee, the number of meetings of the Nomination Committee, the number of meetings attended by each of the Nomination Committee and assessment result of the Nomination Committee, and the briefly movement contents of Nomination Committee; 6. To perform other rights and duties as assigned by the Board of Directors.
3. Another Committee 3.1 Related Party Transaction Committee A. Member of Related Party Transaction Committee
No Name list Position 1 Mr. Nanthalath Thilakoun Chairman of Related Party Transaction Committee 2 Mr. Anolay Siharath Related Party Transaction Committee 3 Mr. Amphayvanh Chanthaphaly Related Party Transaction Committee
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B. Right and duties on Related Party Transaction Committee 1. To compile a name list of individuals and jouristic entities that related to the compnay including with changes to the name of individuals and jouristic entities that related to the company to Lao Securites Commission Office (LSCO); 2. To study, monitor procedures of related party transaction; 3. To appoint independentl financial advisor; 4. To perform other rights and duties as determined by the Company.
1.9.5 Compensation of Board of Directors, the sub-committees
The Extraordinary Shareholders’ Meeting as of 18 November 2016 had set allowance for Board of Directors as follow Independent director will received monthly remuneration as follow : - Chairman LAK 4,000,000 /month/person - Vice Chairman LAK 3,500,000 /month/person - Director LAK 3,000,000 /month/person
• Meeting Allowance
Table 1.9.2: Remuneration of Board of Directors and its members Position LAK/time/person Chairman 1,000,000 Vice Chairman 800,000 Director 600,000 Chairman of each committee 600,000 Member of each committee 500,000 Remark: 1) The Executive Committee will not receive salaries and meeting allowance; 2) For the Board of Directors or the sub- committees who attending many meetings over 1 session per day, they will receive the allowance only once a day; 3) No extra compensation (bonus) for the Board of Directors and/or sub-committees.
1.9.6 Personnel of Company The Company emphasized employees and their family’s life to enhance their encouragement of work in order to put their efforts for the Company. a. Personnel As of 30th June 2016, the Company had a total employee of 178 persons.
Table 1.9.3: Number of Employees from 2014 to 30th June 2016 Year Men Women Total 2014 44 9 53 2015 125 15 140 30th June 2016 162 16 178
Part 1.9 - 8 Phousy Construction and Development Public Company
b. Disputes with employees Since establishing the Company in 1997 up to now, the Company never had any dispute on labor and never had protests or court order affecting business of the Company in any manner. c. Policy in personnel development The Company has the policy to develop human resources continuously by emphasis to enhance their knowledge and skills by providing in-house training in line with the best practices under the eye and guidance from the supervisors of each department. Moreover, the Company encourages staff to develop and upgrade their skills in order to enhance Company’s performance. The Company focus on good working environment for staff by improving the welfare in appropriate way to make sure their opportunity along with the Company growth.
Part 1.9 - 9 Phousy Construction and Development Public Company
1.10 Internal Control
The Company has assigned the Board of Directors to do research and establish the corporate governance policy, improvement, follow up and evaluate working performance of every department in accordance with the goals as well as the internal control system of the Company. In addition, the Company has assigned the audit committee to do the internal auditing, the role is to supervise and ensure that the internal control system works effectively, monitor the compliance of every department both management and operating level to ensure that the Company has transparency and solid managerial system. Additionally, the using of the Company’s resources or money by major shareholders in the related company must be done under the regulation of Laos Securities Commission Office or Lao Securities Exchange or other party related, which practically help protecting any foreseen risks. The Company monitoring and reviewing the internal control system of the construction project as follows: - Control the quality of construction project: to perform any project in accordance with the plan, the Company will monitor, report the result of the daily works, and constantly notify a working plan for the next day to the consulting engineer in order to acknowledge and verify itself as a quality control. Moreover, there will be monthly report explaining the working progress which helps comparing the completed works with the original working plan. The Company will invite the inspection committee to do the inspection and certify the completeness of the project every stage. - Safety policy: The Company prioritized the safety procedure of the construction process by issued the policy which forced every employee/worker to record their name in the list and wear the safety uniform every time they go to the field work. Furthermore, the machinery and equipment must be in a good condition and ready to be used efficiently affecting the Company can control the quality and safety of the works. In conclusion, the Company has a sufficient internal control system, corporate governance and risk management that meets the international standard in order to ensure the shareholders, employees and stakeholders’ interests.
Part 1.10 - 1 Phousy Construction and Development Public Company
1.11 Related Party Transactions
The Company has related party transactions with the connected person(s). Those related party transactions are disclosed in the notes to the financial statement audited by the Company’s external auditor. In addition, the Audit Committee has given the opinion on the said transactions that they are normal business practice of the Company, reasonable, and have comparable market price and condition under arm’s length basis to ensure no conflict of interest between the Company and related parties. Detail of related party transactions are as follow:
Table 1.11.1: List of connected persons
Related party Connected persons or Relationship transaction Related parties (Have= √, Don’t have=X) 1. Phousy Group Sole Mr. Sithong Phommachith is the only √ Company Limited shareholder of the Company hold 100% (PSG)/1 share in PSG 2. Phousy Lao Petroleum Mr. Sithong Phommachith is the only √ Sole Company Limited shareholder of the Company hold 100% (PLP) share in PLP 3. Mr. Sithong Mr. Sithong Phommachith’s family are the √ Phommachith’s family major shareholders of the Company
Remark: /1- Phousy Road and Bridge Construction Sole Company Limited (now is Phousy Construction and Development Public Company) sent the request and signed the contract with the government of Lao P.D.R on 08th June 2012 for the permission to do the research and survey of Antimon mineral at Mueng Hueb Village, Phonethong District, Luangprabang Province, thus Mr. Sithong Phommachith has established Phonethong Mining Company Limited in order to get the certification of the project (whenever the researching process has completed, Mr. Sithong Phommachith will change the name of the investor to Phousy Group Sole Company Limited) /1- Phousy Road and Bridge Construction Sole Company Limited (now is Phousy Construction and Development Public Company) sent the request and signed the contract with the government of Lao P.D.R on 08th June 2012 for the permission to do the research and survey of Steel mineral at Huay Hlex and Pha Toub Village, Ngoy District, Luangprabang Province, thus Mr. Sithong Phommachith has established Mueng Ngoy Mining Company Limited in order to get the certification of the project (whenever the researching process has completed, Mr. Sithong Phommachith will change the name of the investor to Phousy Group Sole Company Limited)
Part 1.11 - 1 Phousy Construction and Development Public Company
Table 1.11.2: Summary of Related Parties’ Transaction Connected Characteristic of the Related matters in Value (Million Kips) Necessities and Responsibleness of the Persons or Transaction Year 2015 and 6 Month Period Year 2016 and Transaction Ralated Parties as of 31st December 2015 as of 30th June 2016 1. Phousy Group - The Company gives the Beginning Balance 27,173 Beginning Balance 27,173 Comments from the Audit Committee: Sole Public loan to PSG to use as its - Increase - - Increase - The transaction is necessary due to the previous Company outstanding. In the past, the Company borrow working capital of the - Decrease - - Decrease (705) business ______money to operate its business with no interest Ending Balance 27,173 Ending Balance 26,468 and on-call repayment. There are no transfer of benefits and the Company shall make repayment after the IPO. - The Company receives Beginning Balance 24,000 Beginning Balance 24,000 Comments from the Audit Committee: the loan from PSG to - Increase - - Increase - The transaction is necessary due to the previous outstanding. In the past, the Company acted as invest in Phonthong - Decrease - - Decrease (24,000) Mining Co., Ltd & the concession requestor on conducting mining Meung Ngoy Mining ______business under Phonthong Mining Co., Ltd & Development Co., Ltd Ending Balance 24,000 Ending Balance 0 Meung Ngoy Mining Development Co., Ltd. Since PSG is the one who invested in the mining business, PSG becomes the Company’s creditor. The Company has a plan to sell this investment to PSG as a part of its business restructuring plan . 2. Phousy Lao - The Company purchases Fuel cost 9,880 Fuel cost 3,025 Comments from the Audit Committee: Petroleum fuel from PLP to conduct The transaction is necessary and beneficial to Sole Company its business the Company, and is made under arm’s length Limited (PLP) basis. 3. Mr. Sithong - The Company received Beginning Balance 7,600 Beginning Balance 11,100 Comments by the Audit Committee: Phommachith’ the loan from Mr. Sithong - Increase 4,800 - Increase - The transaction is necessary and beneficial to the s family Company as it is increasing its liquidity and Phommachith’s family - Decrease (1,300) - Decrease - ______interest rate has been equally charged, compared Ending Balance 11,100 Ending Balance 11,100 to those being charged from financial institutes. The assets is rent to use as the Company’s Office - Interest paid 30 15 Rental expense 1,518 665 in Luangprabang Province. -
Part 1.11 - 2 Phousy Construction and Development Public Company
2. Opinion of Audit Committee
According to the Audit Committee’s resolution number 1/2015, the committee is aware of the importance of auditing related party transactions and abides the regulations that the transactions must be regulated as follows: 1. The transaction is necessary and equally beneficial to the Company, and both minority and majority shareholders. 2. The transaction must be under business normal practice which the price and condition should be comparable with the market in arm’s length basis. 3. The transaction must be approved according to the Company’s regulations and/or by the authorized person.
The transactions between the Company and related party were done under the normal practice basis which the price and condition are comparable with the market, and also the interest rate refered to the average rate of major commercial banks in Lao PDR.
3. Approval Process for Related Party Transactions
The Company is aware of the importance of the transparence of the transaction as well as the benefit of the Company. Hence, it is very important to protect the conflict of interest in related party transaction. The Company has a principle for the related party transactions as follows:
− Basis of the necessity of the transaction must be beneficial to the Company, ethical and under the regulations and laws. − Basis of the fair price which is considered to be the appropriate price and condition that is a normal practice in the market which is comparable. However, the opinion should be given before asking for an approval from the Board of Directors and/or shareholders (by case). − In case the auditing committee has limited skill or knowledge on considering such transaction, the Company shall seek an opinion to the transaction from the independent appraiser or from the external auditor of the Company as a third party’s opinion presented to the Board of Directors and/or Audit Committee and/or shareholders (by case). The related parties who probably have a conflict of interest shall not have voting right to approve the transactions. − To conform with the rules and regulations of Lao Securities Commision Office and/or Lao Securities Exchange and/or related rules and regulations. − If there is a related transaction with a large scale or significance, the Audit Committee will consider the transaction together with the Related Party Transaction Committee in order to consider specified individuals and/or jouristic entities related to the Company, including following up and monitoring the procedures of related transaction adhere to rules or regulations issued by the NRA and/or LSX and/or involved division.
4. Policy for Future Related Party Transactions
Once the Company is listed on the LSX, the Company’s Board of Directors shall conduct the business in accordance with securities law, notice of LSCO and LSX and regulations including the disclosure of the information of the related party transaction / acquisition and disposal of assets together with the accounting standard determined by accounting professional council. Therefore, if there is any related party transaction with the connected person, the Company shall arrange to seek for the audit committee’s opinion on the necessity and the appropriateness
Part 1.11 - 3 Phousy Construction and Development Public Company of the transaction as well as the price and condition should be under a normal practice in the market which is comparable. As a result, the policy for future related party transactions are as follows: 1. For normal business transaction, it should be conducted under the arm’s length basis which means the products and services should be favorable to the related party as similar as to non-related party. 2. There will be no payment for related persons, once the Company is listed on the LSX. 3. There will be no loan or lend from/to related party once the Company is listed on the LSX. However, the transactions that occurred before the Company is listed in LSX, the Company or related party will be proceed under the mutually agreed obligation.
Part 1.11 - 4 Phousy Construction and Development Public Company
1.12 Financial and Operating Results 1.12.1 Financial Statement
Summary of Audited Financial Report The Financial Statement as at the end of 2013 and 2014 were prepared by the Company and were approved by the accounting department and the CEO of the Company. They were not audited by the external auditor with the purpose of using only as the comparison data in this prospectus which they cannot be used for other purpose. According to amical 8 of the law of issuing initial public offering No.018/LSCO on 27th July 2015 of the LSCO which stated that the issuing company requiring one year audited financial statement by external auditor, in the case of the Company send the request to award the permission for IPO to LSCO after 30th June 2016. The Company must send Financial Statement for 6 month period ended 30th June 2016, reviewed by external auditor. Therefore, the Financial Statement as at the end of 2015 is audited by the external auditor and Financial Statement ended 30th June 2016 is reviewed by the external auditor who gives the unqualified opinion as the condition below:
Table 1.12.1: Summary of Audited Financial Report Audited Financial Report: The Financial Statement for the year ended 31st December 2015 External Auditor: PricewaterhouseCoopers (Lao) Sole Company Limited which is approved by Lao Securities Committee Office. External Auditor Opinion: Unqualified opinion. In our opinion, the financial statements of Phousy Road and Bridge Construction Sole Company Limited for the year ended 31st December 2015 are prepared, in all material respects, in accordance with the accounting policies described in Note 2 to the Financial Statements.
Audited Financial Report: The Financial Statement for the year ended 30th June 2016 External Auditor: PricewaterhouseCoopers (Lao) Sole Company Limited which is approved by Lao Securities Committee Office. External Auditor Opinion: Unqualified opinion. In our opinion, the financial statements of Phousy Road and Bridge Construction Sole Company Limited for the year ended 30th June 2016 are prepared, in all material respects, in accordance with the accounting policies described in Note 2 to the Financial Statements.
Part 1.12 - 1 Phousy Construction and Development Public Company
1.12.2 Summary Table of Financial Statement and Operation A. Balance Sheet of Phousy Construction and Development Public Company
Table 1.12.2: Balance Sheet
31st December 2013 31st December 2014 (provided by the (provided by the 31st December 2015 30st June 2016 company company (Audited) (Reviewed) Financial Statement management) management) (LAK: (LAK: (LAK: (LAK: % % % % million) million) million) million) Cash and cash 294 0.04% 1,407 0.17% 450 0.05% 753 0.07% equivalents Trade and other 210,938 26.40% 122,082 15.04% 262,838 26.97% 342,877 33.33% receivables Inventories - 0.00% - 0.00% 122 0.01% 29 0.00% Other current assets 630 0.08% 694 0.09% 249 0.03% 103 0.01% Total current assets 211,862 26.51% 124,183 15.29% 263,659 27.05% 343,762 33.42% Property, plant and 587,167 73.49% 687,758 84.71% 685,534 70.33% 683,902 66.49% equipment Investment in - 0.00% - 0.00% 24,000 2.46% - 0.00% subsidiaries Non-current assets - 0.00% - 0.00% 1,538 0.16% 975 0.09% Total non-current 587,167 73.49% 687,758 84.71% 711,072 72.95% 684,877 66.58% assets Total assets 799,029 100.00% 811,941 100.00% 974,731 100.00% 1,028,639 100.00% Trade and other accounts 2,715 0.34% 4,946 0.61% 57,070 5.85% 16,674 1.62% payable Borrowings from related - 0.00% - 0.00% 7,000 0.72% 21,000 2.04% parties Borrowings from - 0.00% 9,588 1.18% 6,300 0.65% 5,100 0.50% financial institutions Income tax payable 16,827 2.11% 7,554 0.93% 5,467 0.56% 7,768 0.76% Other current liabilities 69,347 8.68% 290 0.04% 20,300 2.08% 30,039 2.92% Total current liabilities 88,889 11.12% 22,378 2.76% 96,137 9.86% 80,581 7.83% Long-term borrowings from financial 1,600 0.20% 7,600 0.94% 29,000 2.98% 20,000 1.94% institutions Long-term borrowings 4,510 0.56% 5,248 0.65% 4,800 0.49% 6,000 0.58% from related parties Total non-current 6,110 0.76% 12,848 1.58% 33,800 3.47% 26,000 2.53% liabilities Total liabilities 94,999 11.89% 35,226 4.34% 129,937 13.33% 106,581 10.36% Share capital 10,000 1.25% 10,000 1.23% 10,000 1.03% 10,000 0.97% Legal Reserve - 0.00% - 0.00% 5,000 0.51% 5,000 0.49% Retained earnings 694,030 86.86% 766,715 94.43% 829,794 85.13% 907,058 88.18% Total shareholders' 704,030 88.11% 776,715 95.66% 844,794 86.67% 922,058 89.64% equity Total liabilities and 799,029 100.00% 811,941 100.00% 974,731 100.00% 1,028,639 100.00% shareholders' equity
Part 1.12 - 2 Phousy Construction and Development Public Company
B. Income Statement of Phousy Construction and Development Public Company
Table 1.12.3: Income Statement
Year 2013 Year 2014 6 month period (provided by the (provided by the Year 2015 Financial Statement year 2016 company company (Audited) (Reviewed) management) management) (LAK: (LAK: (LAK: (LAK: million) % million) % million) % million) % Revenue 118,101 100.00% 93,266 100.00% 144,629 100.00% 97,964 100.00% Cost of Service (71,997) (60.96%) (14,098) (15.12%) (64,126) (44.34%) (10,847) (11.07%) Gross Profit 46,104 39.04% 79,168 84.88% 80,503 55.66% 87,117 88.93% Other income 7 0.01% 0 0.00% 1,623 1.12% 49 0.05% Administrative expenses (4,555) (3.86%) (3,531) (3.79%) (6,707) (4.64%) (3,675) (3.75%) Gain/(loss) from foreign 31 0.03% 16 0.02% 175 0.12% 17 0.02% exchange Operating Profit 41,587 35.21% 75,653 81.12% 75,594 52.27% 83,508 85.24% Finance costs (176) (0.15%) (726) (0.78%) (4,044) (2.80%) (3,893) (3.97%) Profit before Income tax 41,411 35.06% 74,927 80.34% 71,550 49.47% 79,615 81.27% expenses Income tax expenses (2,852) (2.41%) (2,242) (2.40%) (3,471) (2.40%) (2,351) (2.40%) Net Profit of the year 38,559 32.65% 72,685 77.93% 68,079 47.07% 77,264 78.87%
C. Cash Flow Statement of Phousy Construction and Development Public Company
Table 1.12.4: Cash flow statement
2014 (provided by 30th June 2016 Cash Flow Statement 2015 (Audited) the company (Reviewed) management) (LAK: million) (LAK: million) (LAK: million) Net income 72,685 68,079 77,264 Adjustment for non-cash items: Depreciation and amortization 5,059 5,288 2,666 Gross cash flow Increase (decrease) Trade and other receivables 88,856 (140,756) (80,039) Increase (decrease) inventories - (122) 93 Increase (decrease) Other current assets (64) 445 146 Increase (decrease) non-current assets - (1,538) 563 Increase (decrease) Trade and other accounts payable 2,231 52,124 (40,396) Increase (decrease) Income tax payable (9,273) (2,087) 2,301 Increase (decrease) Other current liabilities (69,057) 20,010 9,739 Net cash flows from operating activities 90,437 1,443 (27,663) Increase (decrease) Property, plant and equipment (105,650) (3,064) (1,034) Increase (decrease) Investment in subsidiaries - (24,000) 24,000 Net cash flows from investing activities (105,650) (27,064) 22,966 Dividend paid - - Increase (decrease) borrowing from related parties - 7,000 14,000 Increase (decrease) borrowings from financial institutions 9,588 (3,288) (1,200) Increase (decrease) long-term borrowings from financial 6,000 21,400 (9,000) institutions Increase (decrease) long-term borrowings from related parties 738 (448) 1,201 Net cash flows from financing activities 16,326 24,664 5,001 Net increase (decrease) in cash 1,113 (957) 303 Cash at the beginning of the year 294 1,407 450 Net Cash of the year 1,407 450 753
Part 1.12 - 3 Phousy Construction and Development Public Company
D. Financial Ratio Table 1.12.5: Financial Ratio Approved and Reviewed Financial Ratio 2013 2014 2015 30th June 2016 Liquidity ratio Current ratio time 2.38 5.55 2.74 4.27 Quick ratio time 2.38 5.55 2.74 4.27 Cash Flow ratio time n/a 1.63 0.02 (0.31) Accounts receivable turnover time 0.67 0.63 0.75 0.65* Collection Period day 535 575 479 556 Inventory Turnover time - - 1,051 287* Inventory Conversion Period day - - - - Accounts Payable Turnover time 26.52 2.85 1.94 1.30* Average Payment Period day 14 126 186 227 Cash Cycle day 522 448 293 280 Profitability ratio Gross Profit Margin % 39.04% 84.88% 55.66% 88.93% Operating Profit Margin % 35.21% 81.12% 51.15% 85.19% Cash to Profit Ratio % n/a 119.54% 1.95% -33.15% Net Profit Margin % 32.65% 77.93% 46.55% 78.83% Return on Equity % 5.48% 9.82% 8.40% 17.49%* Efficiency ratio Return on Asset % 4.83% 9.02% 7.62% 15.43%* Return on Fixed Asset % 7.31% 12.20% 10.49% 22.68%* Total Assets Turnover time 0.15 0.12 0.16 0.20* Financial policy ratio Debt to Equity Ratio time 0.13 0.05 0.15 0.12 Interest Coverage Ratio time n/a 128.66 2.22 (5.50) Debt Service Coverage Ratio (cash basis) time n/a 0.86 0.05 2.35 Dividend Payout Ratio % - - - - Remark: *: - The items has been annualized in order to compare with the recent year
1.12.3 Management Discussion and Analysis on Financial Statement
1. Operating result Phousy Construction and Development Public Company (referred to as “Company” or “PCD”) is one of the service providers in Design and Engineering, Procurement and Construction (Design and EPC) management. These include: design engineering, prototype engineering, procurement of materials for engineering works, and constructions. The Company aims to provide infrastructure services, namely: road construction, erosion protection and other related infrastructure work. When considering the business activities over the last 3 years, according to the financial reports of 2013, 2014 and 2015, it shows that the Company’s revenues from the construction are equivalent to LAK 118,101 million, LAK 93,266 million, LAK 144,629 million respectively. For the half year ended 30th June 2016, the revenue from the construction equals to LAK 97,964 million. In 2015, the Company received its highest revenues from the construction in the past 3 years due to the fact that the Company received 1st class contracts (construction contract of new areas where have not had roads, tunnels or bridges before) in total of 3 projects where the majority of the contracts are 1st class with high project values. The gross profit rate of the Company for 2013, 2014 and 2015 equals to 39.04%, 84.88%, and 55.66% respectively. For the half year ended 30th June 2016, the gross profit rate equals to 88.93%. In 2014 and the half year ended 30th June 2016, the Company had high gross profit rates due to the low cost of constructions while maintaining regular revenues base on project-based. The Company’s net profits in 2013, 2014 and 2015 equal to 32.65%, 77.93%, and 46.55% respectively. For the half year ended 30th June 2016, the net profit equal to 78.83%. In 2014 and the half year ended 30th June 2016, the Company experienced high profit that was consistent with increased gross profit rates. In addition, the administrative
Part 1.12 - 4 Phousy Construction and Development Public Company expenses in 2014 were lower, compared to 2013 and 2015. The half year ended 30th June 2016, the cost of construction service was low at 11.07% of the total revenues. The Company experienced current ratio in 2013, 2014, 2015 and the half year ended 30th June 2016 that equal to 2.38 times, 5.55 times, 2.74 times and 4.27 times respectively that reflect the Company’s liquidity which is capable to make payment for short-term obligations effectively. Meanwhile, the Debt-to-Equity Ratio was low at the rates of 0.13 times, 0.05 times, 0.15 times, and 0.12 times in 2013, 2014, and 2015 respectively which reflect that the Company’s financial risks are minimal. The Company has the operating results and financial status for the fiscal years of 2013, 2014, 2015, and 30th June 2016 as followed:
2. The analysis of the operating result 1) Revenues The Company receives its revenues from construction contracts in 2 types based on the contract characteristics - type 1: Covers the construction in new areas where have not had roads, tunnels or bridges before; and type 2: Covers the renovation and maintenance of existing roads, tunnels, or bridges. The Company had set the policy regarding the recognition of revenues once it issues invoice to the customers based on the value allocated as stipulated in the contract or proportion of work completed and through the inspection from the Inspection Committee. The Company has the account receivable system regarding the construction contracts in 2 characteristics -1.) Cash payment receivable; and 2.) Noncash payment receivable such as: timber or land quotas that have been evaluated by the state authorities. However, in the future the account receivable system regarding the construction contracts will be mostly in cash due to the fact that on the date of 13-May-2016, the Government Order No. 15/PM on the Increase of Strict Control over the management and inspection of timber, timber movements, and timber business that stipulates the government to make payment of goods and services from the private sectors in cash only. In 2013, 2014 and 2015 and the half year ended 30th June 2016, the Company received its revenues from the construction contracts with the total amount of LAK 118,101 million, LAK 93,266 million, LAK 144,629 million and LAK 97,964 million respectively.
Table: 1.12.6: Revenue Structure based on Construction Project
2013 2014 2015 1H /2016 (provided by the (provided by the (Audited) (Reviewed) company company Detail management) management) Amount % Amount % Amount % Amount % (LAK (LAK (LAK (LAK millions) millions) millions) millions) 1. Project type 1 (construction 72,478 61.37% 86,356 92.59% 133,012 91.97% 89,014 90.86% Project) 2. Project type 2 (repair and maintenance 45,623 38.63% 6,910 7.41% 11,617 8.03% 8,950 9.14% project) Total Revenue 118,101 100.00% 93,266 100.00% 144,629 100.00% 97,964 100,00%
In 2013, the Company received its revenues from construction contracts in type 1 and type 2 for LAK 72,478 million and LAK 45,623 million or equivalent to 61.73% and 39.63% from the construction contract revenues respectively. In that year, the Company recognized the type 1 construction contract of 1 project named Detour of Luang Prabang District and 1 bridge from Kok Ngiw Village to Phonexay Village that recognized the revenues based on the proportion of 43.42% of the total project value. In addition, the Company recognized the revenues from the type 2 construction contract of 7 projects which have completed and handed-over in that year due to short durations of renovation-maintenance. In 2014, the Company received its revenues from construction contracts for LAK 93,266 million which was 21.02% decreased compared to 2013. Even though the Company recognized its revenues from type 1
Part 1.12 - 5 Phousy Construction and Development Public Company
construction contract that was a continuous project from 2013 (Detour of Luangprabang District and 1 bridge from Kok Ngiw Village to Phonexay Village). However, the hand-over of type 2 decreased from LAK 45,623 million in 2013 to LAK 13,256 million in 2014 or decreased 70.94% due to falling number of renovation-maintenance projects. In 2015, the Company received its revenues from construction contracts for LAK 144,629 million which increased 55.07% compared to 2014. Reasons behind the increasing of revenues were the hand-over of type 1 construction contract for 3 projects namely: 1. Detour of Luangprabang District and 1 bridge from Kok Ngiw Village to Phonexay Village Project which was the continuous project from 2013 and 2014; 2. 2-levels asphalt paving project of Nam Ou Luangprabang to Sibounheung Village, Nam District which recognized the revenue proportion of 15.46% of the total project value (excluding tax) having the amount of LAK 312,377 million; and 3. Earthmoving project for building the road along Lao PDR-Viet Nam-Cambodia borders that recognized the revenues at the proportion of 13.79% of the project value (excluding tax) having the amount of LAK 377,840 million. For the first half-year of 2016, the Company had revenue from construction equals to LAK 97,964 million from the 6 projects two of which are from project type 1 (continuously 1 project from 2015 and 1 new project) or equivalent to 89.86% of total revenue and 4 projects from project type 2 or equivalent to 9.14% of total revenue.
2) Cost and Gross Profits The service cost in the construction and renovation-maintenance of roads by the Company referred to the cost expenditure related to materials such as cement, steel, asphalt, stone, sand and soil, etc. together with the transportation costs, labor costs and machinery or equipment depreciation cost. The Company’s total Cost of services for 2013, 2014, 2015 and the half year ended 30th June 2016 equals to to LAK 71.997 million, LAK 14.098 million, LAK 64,126 million and LAK 10,847 million or 39.04%, 84.88%, 55.66% and 88.93% respectively. Considering gross profit ratio, we found that in 2014 and the half year ended 30th June 2016, the gross profit was high at 84.88% and 88.93% of the total revenues due to the fact that the Company had low cost of service in the construction while recognizing regular revenues based on the project-based.
3) Administrative Expenses The Company’s administrative expenses are relating to the expenses on the personnel such as: salaries and related welfare, and consultation fees. In 2013, 2014, 2015 and the half year ended 30th June 2016, the Company had the administrative expenses at LAK 4,555 million, LAK 3,531 million, LAK 6,707 million and LAK 3,675 million respectively.
4) Net Profit and Net Profit Ratio The Company had the net profit for 2013, 2014, 2015 and the half year ended 30th June 2016 equal to LAK 38,559 million, LAK 72,685 million, LAK 68,079 million and LAK 77,264 million or having the net profit ratio that equals to 32.65%, 77.93%, 46.55% and 78.83% of the total revenues from contract services respectively. In 2014 and the half year ended 30th June 2016, the Company experienced highest net profit ratio during the specified period due to high gross profits while maintaining low administrative expenses.
3. Financial position of Company 1. Asset At the end of 31st December 2013, 2014, 2015, and at 30th June 2016, the Company had the total assets of LAK 799,029 million, LAK 811,941 million, LAK 974,731 million and LAK 1,028,639 million respectively. The important elements include:
1.1 Cash and Cash Equivalents At the end of 31st December 2013, 2014, 2015, and at 30th June 2016, the Company had cash and cash equivalents at the total amount of LAK 294 million, LAK 1,407 million, LAK 450 million and LAK 753 million respectively which comprised of cash and bank deposits in the forms of saving account under LAK, THB, and USD currencies respectively. In 2014, the Company had its cash amounts increased from LAK 294 million to LAK 1,407 million due to the collection of account receivable from 2013 revenues. In 2015, the Company’s cash decreased from LAK 1,407 million to LAK 450 million due to the decrease of Company’s cashflow due to high account receivable even the Company had
Part 1.12 - 6 Phousy Construction and Development Public Company
its revenues increased in that year. At 30th June 2016, the Company had cash and cash equivalents at the total amount of LAK 753 million which slightly increased from 2015.
1.2 Trade and other receivables At the end of 31st December 2013, 2014, 2015, and at 30th June 2016, the Company had Trade and other receivables equal to LAK 210,938 million, LAK 122,082 million, LAK 262,838 million and LAK 342,877 million respectively.
Table: 1.12.7: Amount of Trade and other receivables th 30 June 2016 LAK: million Trade receivables Not yet due - 1-3 months 73,955 3-6 months 84,927 6-12 months 40,511 Over 12 months 116,683 Less allowance for doubtful debts - Total Trade receivables 316,076 other receivables 26,801 Total 342,877
The above timetable illustrates the Company’s Trade receivables values by aging which can be summarized that the Company had overdue debt from 1 month to over 12 months, but the Company did not set allowance for doubtful debts as the Company’s debtors are government sectors that have stable financial status. Moreover, the debtors have no history of nonperforming loan (NPL) despite delay in the repayments due to the allocation of state budget. Therefore, the Company does not set allowance for doubtful debts as the risk in the incapable of repayment seems to be low.
1.3 Property, plant and equipment At the end of 31st December 2013, 2014, 2015, and at 30th June 2016, the Company had fixed assets that include: land, building, and equipment at the net amount of LAK 587,167 million, LAK 687,758 million, LAK 685,534 million and LAK 683,902 million respectively.
Table: 1.12.8: land, building, and equipment at the end of 31st December 2015
31st December 2015 Properties, plant and equipment (Audited) LAK: million Land 666,000 building 16 Furniture and fixture 598 Office equipment 122 Motor vehicles 18,798 Total 685,534
During 2015, the Company had refurnished the building and interior decoration along with importing office supplies for LAK 172 million. In addition, the Company had purchased vehicles for conduct its business at the value of LAK 2,178 million.
1.4 Investment In the past, the Company had applied for concessions of mining business under 2 companies (Phonthong Mining Co., Ltd and Meung Ngoy Mining Development Co., Ltd). However, Phousy Group Sole Company Limited
Part 1.12 - 7 Phousy Construction and Development Public Company acts as the investor in the explorations of those mines. Therefore, the Company holds the accounts of both companies along with the loan record from Phousy Group Sole Company Limited. From the above scenario in 2015, the Company held the shares in two subsidiaries namely: Phonthong Mining Co., Ltd at the value of LAK 12,000 million and Meung Ngoy Mining Development Co., Ltd at the value of LAK 12,000 million that bring to the total investment in subsidiaries to LAK 24,0000 million. However, the Company has not conducted any other type of business due to the fact that it plans to sell the shares in subsidiaries as its business restricting plan. During the first haft of year 2016, the Company had sold the two subsidiaries to Phousy Group Sole Company Limited as mention before.
2. Total Liabilities As at 31st December 2013, 2014, 2015, and at 30th June 2016, the Company had total liabilities of LAK 94,999 million, LAK 35,226 million, LAK 129,937 million, and LAK 106,581 million respectively. The significant items that affect the total liabilities of the Company are as follow:
2.1 Trade and other accounts payable The Company had trade and other accounts payable of LAK 2,715 million in 2013, LAK 4,946 million in 2014, LAK 57,070 million in 2015, and LAK 16,674 million at 30th June 2016. In 2015 the Company had other account payable from related company at the amount of LAK 24,000 million which was the borrowing for investing in two Subsidiaries Company as mentioned above. The Company was not charged the interest and need to payback when debtor ask. During the first half of the year 2016, the Company had sold the two subsidiaries to Phousy Group Sole Company Limited at the amount of LAK 24,000 million.
2.2 Borrowing from related party At 30th June 2016, the Company had the borrowing from related party equals to LAK 11,000 million which is the loan the related party has borrowed from the bank and lend to the Company. The Company is responsible for interest and principal payment at the same condition the related party has with the bank.
2.3 Other current liabilities The other current liabilities of the Company consist of accrued expenses, accrued VAT and advancement. In 2013, 2014, 2015, and for the half year ended 30th June 2016, the Company had total other current liabilities equal to LAK 69,347 million, LAK 290 million, LAK 20,300 million and LAK 30,039 million, respectively.
3 Shareholders’ equity As at 31st December 2013, 2014, 2015, and 30th June 2016, the total Shareholders’ equity increased continuously to LAK 704,030 million, LAK 776,714 million, LAK 844,794 million, and LAK 922,058 million, respectively, which increased from the increase in retained earnings each year. The Company has registered capital during 2013 – 2015, and at 30th June 2016 equal to LAK 10,000 million. Comprising of legal reserve of LAK 5,000 million and unappropriated retain earning of LAK 907,058 million. The Company has allocated those retain earning to increase capital in order to prepare for listing in Lao Securities Exchange at the end of year 2016.
4 Events after the financial report for the year ended 30th June 2016 According to the Extraordinary General Meeting on 18th October 2016, the Company has transformed its status from a limited company to a public company and changed its name to Phousy Construction and Development Public Company and increased the registered capital from LAK 10,000 million to LAK 700,000 million in order to prepare for the Initial Public Offering. The Company has completed the process of change and increase registered capital on 11st November 2016 and according to the Company’s Extraordinary General Meeting dated on 24th April 2017 there will be the decrease of registered capital from LAK 700,000 million to LAK 500,000 million, and the capital increase for IPO will decrease from LAK 300,000 million to LAK 100,000 million, having total registered capital in amount of LAK 600,000 million and total share of 600 million shares after IPO.
4. The Company’s Liquidity analysis 1. Liquidity analysis In 2013, 2014, 2015, and for the half year ended 30th June 2016, the Company had liquidity ratio equal to 2.38, 5.55, 2.74, and 4.27 respectively. In the past, the Company can keep the liquidity level to more than 1 which
Part 1.12 - 8 Phousy Construction and Development Public Company means the Company had low risk on ability to payback current liabilities of the Company. However, if considering trade account receivable day, the Company had payment period up to 1 year, and most of them were overdue. In 2013, 2014, 2015, and for the half year ended 30th June 2016, the Company had collection day equal to 535 days, 575 days, 479 days, and 556 days respectively. The reason was because most of the projects’ owner are government sector which required a pre-investment from the Company. The Company will send an invoice to the projects’ owner according to the term stated in the contract, and the payment may be delayed because it relies on the annual government budget. However, the Company never had bad debt and low risk for the payment from clients since the debtor is government sector. The Company had cash cycle in 2013, 2014, 2015, and for the half year ended 30th June 2016 equal to 522 days, 477 days, 305 days, and 280 days respectively. The cash cycle of the Company was quite high due to high account receivable day whereas account payable day is low. However, the trend of cash cycle will be better because of management improvement as well as the business performance. Net cash flow 2014, 2015, and for the half year ended 30th June 2016 equal to LAK 1,113 million, LAK (957) million and LAK 303 million, respectively. The Company had a decreasing net cash flow even income had increased. It is because even though the cash flow from operating in 2015 equals to LAK 1,443 million, the Company has invested in 2 subsidiary companies and had bought new machine and equipment amounting to LAK 27,064 million whereas the cash flow from financing was LAK 24,664 million, affecting the net cash in 2015 to be LAK 450 million.
2. Financial Structure Analysis The Company has the debt to equity ratio in 2013, 2014, 2015 and 30th June 2016 at 0.13 time, 0.05 time, 0.15 time and 0.12 time respectively. As stated earlier, the Company had low debt to equity ratio which signifies that the Company has low financial risks.
Part 1.12 - 9
Phousy Construction and Development Public Company
Chapter 2 Information relating to the offer
The following section outlines information relating to the shares of the Company and ownership rights of the shareholders based on the Company’s Article of Association (AOA) and the relevant laws and regulations of Lao PDR.
2.1 Description of shares 2.1.1 General The Company was converted from a private company (sole company limited) to a public company with limited liability under the laws of Lao PDR. On the Conversion Date, the nine existing shareholders owned 100% of registered shares of the Company. Thereafter, the Company resolved in its Share on 24th April 2017, the resolution of the Extraordinary General Meeting of shareholder of the Company agreed to increase the Company’s registered capital from its previous registered capital of LAK 500.00 billion divided the shares into 500,000,000 (five hundred million) shares with the par value of LAK 1,000 (one thousand) per share to LAK 600.00 billion divided the shares into 600,000,000 (six hundred million) shares with the par value of LAK 1,000 (one thousand) per share. For the issuance of the Company shares for Initial Public Offering (IPO), the Company shall issue 100,000,000 (one hundred million) shares or 16.67 % of total paid up capital after the IPO. In principle, the Company is administrated by the Company’s regulation and some from enterprise law.
2.1.2 Capital. The Company’s capital stipulated in this prospectus is LAK 500.00 billion consisting of 500,000,000 (five hundred million) shares, with par value of LAK 1,000 per share. The total share was fully paid. After the IPO, the financial advisor and Underwriter shall propose to list all shares of the Company on LSX. The Company wishes that the proposal will be approved for the implementation, and the qualification of the Company will be in line with LSX’s regulations.
2.1.3 The limitations of foreign shareholders. According to the regulation on securities transaction of foreign investors in the Lao securities exchange, No. 012/LSCO, dated 19 May 2011, the number of shares hold by foreign investors are limited, so they are able to receive shareholding proportion as defined in the such regulation of LSCO in Article 8 as following: - Regulation of related Government entities; - Resolution of the Company’s meeting; - The decision of LSCO as below: o Foreign investors are able to purchase the shares no greater than 10% of total outstanding shares of a listed company. o Each individual foreign investor is able to purchase the shares no greater than 1 % of total outstanding shares of a listed company.
Since Phousy Construction and Development Public Company had the resolution from the Extraordinary General Meeting of shareholder of the Company on 18 November 2016 agreed not to limit the shareholding ratio of foreign investors, so the foreign investors are able to hold the shares of the Company with the highest ratio at 100% of total registered capital. Consequently, it is followed and consistent with the regulation on Securities transaction of foreign investors management in the Lao securities exchange, No. 012/LSC, dated 19 May 2011, Article 8.
Part 2 - 1
Phousy Construction and Development Public Company
2.1.4 Dividend. The Company will pay the dividend to the shareholders not less than 50% of net profit after the deduction of legal reserve and other reserves (if any). The Company has a policy to pay dividend to the existing shareholders equals to 50% of dividend payment announced to pay to general shareholders. This condition become effective for the period of 2 years after listed in LSX. The shareholders’ meeting resolution for the dividend payment approval is for (1) annual dividend payment and (2) interim dividend payment. The interim dividend payment must be approved by Shareholders’ meeting resolution or Shareholders’ meeting entitles to Board of Directors in order to approve interim dividend payment. The interim dividend payment can be paid, considering current financial condition and appropriateness, but it must accord with related regulation. The dividend payment might be amended upon the consideration and approval from the shareholders’ meeting which will depend on the economic situation, cash flow, investment plan, conditions and the Company’s obligation as well as the law and the capital adequacy for business expansion in the future. The dividend shall be paid in LAK (kip) currency and will be subject to tax exemption as dividend that paid from net profit from being listed company date in Lao Securities Exchange.
2.1.5 Shareholder’s meeting. According to the Company’s regulation, the Board of Directors of the Company shall call on the annual general meeting of the shareholders of the Company at least once a year within June. Then after listing in LSX, the Company also has to comply the regulations from LSCO and LSX as well as other regulations from related entities. The Board of Directors of the Company probably call on the extraordinary general meeting of shareholders when it deems necessary to request for the resolution of the shareholder’s meeting on the agenda stipulated in the Company’s regulation or related laws. In case the extraordinary general meeting of shareholders is called on by the number of shareholders or core directors (refers to the enterprise law) or court order, the board of directors shall call on the extraordinary shareholder’s meeting within 30 days from the date received the notifications. A notice of a shareholder’s meeting shall be directly sent via the appropriate channels to all shareholders of the Company according to the related laws. The quorum for a shareholder’s meeting of the Company shall be at least two persons with the number of share being more than half of total paid up shares.
2.1.6 Voting right. In general, a shareholder is generally entitled to one vote per share. A resolution may be adopted at a general meeting by a simple majority vote. However, special resolutions shall be passed by a vote of at least two-thirds of the shareholders or their proxies attending the meeting, representing at least 80 percent of the total paid shares. The below issues are in relation to the Company requiring the particular resolution of the shareholders. − Voting on matters specified by the Enterprise Law; − Amending regulation or the establishment agreement of the Company ; − Increasing or reducing of the Company’s capital; − Merger or dissolution of the Company; − Sale or transfer of all or a substantial part of the business of the Company to another person; and − Purchase or acceptance of a transfer of another business enterprise.
Pursuant to the Enterprise Law, shareholder(s) may be restricted from voting on a matter in which they are involved and through this involvement may receive a direct benefit or gain. The members present at a Shareholders’ Meeting shall determine whether a shareholder falls within this scope.
Part 2 - 2
Phousy Construction and Development Public Company
2.1.7 Pre-emptive Right on shares offering and additional shares issuance. Chapter 1 of the resolution of NASC provides an exemption for all companies listed on the LSX from their legal obligations under the Enterprise Law relating to the pre-emptive rights of the shareholders when selling additional shares of a company. Pursuant to the Enterprise Law, the Company is required to call for a Shareholders’ Meeting seeking approval for any increase of the Company’s registered capital. An increase in registered capital shall be registered with the MOIC within 10 business days from the date specified for the payment of subscribed shares. In addition, after the registration of the increase of capital, the Company shall give public notice of the increase within 10 business days from the registration date.
2.1.8 Right on settlement. In the event of liquidation, the assets remaining after distribution to the creditors in full shall be distributed to the shareholders in proportion to the number of shares held by the shareholders.
2.1.9 Shareholder register book. The Company shall record name and surname, address and nationality of shareholders in the shareholder book herein after it’s called “shareholder register book”.
2.2 Share Transfer Restriction. Upon the certain period, the promoters of the Company are restricted to transfer their shares at least 10% of registered capital within 2 years from the date of registering as public company in consistent with Enterprise Law. In addition, if the Company is listed on LSX, according to listing regulation of LSX, No. 005/LSX, dated 26th November 2015, the largest shareholders and related parties shall be restricted to transfer all shares within 6 months from the listing date (Silent Period).
2.3 Determination of Offering prices. The determination of the offering price was based on the “Price to Earnings per share” (P/E Ratio). By calculating the Earnings per Share (EPS) from the estimated net profit of the year 2016 divided by average number of shares. The details are as follow:
Table 2.3.1 : The comparing of P/E rate Items Formula Result Estimated net profit LAK 63,956 million of 2016 Weight average Total number of shares before IPO number of shares + [number of shares for IPO * (12- 541.66 million shares the month of IPO)/12] Offering Price - Offering to the P/E Value = 10.16 times Offering Price = LAK 1,200 per share public investors
2.4 Distribution, Subscription and Allocation of IPO 2.4.1 Distribution method. The Shares are being distributed and offered in a public offering by the Underwriter through the Selling Agent to investors inside Lao PDR and foreign investors including the executives and employees of the Company.
Part 2 - 3
Phousy Construction and Development Public Company
• The distribution of IPO
➢ The distribution of 100,000,000 shares of this IPO shall distribute to both public investors in Lao PDR and foreign investors including the executives and employees of the Company. ➢ This IPO issuance has a specific policy in term of number of share and share price as follows:
Table 2.4.1 : The distribution of IPO Group of investors Number of shares Condition Price LAK 1,200 per share 1. Public investors 90,000,000 Share Transfer Restriction: none Price LAK 1,100 per share 2. The executives and employees 10,000,000 Share Transfer Restriction: lock up 6 of the Company months from the listing date. Total 100,000,000 ➢ The distribution of all IPO shares had already been registered with LSCO.
• IPO. The IPO distribution to investors in Lao PDR and foreign investors shall be distributed by an Underwriter and through Selling Agent in reliance on applicable laws in the countries in which such offers are made.
• Information of an Underwriter and Selling Agents. 1.) Underwriter Lanexang Securities Public Company (LXS) Address: 5th floor, LSX building T4 Rd, Phonethan Village. Saysettha district, Vientiane Capital Tel: (+856 21) 265 461-4 Fax: (+856 21) 265 465-6 Website: www.lxs.com.la
2.) Selling Agents BCEL-KT Securities Company Limited (BCEL-KT) Address: 7th floor, LSX building T4 Rd, Phonethan Village. Saysettha district, Vientiane Capital Tel: (+856 21) 265 477 Fax: (+856 21) 265 488 Website: www.bcel-kt.com
Lao China Securities Company Limited (LCS) Address: 6th floor, LSX building T4 Rd, Phonethan Village. Saysettha district, Vientiane Capital Tel: (+856 21) 419 222 Fax: (+856 21) 419 221 Website: www.lcs.com.la
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Phousy Construction and Development Public Company
• Within Vientiane Capital, 2 Selling Agents are: 1. Lao Development Bank, Head Office Address: Sihom village, Chantabouly district, Vientiane Capital Tel: (+856 21) 213 300 Fax: (+856 21) 241 275 2. Lao Development Bank, Nakhonneluang Branch Address: Mixay village, Chantabouly district, Vientiane Capital Tel: (+856 21) 213 400 Fax: (+856 21) 213 404 • Outside Vientiane Capital, 17 Selling Agents are: 1. Lao Development Bank, Phonhong Branch Address: Phonsi village, Phonhong district, Vientiane province Tel: (+856 23) 211 018 Fax: (+856 23) 212 070 2. Lao Development Bank, Luangprabang Branch Address: Visoun village, Laungprabang district, Laungprabang province Tel: (+856 71) 212 271 Fax: (+856 71) 212 185 3. Lao Development Bank, Xayyaboury Branch Address: Simeaug village, Xayyaboury province Tel: (+856 74) 211 153 Fax: (+856 74) 211 365 4. Lao Development Bank, Oudomxay Branch Address: Poukiew village, Xay district, Oudomxay province Tel: (+856 81) 312 059 Fax: (+856 81) 312 222 5. Lao Development Bank, Luangnamtha Branch Address: Phonxay village, Laungnumtha province Tel: (+856 86) 211 398 Fax: (+856 86) 211 398 6. Lao Development Bank, Houayxai Branch Address: Konekeo village, Houayxai district, Bokeo province Tel: (+856 84) 211 492 Fax: (+856 84) 211 024 7. Lao Development Bank, Phongsaly Branch Address: Phongsaly village, Phongsaly district, Phongsaly province Tel: (+856 88) 210 076 Fax: (+856 88) 210 015 8. Lao Development Bank, Samneua Branch Address: Punxay village, Samneua district, Huapun province Tel: (+856 64) 312 464 Fax: (+856 64) 312 824 9. Lao Development Bank, Xiengkhuang Branch Address: Phonsavang vilage, Paek district, Xiengkhuang province Tel: (+856 61) 213 278 Fax: (+856 61) 213 301 10. Lao Development Bank, Khammouane Branch Address: Phonsanam village, Thakeak district, Khammoun province Tel: (+856 51) 212 253 Fax: (+856 51) 212 073 11. Lao Development Bank, Paksan Branch
Part 2 - 5
Phousy Construction and Development Public Company
Address: Phoxay village, Paksun district, Bolikhamxay province Tel: (+856 54) 212 025 Fax: (+856 54) 212 823 12. Lao Development Bank, Savannakhet Branch Address: Soununtha village, Kaisonepomvihan district, Savannakhet province Tel: (+856 41) 212 226 Fax: (+856 41) 212 856 13. Lao Development Bank, Pakse Branch Address: Thalaung village, Pakse district, Champasak province Tel: (+856 31) 212 168 Fax: (+856 31) 212 818 14 Lao Development Bank, Salavan Branch Address: Nakokpo village, Salavan district, Salavan province Tel: (+856 34) 211 388 Fax: (+856 34) 211 301 15 Lao Development Bank, Sekong Branch Address: Watluang village, Raman district, Sekong province Tel: (+856 38) 211 075 Fax: (+856 38) 211 022 16. Lao Development Bank, Attapeu Branch Address: Watluang village, Samakexay district, Attapeu province Tel: (+856 36) 211 185 Fax: (+856 36) 211 857 17. Lao Development Bank, Lak Sao Branch Address: Laksao village, Khamkirth district, Bolikhamxay province Tel: (+856 54) 341 513 Fax: (+856 54) 341 513
However, the Underwriter may consider a change or increase in the number of Selling Agents according to the conditions and appropriateness.
• The condition of underwriting. The Company has appointed Lanexang Securities Public Company to be the Underwriter for the total 100,000,000 shares. In case any party breaches the condition or fail to deliver its own obligation as in the Underwriting Agreement, the damaged party shall officially notify and request to another party for the compensation within 30 days (calendar day) upon the terms and conditions of the Underwriting Agreement. For the disputes solving, both parties shall make their best efforts to negotiate to solve its disputes under peaceful way basis. In case of incapibility to peacefully dispute solving, both parties shall invite LSCO to assist in the process of dispute solving.
• Estimated expenses in relation to the offer. The Company shall pay the underwriting fees to the Underwriter, the Selling Agents shall receive partial commission for taking underwriting from the Underwriter, the total expenses in relation to the offer excluding underwriting charge shall be paid mostly by the Company and it is approximately expected to be LAK 6,545 million.
• Procedures for obtaining Prospectus and Subscription Form The Prospectus and the share subscription form will be made available for investors at LXS’s office on 5th floor, LSX building, Kamphaeng Meuang, T4 Rd, Saysettha district, Phonethan Neua Village, Vientiane Capital, Lao PDR as well as at each branch of Selling Agent
Part 2 - 6
Phousy Construction and Development Public Company
during 8:30 am to 3:30 pm, during 17th July 2017 – 21st July 2017 herein after is called ‘Subscription Period’.
2.4.2 Subscription method. A subscriber can obtain the subscription form at the Underwriter and Selling Agents, within the Subscription Period specified in this section. The subscriber must clearly fill out the subscription form and cause its authorized signatory to sign together with the Company’s seal affixed (if any), and must pay a subscription price according to the procedures in this section, by the end of the Subscription Period. In the Combined Offer, the subscription shall be at the minimum amount of 100 shares and in multiples of 100 shares. A subscriber must fully and clearly fill out the subscription form and submit all documents as shall be required by the Underwriter or Selling Agent (as the case may be) together with the full payment of the subscription price to the Underwriter or Selling Agent. A subscriber must make a subscription payment in a full amount of the share subscription by cash transferring into the shown account number on the subscription form so that the Underwriter can receive such amounts within the last day of subscription. A subscriber shall bring (1) Subscription form and (2) Document of Identification and (3) Documents certifying money transfer with an amount equal or exceed the subscription amount to subscriber’s securities trading account (similar to securities trading process) and submit those documents to Lanexang Securities Public Company at 5th floor, LSX building, Kamphaeng Meuang T4 Rd, Saysettha district, Phonethan Neua Village, Vientiane Capital, Lao PDR or Selling Agent within due date and time defined on the subscription form.
Required certification documents: (1): For Lao individual: A certified copy of Lao ID card (2): For Foreign individual: A certified copy of passport (3): Letter of attorney: in case there is a third person to be a subscriber’s representative (4): Juristic Person: A certified copy of the passport or Lao ID card of authorized person(s) and/or Copies of certificate of incorporation (if any)
The Underwriter and Selling Agents must issue a certification as an evidence for the subscribers, the Underwriter and Selling Agents have to notify the subscribers the number of allocated shares, procedure and settlement period.
2.4.3 Refund for unallocated shares. The subscribers shall pay the full amount of their subscription to the Underwriter or Selling Agents through the subscribers’ securities account at Lanexang Securities Public Company. Then, the Underwriter or Selling Agents shall deduct the amount of money equal to subscription amounts identified by subscribers. The banking fees or other fees related to exchange rate, which separated from the subscription payment, shall be responsible by the subscribers. Thus, the subscribers shall submit the subscription payment receipt within the verified payment day to the Underwriter or Selling Agents. The subscribers, who settled the payment, cannot be cancelled the subscription and redeemed the subscription amounts.
2.4.4 Shares allocation. The Underwriter and selling agents will complete share allocation process to investor within 3 business days after the share subscription period has ended. To ensure the right and maximize the benefit of the investors and the Company, The Underwriter will allocate the share to the investors by using the first-come, first-served method which shall be complied with the
Part 2 - 7
Phousy Construction and Development Public Company
related regulations. However, the Underwriter and Selling Agent reserve the right to refuse a subscription for the Shares according to the subscription form where the Underwriter or Selling Agent (as the case may be) deems that such subscription does not comply with the subscription method which will smooth all of the process and made the best interests of the Company. In the case all offering shares are booked prior to the end of subscription period, the Underwriter shall immediately close the subscription as stated in above.
2.5 Delivery of Share. The Share Registrar shall deposit the Shares in the securities account of the subscribers. This will be done through registered brokers who have opened accounts on behalf of their clients as notified by the subscribers on the subscription forms. The shares will then be registered and deposited at the Securities Depository Center.
2.6 Distribution Plan and Use of Proceeds The Underwriter has entered into an Underwriting Agreement pursuant to which the Company has agreed to issue and the Underwriter has agreed to procure subscribers for the subscription and purchase of 100,000,000 shares under the condition of underwriting contract prescribed that the Underwriter shall take underwriting all issue shares in consistent with the contract. The Selling Agent has entered into an agreement with the Underwriter pursuant to which the Selling Agent will place the 100,000,000 shares with general investors inside Lao PDR and foreign investors (investors living outside Lao PDR) in reliance on applicable laws in the countries in which such offers are made, which will not be subject to any filing requirement. The Underwriter is to market the Shares under LSX, subject to approval of legal matters by its counsel, including the validity of the Shares, and other conditions contained in the Underwriting Agreement, such as the receipt by the Underwriter of officer’s certificates. The Underwriter reserves the right to withdraw, cancel or modify its offer of the Shares and to reject orders in whole or in part to the extent permissible under the securities laws of the Lao PDR. The Company has agreed to fully indemnify the Underwriter against certain liabilities, including liabilities under the Lao laws and any other Lao securities laws, and to contribute to payments which the Underwriter may be required to make in respect of those liabilities.
• Over-allotment option There will be no over-allotment option in the Offering.
• Shares shall not be registered in other countries except Lao PDR. The Offer will be in compliance with the applicable rules and regulations of the LSCO, and the Lao Prospectus was prepared specifically for the Initial Public Offering of the Shares in the Lao PDR. Accordingly, the Shares will not be registered under the securities laws in any jurisdiction other than the Lao PDR. There is no any presentation both in Lao and English version indicating the distribution of the shares in foreign countries.
• IPO in Lao PDR. This Offer is the initial public offering of the Company’s Shares and if the LSX approves the initial listing application of the Company, the Company’s Shares will be listed on the LSX. The LSX is a secondary market which was established in October 2010. The Company expects that the Company shares shall be listed on LSX and shall begin trading before or around 31st July 2017.
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Phousy Construction and Development Public Company
2.7 Objective of using fund. The net proceeds of fund received from IPO before deducting the cost from fund raising is approximately LAK 119,000 million, which shall be used for the purposes aforementioned in the topic of the Use of proceeds (Part 1.2).
Part 2 - 9 Phousy Construction and Development Public Company
Part 3 Certification of the Accuracy 3.1 Certification of the Company accuracy. As the Board of Directors of Phousy Construction and Development Public Company, already checked the information in the prospectus made by Lao language with caution, certify that the information is accurate and completed. As an evidence of all documents shall be an identical and certified by me. I hereby authorized Ms. Philaiphone Vongpraseuth to countersign on every page of the documents regardless of the document will be considered an uncertified document if without the countersign of Ms. Philaiphone Vongpraseuth.
Board of Directors
Name Position signature
1. Mr. Sithong Phommachith Chairman (Mr. Sithong Phommachith) 2. Mr. Khanthavong Dalavong Vice-Chairman/ (Mr. Khanthavong Dalavong) Chairman of Audit Committee/ Independent Director
3. Ms. Philaiphone Vongpraseuth Director/ (Ms. Philaiphone Vongpraseuth) Chief Executive Officer
4. Mr. Sitha Phommachith Director / (Mr. Sitha Phommachith) Member of Audit Committee
5. Mr. Nanthalath Thilakoun Director/ (Mr. Nanthalath Thilakoun) Member of Audit Committee Independent Director
Authorized person
Name Position signature
1. Ms. Philaiphone Vongpraseuth Director/ (Ms. Philaiphone Vongpraseuth) Chief Executive Officer (Company Seal)
Part 3 - 1 Phousy Construction and Development Public Company
3.2 Certification of Financial Advisor This prospectus is a part of IPO listing application documents of Phousy Construction and Development Public Company made by between the Company and APM(LAO) Securities Co., Ltd. under the financial advisory contract for going to public (IPO). I hereby certify that the analysis, value estimation and words definition in this prospectus is proper and completed base on the information provided by Phousy Construction and Development Public Company.
Authorized of Financial Advisor
APM(LAO) Securities Company Limited
(Mr. Somphob Sakpunpanom)
(Company Seal)
Part 3 - 2 Phousy Construction and Development Public Company
3.3 Certification of Underwriter This prospectus is a part of IPO listing application documents of Phousy Construction and Development Public Company which Phousy Construction and Development Public Company and Lanexang Securities Public Company prepared under the Underwriting Agreement for the objective of IPO. I hereby certify that the analysis, value estimation and words definition in this prospectus is true and correct based on the information provided by Phousy Construction and Development Public Company.
Authorized of Underwriter
Lanexang Securities Public Company
(Mr. Sounthone Sinthapaseuth)
(Company Seal)
Part 3 - 3 Phousy Construction and Development Public Company
Information of Board of Directors and Executives Shares Relationship Work Experience in the past Name – Surname / Age Highest Education Owned with Positions Current Position (Percent) Shareholders Periods Business Type Organization / Company 1. Mr. Sithong 42 - Bachelor of 69.19% Brother of 2001 – 2005 - Project Site Manager of Phousy - Construction Mr. Sitha Phommachith Mathematics, Luang Luang Prabang Road & Bridge Phommachith ➢ Chairman Prabang Teacher Construction Sole Company
➢ Compensation Training College Limited
Committee - Master of Finance, - Project Site Manager of Phousy 2005 – 2013 Construction Sengsavanh College Luang Prabang Road & Bridge - Construction Sole Company
Limited 2013 Present – - President of Phousy Group Sole - Project Investment Company Limited 2013 – Present Director of LUANG PRABANG - Foreign - Investment LAOS HOLDING PTE. LTD
2013 Present - Director of Phousy Lao Petroleum – Petroleum Trading Sole Company Limited -
2014- 2016 - Chief Executive Officer of Phousy Luang Prabang Road & Bridge - Construction Construction Sole Company
Limited
2016 – Present - Chairman of Phousy Construction - Construction and Development Public Company 2. Mr. Kanthavong 55 - Diploma of None None 1976-1978 - Head of Hmong Tribes instruction - Civil Service Dalavong Mathematic, Teacher (Mathematics Teacher)/ ➢ Vice Chairman Training School No 3 - Head of Natural Sciences /Independent Director - Bachelor of 1981-1983 (Mathematic Instructor) of - Civil Service ➢ Audit Committee Construction, Teacher Training School No 3 ➢ Risk Management Vonkorad University - Head of Mathematic department - Civil Service Committee (Russia) 1990-1993 (Mathematic Instructor) of ➢ Chairman of Nomination - Bachelor of Teacher Training School Dongdok Committee Mathematic, Head of Natural Sciences Civil Service Vonkorad University 1990-1999 - - Institution of Teacher Development (Russia) Institution
Phousy Construction and Development Public Company
Shares Relationship Work Experience in the past Name – Surname / Age Highest Education Owned with Positions Current Position (Percent) Shareholders Periods Business Type Organization / Company - Bachelor of Music, 1999-2000 - Head of Business Administration Moscow Music Department (Business Instructor) Civil Service University (Russia) - of National University of Laos - Bachelor of Industrial 2000-2004 - Director at Factory of Xiangkoaun Management, Russia steel and Factory of Sangkasi - Bachelor of Media, - Private Phonthan RECSAM University 2004 - 2006 Training Course Expertise (Project - Master of - Management) of Ministry of Civil Service Mathematic, Education - Vonkorad University Secretary Lao National Chamber (Russia) 2006 - 2016 - / - Master of Business of Commerce and Industry - Civil Service Administration, 2015 - Present - Consultant (International Konkaen University Organization Standardization:
ISO)/National standard verification and quality - Civil Service
investigation institute
Vice Chairman, Independent 2016 - Present - Director of Phousy Construction and Development Public Company - Construction 3. Ms. Philaiphone 38 - Bachelor of None None 2001 – 2002 - Consultant at University of South - Foreign Vongpraseuth Telecommunications Australia Organization Engineering, ➢ Director/CEO 2001 – 2002 - Research Assistant at Institute - Foreign University of South ➢ Compensation Telecommunication Research Organization Australia Committee 2003 - 2006 - Manager of Millicom International - Foreign - Master of Business Cellular Organization Administration Managing Director Assistant of Foreign University of South 2007 – 2008 - - The World Bank Organization Australia Operations Specialist of The Foreign 2014 - - World Bank Organization
- Program Officer of Swiss Agency - Foreign 2014 – 2016 for Development Organization
2016 - Present - MD of Phosy Group Sole - Project Company Limited Investment
Phousy Construction and Development Public Company
Shares Relationship Work Experience in the past Name – Surname / Age Highest Education Owned with Positions Current Position (Percent) Shareholders Periods Business Type Organization / Company 2016 - Present - CEO of Phousy Construction and - Construction Development Public Company 4. Mr. Sitha Phommachith 32 - Diploma of Business 0.83% Brother of 2006 – 2016 - Deputy director of Phousy Luang - Construction Mr. Sithong ➢ Director Administration, Prabang Road & Bridge ➢ Audit Committee Settha Business Phommachith Construction Sole Company
➢ Risk Management Administration Limited College Committee Director of Phousy Construction Bachelor of 2016 - Present - ➢ Nomination Committee - - Construction Education, Majoring and Development Public Company
in Physics, Faculty of Education, National University of Laos
- Master of Business Administration, Rattana Business Administration College 5. Mr. Nanthalath 46 - Diploma of Business 2001 - 2003 - Manager of Canada Life Insurance - Private Thilakoun Administration, 2009 - 2011 - Director of Petroff - Private ➢ Director/Independent Fanshawe college, 2011 -2016 Communication Private Director United of Kingdom - Director of Consultant – ➢ Chairman of Audit - 2016 - Present Construction Committee Accounting Company - ➢ Chairman of Risk - Independent Director of Phousy Management Committee Construction and Development ➢ Chairman of Public Company Compensation Committee ➢ Nomination Committee ➢ Chairman of Related Party Transaction Committee 6. Mr. Amphayvanh 45 - Diploma of Road- None None 1995 – 1996 - Officer of Ministry of Public - Civil Service Chanthaphaly Bridge Design Works and Transportation ➢ Related Party Acting head of department/Lao Engineering, College 1996 – 2012 - - Civil Service Transaction Committee Transport Engineering Consultant of Transportation ➢ Chief Operating Officer
Phousy Construction and Development Public Company
Shares Relationship Work Experience in the past Name – Surname / Age Highest Education Owned with Positions Current Position (Percent) Shareholders Periods Business Type Organization / Company - Bachelor of Road- 2012 – 2016 - Director of Global Engineering - Private Bridge Design Consultant Co., Ltd (LGE) Engineering, 2016- Present - COO of Phousy Construction and - Construction National University Development Public Company of Laos - Master of Business Administration, Chiangmai University (studying) 7. Mr. Anolay Siharath 57 - Diploma of None None 1990 – 1992 - Accounting Officer of Joint- - Private ➢ Related Party Accounting, Development Bank Transaction Committee 1993 – 2007 Pakpasak Technical - Head of Finance-Accounting of - Foreign ➢ Chief Financing Officer School Saen (LAO) Co., Ltd Organization 2007 – 2009 Head of Finance-Accounting of Private Bachelor of Mining - - - Casino Savan Vegas Engineering, 2011 – 2016 - Accounting Manager of Phonesak - Private University of Ming Group
Excavation (Russia) CFO of Phousy Construction and Construction 2016 - Present - - Master of Business - Development Public Company Administration, Comcenter College