investor profile risks...as the pipeline for true high-yield sgd issuance dried up, we observed that...
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BOND CLASSIFICATION INVESTOR PROFILE RISKS
StableIncome Seeker
Suitable for investors who want to take on some credit risk in exchange for higher yields
¡ As opposed to Sovereign bonds (or even quasi-sovereign bonds), credit risk is an issue – there is the risk that an issuer could default leading to an impairment on the bond investment
¡ Investors have to be mindful of interest rate risk, which can affect the performance of longer-maturity securities
¡ Investors can usually find a good mix of lower and higher-yielding names in the investment-grade corporate space, which can offer differing risk-reward profiles
High YieldSeeker
Suitable for investors who are looking for some of the strongest potential returns in the fixed income space, and are willing to accept a higher level of risk in their investments
¡ Default/credit risk is the main issue, given the lower-qual-ity nature of the issuers; for troubled companies, default may be avoided via a restructuring, which may see bond investors take a write-down on their investment
¡ Bond price volatility can be fairly high¡ Interest rate risk is less of an issue, since non-investment
grade corporate issuance is usually of a shorter maturity¡ A large amount of non-investment grade corporate issu-
ance tends to be in USD; investors who do not use the USD as a functional currency may be exposed to poten-tial currency risk
Disclaimer: No investment decision should be taken without first viewing a bond’s offering documents. Any advice herein is made on a general basis
and does not take into account the specific investment objectives of the specific person or group of persons. All contents herein do not constitute
financial advice or formal recommendation and must not be relied upon as such. We are not giving or purporting to give or representing or holding
ourselves out as giving personalised financial, investment, tax, legal and other professional advice.
Enjoy Diversificationin Bonds
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(for Accredited Investors/FSM+ investors only)
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Market Review and Outlook
361 Degrees International Limited
Banyan Tree Holdings Limited
Breadtalk Group Limited
Cache Logistics Trust
CapitaLand Limited
Century Sunshine Group Holdings Limited
China Evergrande Group
City Developments Limited
DBS Group Holdings Ltd
China Eastern Airlines Corporation Limited
ESR Cayman Limited
ESR-REIT
Fraser and Neave, Limited
Fosun International Limited
Frasers Property Limited
FWD Group Limited
GuocoLand Limited
Golden Agri-Resources Limited
Heeton Holdings Limited
Hotel Properties Limited
HSBC Holdings PLC
Julius Baer Group Limited
Keppel Corporation Limited
Lippo Malls Indonesia Retail Trust
Logan Property Holdings Company Limited
Manulife Financial Corporation
Mapletree Commercial Trust
Mapletree Industrial Trust
Mapletree Logistics Trust
Mapletree North Asia Commercial Trust
Neptune Orient Lines Limited
OUE Limited
Oxley Holdings Limited
Perennial Real Estate Holdings Limited
Ping An Insurance (Group) Company of China, Limited
PT Ciputra Development Tbk
Ronshine China Holdings Limited
Sembcorp Industries Limited
Singapore Airlines Limited
Singapore Post Limited
Soilbuild Business Space REIT
StarHub Limited
Studio City International Holdings Limited
Trafigura Group Private Limited
Uber Technologies Inc.
UBS Group AG
United Engineers Limited
Wing Tai Holdings Limited
Wing Tai Properties Limited
Bonds under the “High Yield Seeker” investor profile category are suitable only for investors who are
willing to accept a higher level of risk in their investments.
Risks to be mindful of:
¡ Default/credit risk. This is the risk that the issuer may fail to make timely interest or principal payments and default on its
bond. Because high-yield bonds are typically issued by companies with weaker financial health, this risk is particularly im-
portant to consider for high-yield investors. Default may be avoided via a debt restructuring, which may see bond investors
take a write-down on their investment.
¡ In times of economic stress, defaults may spike, making the asset class more sensitive to the economic outlook than other
sectors of the bond market.
¡ Bond price volatility can be fairly high.
HIGH YIELD SEEKER
CONTENTS
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Market Review and Outlook
At the end of 2018, the world of finance seemed to be heading for a year of uncertainty and market volatility, with potential shocks coming
from various sources. As 2019 drew to an end, it became clear that the year did bring about plenty negative headlines and slowing global
growth. But investors who had stayed away from the market due to uncertainty would have lost out on the impressive returns across major
asset classes and markets (see Figure 1).
So it seems like we have had a strange year of strong financial market performance with disappointing economic growth and political
headwinds. We don’t think anyone has a definite answer as to what gave rise to this curious combination of exciting investment returns
and elevated global policy uncertainty. But if we had to take a guess, we would say it was due to two factors.
Firstly, as can be gleaned from Figure 1, investment markets were coming off the weak year of 2018, when investors spooked by escalations
in the US-China trade war and tightening monetary policy went into an extreme-fear mode. As market participants went into 2019 with an
abjectly pessimistic outlook on the things to come, the subsequent reality of weaker economic growth and corporate profits were unlikely
to surprise them, and the slightest reason for optimism could spur a rally in asset prices.
Second, and more importantly, after a brief attempt to return to monetary normalcy, major central banks have retreated back to using
their trusted tools of rate cuts and quantitative easing in 2019. Low interest rates, described by venerable investor Howard Marks as the
“dominant feature of the world of finance” over the past decade, look destined to continue to dictate the market narrative for the fore-
seeable future. When Federal Reserve Chairman Jerome Powell hinted on 10 July 2019 that a rate cut was about to happen, the market
promptly sent the S&P 500 index above the 3,000 level for the first time, which translated to a valuation that was expensive relative to
history. In their fervor for the prospect of monetary easing, investors had perhaps brushed aside other comments made by Powell in the
same statement, which explained the rationale for a dovish stance—for instance, “uncertainties about the outlook have increased in recent
months”, and “growth in business investment seems to have slowed notably”.
As risk sentiment and capital market conditions improved, new issue volume had picked up in 2019. Based on Bloomberg data, following
a significant dip in 2018, offshore Chinese bond issuance volume rebounded strongly in 2019, increasing roughly 31% in year-to-date 17
December 2019. In terms of the growth in bonds outstanding, the issuance volume of offshore Chinese bonds in 2019 was impressive but
not unusual.
Figure 1: Investment markets have performed strongly across the board in 2019
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A more worrying statistic was the breakdown in credit ratings, as close to one-third of new offshore Chinese bonds carried specula-
tive-grade ratings, much higher than previous years. This could indicate that tightening credit conditions in the domestic market had a
disproportionate effect on Chinese companies with shakier financials, which had to increase their reliance on the offshore market for their
refinancing needs.
Back in Singapore, the SGD corporate new-issue market had rebounded strongly in 2019 as well, with a 19% increase in SGD issuance vol-
ume to S$18.2 billion (as at 17 Dec 19) according to Bloomberg data. The growth in SGD issuance value was robust even though the number
of deals remained low relative to the past decade.
However, we observed that the majority of new SGD corporate bonds categorized under the “High Yield Seeker” investor profile by our
proprietary database were actually “structural high-yield” bonds—e.g. capital instruments of banks with investment-grade ratings and
corporate perpetual bonds. Excluding these structural high-yield credits, we estimated that “true high-yield” bonds constituted less than
10% of new SGD corporate issues in 2019, which would be exceedingly low relative to recent years’ numbers.
We suspect the persistently low true high-yield SGD issuance volume was due to issues on both the supply and demand sides. Investors
have rationally demanded significantly higher credit spreads for speculative-grade credits since the second half of 2018, in response to
macro headwinds and the correction of historically low spreads in early 2018. The higher spreads might have turned away SGD high-yield
issuers, which were mostly local issuers that probably would struggle to generate the required return on invested capital to support the
higher borrowing costs.
As the pipeline for true high-yield SGD issuance dried up, we observed that investor demand for structural high-yield notes, especially
from issuers with strong or perceived strong credit profile, had been booming in 2019. With the increasing popularity of structural high-
yield instruments, investors should be mindful of the importance of demanding reasonable risk premiums and avoid loosening their risk
controls and valuation standards in exchange for yields.
Speaking of valuation, credit spreads in the US corporate sector had fallen to near historical lows (see Figure 2). The risk premiums on both
high-yield and investment-grade US corporate issues, as well as the junk-minus-IG spread, were more than one standard deviation below
their long-term averages. When combined with the flattened yield curve, this meant that investors of US corporate bonds were looking at
poor prospective returns.
Figure 2: Credit spreads in the US are near historical lows
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Comparatively, Asian credits, particularly Asia high-yield bonds, looked significantly more attractive to us (see Figure 3). Credit spreads
on Asia high-yield credits remained above their long-term average, and offered good compensation for risks from rising protectionism and
slowing growth. Given the poor pricing of duration risk, we would prefer short- to medium-term maturities within the Asia high-yield sector.
Looking ahead, our assessment of the current market environment and valuation suggests that risks are tilted slightly to the downside for
credit investors. While the agreement of a “phase one” trade deal indicated a significant improvement in the relationship between the US
and China, longstanding and fundamental issues raised by the US, such as China’s use of industrial subsidies and the loosening of technol-
ogy-transfer requirements for foreign companies doing business in China, remained unresolved. There is also a great deal of uncertainty
around other geopolitical threats such as impeachment proceedings and election politics in the US, the social unrest in Hong Kong, Brexit,
and rising tensions in the Persian Gulf.
On the other hand, the dovish pivot by global central banks should cap downside risks, at least for the near term. Global growth should
stabilize, albeit perhaps at a relatively modest pace, and inflation should remain muted, which together suggest that we are unlikely to see
significantly higher yields for some time. Asset prices are also reasonable or attractive in a number of markets, including Asian equities
and Asian credit.
Finally, as 2019 taught us, the opportunity cost of staying on the sideline could be punitive, and the right way of thinking about our invest-
ments is to calibrate our portfolio along the spectrum that runs from defensive to aggressive, but rarely at the extreme ends. In today’s
market environment, our advice for investors is to be pro-risk, but with caution, and be realistic about their return expectation. In credit
markets, that means we should focus on getting reasonable and steady yields relative to the price we pay, and refrain from stretching our
portfolio for outsized capital appreciation opportunities. We hope our latest edition of the Recommended Bonds Report would help you
achieve this challenging undertaking.
Figure 3: Valuations of Asian credits are attractive versus developed markets
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361 Degrees International Limited
DEGREE 7.250% 03Jun2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer 361 Degrees International Limited
Guarantor Subsidiaries
Maturity Date 03-Jun-2021
Next Call Date 03-Jun-2020
Years to Maturity (Approx.) 1.479
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 7.250
Bond Sub Sector Textiles, Apparel and Luxury Goods
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) BB- / BB-
Issuer Credit Rating (S&P/Fitch) BB- / BB-
Seniority Senior Unsecured
Issue Size USD 348,072,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
79.266INDICATIVE BID PRICE
78.008ASK YIELD TO WORST
25.044%BID YIELD TO WORST
26.327%
AVAILABLE ON BOND EXPRESS
Background¡ 361 Degrees International Limited (“361 Degrees”) is a sporting
goods company selling shoes, apparel, and accessories under its
eponymous brand.
¡ Listed on the Hong Kong Stock Exchange with a market capi-
talization of HKD2.8 billion (~S$490m), 361 Degrees operates
chiefly in China, with an extensive distribution of over 5,000
stores across the country.
¡ A majority of 361 Degrees’ stores are located in China’s third-
tier and lower-tier cities, as the company’s business model fo-
cuses on the mid-market segment with most of its shoes priced
within the RMB200 to RMB500 range.
Credit HighlightsSince our last update, 361 Degrees has registered a marked im-
provement in operating performance. Eliminating the impact of
government subsidies, grants and FX losses, adjusted earnings be-
fore interest and taxes (EBIT) jumped 10.2% from RMB 492.5m in
the first half of 2018 to RMB 542.7m in the first half of 2019.
Gearing has also declined for 361 Degrees. The gearing ratio — cal-
culated by dividing interest-bearing debt by total assets — fell 1.2
ppt to 22.4% as of end-June 2019 (31 Dec 18: 23.6%)
Our positive disposition on 361 Degrees largely stems from the
company’s ample cash holdings relative to its liabilities. As of June
2019, the company had RMB 6.4 billion in bank deposits, cash and
cash equivalents, versus the company’s RMB 6.0 billion of liabilities.
On 13 November, 361 Degrees announced that KPMG, its auditor,
had resigned due to an audit fee dispute with the company. 361
Degrees has since engaged Moore Stephens to act as its auditor in
the interim. We do not see this as cause for concern, as KPMG has
confirmed that there are no matters in connection with its resig-
nation as the auditor of the Company that need to be brought to
the attention of the shareholders. In addition, we understand that
in the past three years, 361 Degrees has not been in receipt of any
qualified audit opinions.
361 Degrees has also been repurchasing its debt in the open mar-
ket. As of 21 November 2019, the company had repurchased USD
44.8m in debt, representing 11.2% of the initial aggregate principal
amount of its bond issue. We are of the opinion that this should
be interpreted positively by bondholders as it demonstrates the
company’s ample liquidity.
RecommendationIn light of the observations in the preceding section, we strong-
ly recommend the bonds issued by 361 Degrees. The DEGREE
7.250% 03Jun2021 Corp (USD) issue matures in just under 2
years and carries a yield to maturity of 25.04%. Such a yield is
typically associated with companies undergoing restructuring or
experiencing some form of distress, which is ostensibly not the
case with 361 Degrees.
In short, given the company’s solid cash position and its robust op-
erating metrics, we think that the current pricing is very attractive.
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Banyan Tree Holdings Limited
BTHSP 4.850% 05Jun2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Banyan Tree Holdings Limited
Guarantor -
Maturity Date 05-Jun-2020
Next Call Date -
Years to Maturity (Approx.) 0.485
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.850
Bond Sub Sector Hotels, Restaurants and Leisure
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.742INDICATIVE BID PRICE
100.273ASK YIELD TO WORST
3.237%BID YIELD TO WORST
4.249%
AVAILABLE ON BOND EXPRESS
Background¡ Banyan Tree Holdings Limited (“Banyan Tree”) is a leading op-
erator and developer of premium resorts, hotels, spas, and res-
idences with 47 resorts and hotels, 63 spas and 3 golf courses
across 24 countries.
¡ Since the launch of its first resort in 1994, the Banyan Tree
group has received over 2,472 awards that were granted to its
hotels and resorts.
¡ In addition to its current hospitality and real estate portfolio,
the group is overseeing the construction of 21 hotels and re-
sorts, as well as 31 other projects that have yet to be launched.
¡ Revenue is recognized primarily through property sales and the
collection of management fees for the provision of services in
hotels, clubs and spas.
Credit HighlightsBanyan Tree’s losses widened to S$10.4m in 3Q19 from S$7.4m
in 3Q18 as total revenue dropped 20% YoY to S$55.4m from
S$69.7m. Property sales declined 36% YoY due to timing differ-
ence in revenue recognition, and management expected to recog-
nize the achieved sales of various projects in 4Q19 when construc-
tion is completed. Overall, Banyan Tree continued to report higher
selling activity as the group had unrecognized revenue of S$258m
in 3Q19, up from S$203m in 3Q18 and S$132m in 3Q17. Cash flows
should improve in 4Q19, as the group expects to recognize S$87m
of property revenue when it hands over secured sales of Cassia
Phuket Phase 3, Laguna Park Townhomes Phase 2 and Banyan Tree
3 Beds Pool villas.
On the hotel investment front, revenue declined 16% YoY to
S$31.8m in 3Q19 but overall forward bookings were 10% above
the same period last year. Looking ahead, 4Q19 and 1Q20 revenue
should be higher than 3Q19 as it coincides with the holiday season,
making it a traditionally busy period for the company’s hotels.
Total debt stood at S$526.3m as of end-September, which if com-
bined with S$58.1m of lease liabilities would translate to a net
debt-to-equity ratio of 68%. Short-term borrowings added to
S$280m, out of which S$123m is made up of secured debt. If need
be, we think the group may pledge its freehold land and buildings
to raise more debt as we think there is still room for more secured
borrowings. According to our estimates, the firm’s ratio of secured
assets to total tangible assets remains below 70%, which is the
maximum threshold set by its debt issuance program.
With the abovementioned factors in mind, the additional financing
from secured loans, rollover of some short-term borrowings, cash
inflows from the handover of units, and the firm’s cash position of
S$103m should help it tide over the near-term obligations.
RecommendationDespite the deterioration of Banyan Tree’s credit metrics in 3Q19,
we are comfortable with the company’s liquidity profile up till 1H20.
Bond yields of the BTHSP 4.850% 05Jun2020 Corp (SGD) look
compelling against comparable notes of similar maturities within
the sector. At an ask yield to maturity of 3.24%, we think that the
bond is still attractively priced among hotel issuers.
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Bond Information
DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
100.542INDICATIVE BID PRICE
100.319ASK YIELD TO WORST
3.811%BID YIELD TO WORST
3.888%
BREAD 4.000% 17Jan2023 Corp (SGD)
Issuer BreadTalk Group Limited
Guarantor -
Maturity Date 17-Jan-2023
Next Call Date -
Years to Maturity (Approx.) 3.104
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.000
Bond Sub Sector Food and Staples Retailing
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
Background¡ BreadTalk Group Limited has become a leading bakery and res-
taurant operator since its incorporation in 2000. The group has
four main business segments namely Bakery, Food Atrium, Res-
taurant, and 4orth (a food concepts division).
¡ BreadTalk’s substantial shareholders include its founder Dr
George Quek and his wife Ms Katherine Lee, who collectively
control 56.3% of the company’s shares.
Credit HighlightsIn 9M19, BreadTalk’s revenue increased 8.7% YoY to S$494.6m as
the company registered growth across all its operating segments.
Its bottom line, however, remained under pressure with profit be-
fore tax (“PBT”) declining 33.8% YoY to S$13.3m in 9M19.
While BreadTalk is diversified in terms of its product offerings, we
note that only the Food Atrium and Restaurant segments have
contributed to profits this year. Particularly, Din Tai Fung is now
the anchor brand within the entire BreadTalk portfolio, with Res-
taurant contributing S$19.5m of PBT (+6.1% YoY), helping to offset
losses from Bakery and 4orth.
Interest expenses increased 161.0% YoY to S$18.0m in 9M19 due to
the adoption of SFRS(I) 16, leading to the recognition of lease-re-
lated expenses as interest expense. Excluding the lease-related
interest expense, interest expense from borrowings amounted to
S$6.4m, down 7.4% YoY.
Overall credit metrics deteriorated with net debt over equity ris-
ing significantly to 77.3% as at end-September (31 Dec 18: 25.6%)
largely due to a decrease in cash balance, which fell to S$124.2m
(31 Dec 18: S$185.0m). In line with BreadTalk’s business expansion
(the group added 48 outlets in 9M19), net cash flow used in in-
vesting activities more than doubled from S$23.3m in 9M18 to
S$53.5m in 9M19.
We expect BreadTalk’s net gearing to rise further in the quarters
ahead, following its acquisition of Food Junction Management
Pte Ltd. While the acquisition will boost BreadTalk’s market share
among food court operators, it had cost a huge sum of S$80m
relative to the company’s net assets (S$147.1m).
Despite BreadTalk’s sluggish profitability and high net gearing, we
take comfort from its low liquidity risk. The group’s short-term
debt of S$61.0m is well covered by S$124.2m of cash as at 30 Sep
19. Furthermore, the group has additional financial flexibility from
its S$39.2m of investment properties (office space in Shanghai
and shophouse in Singapore) and a 29% interest in Chijmes, a re-
tail property with a carrying value of S$334m (as at 31 Dec 18).
RecommendationIn our view, Breadtalk’s BREAD 4.000% 17Jan2023 Corp (SGD)
is fairly priced among other SGD-denominated food and beverage
credits, as well as real estate credits that have exposure to the
retail sector. For instance, the bonds’ ask YTM of 3.81% offers rea-
sonable yield pickup over bonds issued by Fraser and Neave, Lim-
ited (“F&N”), a SGX-listed company that is focused on beverage
productions. In comparison, the FNNSP 3.09% ’22s (YTM: 2.62%)
and FNNSP 3.8% ’27s (YTM: 3.36%) have lower yields, although
we note that F&N is significantly larger in both size and operating
scale, and has a lower net gearing.
Breadtalk Group Limited
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Cache Logistics Trust
Background¡ An industrial REIT listed on the SGX with a market capitalisation
of S$779.7m.
¡ Owns a portfolio of logistics properties in Singapore and Aus-
tralia.
¡ Total valuation of investment properties stood at S$1.31 billion
as at 30 Sep 19.
Credit HighlightsIn 3Q19, Cache Logistics Trust’s (“CLT”) portfolio occupancy was
stable at 94.0%, which was decent relative to the industry aver-
age in Singapore and Australia. Weighted average lease to expiry
by net lettable area stood at a decent 3.2 years, with rental esca-
lations within master leases ranging between 1-4% p.a. However,
21.1% of leases by gross rental income (“GRI”) is due to expire in
2020 (2021: 25.0%), which is significant in our opinion.
CLT reported gross revenue of S$27.7m in 3Q19, down 12.0% YoY.
Factors contributing to the lower revenue include the conversion
of Cache Gul LogisCentre from a master lease to a multi-tenan-
cy structure in April, transitory downtime between replacement
tenants in Commodity Hub, lease expiries at certain properties,
absence of contribution from the divested Jinshan Chemical Ware-
house, and a weaker AUD.
Interest coverage (EBIT over interest expense, excluding fair val-
ue changes of investment properties) was satisfactory at 2.9x, al-
though weakened from 4.0x in 3Q18 as net financing costs rose
23.5% YoY to S$5.4m. Including distributions on perpetual securi-
ties, we estimate CLT’s interest coverage at 2.3x in 3Q19.
Encouragingly, CLT’s tenant concentration risk was lower with
rental income contribution from top-ten tenants gradually declin-
ing from 75% in 2016 to 64% in 2018 and 55.3% in 3Q19. There
was also a greater balance between multi-tenanted and single-us-
er lease structures, as single-tenant leases fell to around 24% of
gross revenue in 3Q19 from 56% in 2016. GRI from the trust’s ma-
jor tenant, CWT Pte Limited, had also reduced to 10.7% in Septem-
ber (4Q18: 20.6%).
Cache’s total borrowings rose to S$507.5m in 3Q19 (4Q18:
S$474.7m), after the REIT incurred additional debt to partially
finance its acquisition of a warehouse in Australia. Reported ag-
gregate leverage (debt over assets) increased to 38.3% (4Q18:
36.2%). Including the S$100m CACHE 5.5% perpetual securities
as debt, we estimate CLT’s adjusted aggregate leverage at ~43%.
CLT had short-term borrowings of S$94.9m in 3Q19, while its cash
balance was S$14.2m. However, we think the trust’s refinancing
risk is manageable given its decent financial flexibility. Investment
properties had a carrying value of S$1.38 billion, while secured
debt as a percentage of investment properties was just 5.3%. The
comfortable asset-to-secured debt ratio should allow CLT to raise
more secured borrowings if needed.
RecommendationCache delivered satisfactory results in 3Q19, although we remain
mindful of its tenant concentration risk. We think the 4.77% yield
to call (Z-spread: 325bps) offered by the CACHE 5.500% Perpet-
ual Corp (SGD) represents a generous return. The perps are first
callable at par on 1 Feb 23, then on every distribution payment date
thereafter. If not redeemed at first call, the distribution rate on the
notes will reset to the sum of the prevailing five-year SGD swap
offer rate and the initial spread of 3.58%.
INDICATIVE ASK PRICE
102.076INDICATIVE BID PRICE
101.768ASK YIELD TO WORST
4.767%BID YIELD TO WORST
4.873%
Reset Date : 01 Feb 2023 and every 5 years thereafterReset Rate : Prevailing SGD 5Y SOR + Initial Spread (3.580%)
Reference Rate
CACHE 5.500% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Cache Logistics Trust
Guarantor -
Maturity Date Perpetual
Next Call Date 01-Feb-2023
Years to Next Call (Approx.) 3.145
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 5.500
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 100,000,000
HIGH YIELD SEEKER
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CAPLSP 3.800% 28Aug2024 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer CapitaLand Treasury Limited
Guarantor CapitaLand Limited
Maturity Date 28-Aug-2024
Next Call Date -
Years to Maturity (Approx.) 4.718
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.800
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.837INDICATIVE BID PRICE
104.650ASK YIELD TO WORST
2.697%BID YIELD TO WORST
2.738%
Background¡ Borne of the merger between DBS Land and Pidemco in 2000.
¡ CapitaLand Limited (“CapitaLand”) maintains a presence in
more than 200 cities across 30 countries.
¡ Managed a global portfolio worth S$131.7 billion as at 30 Sep-
tember 2019.
¡ Developer of Raffles City Singapore and seven other Raffles
City offshoots in China.
¡ Manages eight listed real estate investment trusts (REITs) and
business trusts, together with 25 private equity funds.
Credit HighlightsOn 14 January 2019, CapitaLand announced that it would be en-
tering into a transaction with Temasek to acquire the share cap-
ital of two wholly-owned subsidiaries of Ascendas-Singbridge Pte
Ltd. The transaction saw Temasek’s shareholding in CapitaLand
increase to 50.8%.
CapitaLand recorded a strong operating performance in the third
quarter of 2019. Taking contributions from the newly acquired As-
cendas-Singbridge properties into account, Capitaland saw its rev-
enue for the third quarter surge 37.1% YoY to S$1.7 billion (3Q18:
S$1.3 billion). EBIT rose 30.2% to S$1.1 billion (3Q2018: S$824m),
while profit after tax and minority interests declined 7.8% to
S$333.9m.
As of end September, CapitaLand had a net debt to equity ratio of
0.69x, down from 0.73x reported in the previous quarter. The group’s
interest coverage ratio - EBITDA / Net interest expense – was 6.9x,
down from the 7.3x recorded in the previous quarter. The group main-
tained an average debt maturity of 3.6 years (2Q19: 3.4 years).
CapitaLand maintained an excellent liquidity position with some
S$11.8 billion in cash balances and available undrawn credit facil-
ities, as of September 2019. A relatively small amount of S$1.5
billion of debt is due in 2019, and an estimated S$5.0 billion and
S$4.0 billion is due in 2020 and 2021 respectively. Thus, even if
the company loses access to the capital markets, its untapped
sources of credit and cash reserves should stand the company in
good stead.
In the middle of this year, Ascott Residence Trust (‘Ascott REIT’)
and Ascendas Hospitality Trust (‘A-HTrust’), REITs in which Cap-
itaLand held premerger stakes of 45% and 28% respectively,
announced that they would be combining to form a group with a
total asset value in excess of S$7 billion. Under the terms of the
deal, Ascott REIT will acquire A-HTrust units for S$1.0868 per unit,
comprising S$0.0543 in cash and 0.7942 Ascott REIT-BT units at
a price of S$1.30. When the transaction is completed, CapitaLand
will hold a stake of about 40% in the combined group. The trans-
action has been approved by shareholders of the respective com-
panies.
RecommendationGiven the company’s excellent credit metrics, we strongly recom-
mend CapitaLand bonds as a whole. The ample liquidity enjoyed
by the company, coupled with support from its key shareholder
Temasek, allows us to express our confidence in this company with
virtually no reservations.
In practical terms, bond investors might wish to consider the
CAPLSP 3.800% 28Aug2024 Corp (SGD) issue, which bears a
yield to maturity of 2.70%.
CapitaLand Limited
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CENSUN 7.000% 03Jul2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Century Sunshine Group Holdings
Limited
Guarantor Subsidiaries
Maturity Date 03-Jul-2020
Next Call Date 03-Jan-2020
Years to Maturity (Approx.) 1.022
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 7.000
Bond Sub Sector Chemicals
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / B
Seniority Senior Unsecured
Issue Size SGD 101,750,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
90.623INDICATIVE BID PRICE
89.767ASK YIELD TO WORST
28.314%BID YIELD TO WORST
30.567%
AVAILABLE ON BOND EXPRESS
Century Sunshine Group Holdings Limited
Background¡ Established by founder Mr Chi Wen Fu in 2000 as a fertilizer
producer in China, Century Sunshine Group Holdings Limited is
listed on the HKEX since 2004 and sported a market cap of
around HKD 1.04 billion (~USD 133m) as of 11 Dec 19.
¡ Besides manufacturing and selling fertilizer, Century Sunshine
is also involved in magnesium alloy production through its
72.4%-owned, HKEX-listed subsidiary, Rare Earth Magnesium
Technology Group Holdings Limited (market cap: HKD 1.94 bil-
lion).
¡ In addition to its current hospitality and real estate portfolio,
the group is overseeing the construction of 21 hotels and re-
sorts, as well as 31 other projects that have yet to be launched.
¡ Revenue is recognized primarily through property sales and the
collection of management fees for the provision of services in
hotels, clubs and spas.
Credit HighlightsCentury Sunshine reported revenue of HKD 2.12 billion in 1H19,
down 4.2% YoY from HKD 2.21 billion in 1H18. The decline in top
line was led by an 8.7% drop in the company’s magnesium product
business to HKD 726m (1H18: HKD 796m), as a 2.9% pickup in the
segment’s average selling price (“ASP”) to HKD 25,567 per ton
was unable to offset the 11.1% fall in volume. The fertilizer business
was largely stable with HKD 1.36 billion of revenue (-1.6% YoY), as
a 5.4% drop in volume erased a 4.1% gain in ASP.
The management attributed the decline in magnesium product
revenue to their adjustment of production structure, by moving
production and sales from low-margin products. This is support-
ed by the improvement in the magnesium segment’s gross profit
margin, which rose three percentage points YoY to 28.4% in 1H19.
Overall gross profit fell by just 2.5% YoY to HKD 535m (1H18: HKD
549m), which translated to a gross profit margin of 25.3% (1H18:
24.9%).
Excluding other gains/losses and net exchange difference, we find
Century Sunshine’s EBIT at HKD 382m in 1H19, marginally higher
from HKD 378m in 1H18. Meanwhile, finance costs sunk 10.2% YoY
to HKD 82m (1H18: HKD 92m), even though total borrowings were
mostly unchanged YoY at HKD 2.11 billion (30 Jun 18: HKD 2.12
billion). According to the company, the decrease in finance costs
was mainly due to a change in the debt composition—less financing
by bills, which carried relatively high interest expenses. Interest
coverage as measured by EBIT over finance costs consequently
improved to 4.6x in 1H19 (1H18: 4.1x).
Although Century Sunshine continued to generate positive net op-
erating cash flow of HKD 192m in 1H19 (1H18: HKD 325m), we note
that it was insufficient to cover the HKD 274m of investing cash
outflow. Cash and cash equivalents thus decreased to HKD 533m
at the end of June (31 Dec 18: HKD 718m), and net debt over equity
rose to 38% (31 Dec 18: 34%). Liquidity remained tight with HKD
1.07 billion of debt due with a year, representing 51% of total debt.
RecommendationWhile Century Sunshine’s significant maturity wall and depressed
equity valuation (relative to its indebtedness) continue to weigh on
the company’s credit profile, we are cautiously optimistic that it
would be able to refinance its short-term borrowings (mostly bank
debt), supported by its decent profitability, positive operating cash
flows and low leverage. As such, we remain positive on the CENSUN
7.000% 03Jul2020 Corp (SGD), which offers an outsized YTM of
28.3%.
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China Evergrande Group
Background¡ China Evergrande Group is a HKEX-listed mainland property de-
veloper with a market cap of HKD257 billion (as at 11 Dec 19). It
is one of the largest real estate developers in mainland China,
with over 810 projects in more than 280 cities.
Credit HighlightsEvergrande’s operating income, gross profit, and net profit all de-
clined in 1H19 compared to the same period last year. Operating
income dropped 24.4% YoY to RMB 227 billion, while net profit
attributable to shareholders declined 51.6% YoY to RMB 14.9 bil-
lion. Excluding non-recurring profits or losses and non-property
business losses, core business profit slipped 44.8% YoY to RMB
30.4 billion.
As at end-June, Evergrande’s total debt amounted to RMB 813.2
billion, adding RMB 140 billion from six months ago. The group’s
net debt over EBITDA was manageable at 4.98x (annualized) in
1H19. Its net gearing was 152%, similar to that of end-December.
Looking at Evergrande’s cash flow, it is highly unlikely that the
group will be able to meet its short-term obligations from cash
collection on sales alone. Nonetheless, we still believe that Ever-
grande is able to repay its debts. Firstly, although the sales per-
formance in 1H19 was rather disappointing, it was mostly due to
the timing of the property development cycle. As we expect the
group’s property completion and handovers to be concentrated in
2H19, core business profit should increase correspondingly.
Secondly, Evergrande’s cash reserves rose around 60% in 1H19 to
a rich level of RMB 207 billion. Although there is still a gap with its
RMB 375.8 billion of short-term loans, we think the group should
be able to meet its short-term obligations, after taking into ac-
count its cash collection from sales and RMB 81 billion of restricted
cash.
Thirdly, according to CRIC, Evergrande’s land bank stood above
all other developers with an attributable land bank value of RMB
2,549.6 billion as of end-2018. Evergrande’s extremely low land
acquisition costs helped the group achieve a decent gross profit
margin of 34.0% in 1H19. We think the company has the ability to
maintain its cash flow through price cuts and monetization of its
land bank in times of need.
In September and October, Evergrande achieved record-breaking
contracted sales of RMB 83.1 billion and RMB 90.3 billion respec-
tively. Assuming an attributable cash collection rate of 75%, we
estimate that the group would receive cash inflow of about RMB
125 billion by year-end from sales achieved in these two months.
Even if we take into consideration spending such as construction
cost, Evergrande’s liquidity and net gearing are expected to be im-
proved by year-end.
RecommendationGiven Evergrande’s current debt structure and policy headwinds
facing the property sector, we believe its mid- to short-term
bonds are more investment worthy. We like the EVERRE 6.250%
28Jun2021 Corp (USD) (YTM: 10.78%), EVERRE 8.250%
23Mar2022 Corp (USD) (YTM: 12.79%), and EVERRE 9.500%
11Apr2022 Corp (USD) (YTM: 13.15%), which still offer attractive
returns despite the recent rebound in prices.
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HIGH YIELD SEEKER DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
91.270INDICATIVE BID PRICE
90.834ASK YIELD TO WORST
12.791%BID YIELD TO WORST
13.033%
EVERRE 8.250% 23Mar2022 Corp (USD)
Bond Information
Issuer China Evergrande Group
Guarantor Multiple Guarantors
Maturity Date 23-Mar-2022
Next Call Date 23-Mar-2020
Years to Maturity (Approx.) 2.282
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 8.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / B
Issuer Credit Rating (S&P/Fitch) B+ / B+
Seniority Secured
Issue Size USD 2,025,000,000
AVAILABLE ON BOND EXPRESS
HIGH YIELD SEEKER DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
93.751INDICATIVE BID PRICE
93.501ASK YIELD TO WORST
10.784%BID YIELD TO WORST
10.974%
EVERRE 6.250% 28Jun2021 Corp (USD)
Bond Information
Issuer China Evergrande Group
Guarantor Subsidiaries
Maturity Date 28-Jun-2021
Next Call Date -
Years to Maturity (Approx.) 1.548
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) B / B
Issuer Credit Rating (S&P/Fitch) B+ / B+
Seniority Secured
Issue Size USD 1,473,181,000
HIGH YIELD SEEKER DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
92.872INDICATIVE BID PRICE
92.508ASK YIELD TO WORST
13.151%BID YIELD TO WORST
13.347%
EVERRE 9.500% 11Apr2022 Corp (USD)
Bond Information
Issuer China Evergrande Group
Guarantor Subsidiaries
Maturity Date 11-Apr-2022
Next Call Date -
Years to Maturity (Approx.) 2.334
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 9.500
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) B / N.R
Issuer Credit Rating (S&P/Fitch) B+ / B+
Seniority Secured
Issue Size USD 1,450,000,000
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Background¡ City Developments Limited (“CDL”) is a leading global real es-
tate operating company with a network spanning 103 locations
in 29 countries and regions.
¡ Listed on the Singapore Exchange with a market capitalisation
of S$9.76 billion.
¡ CDL’s London-listed subsidiary, Millennium & Copthorne Hotels
plc is one of the world’s largest hotel chains with over 145 ho-
tels.
Credit HighlightsFor the third quarter ended September 2019, CDL posted revenue
of S$885.3m, a decrease of 12.9% YoY from restated revenue of
S$1.0 billion posted in 3Q18. The decline was in large part attribut-
able to the timing of revenue recognition for various development
projects. In the third quarter of 2018, CDL recognised significant
revenue from the ‘New Futura’ project, which sold 38 units in the
quarter. The project has since been fully sold. Another factor con-
tributing to the YoY decline was the high base effect from signif-
icant revenue recognition from ‘The Criterion’ Executive Condo-
minium last year.
Operating earnings declined 52.5% YoY to S$127.8m (3Q18 re-
stated: S$268.4m), while profit before tax declined 37.9% YoY to
S$155.5m (3Q18 restated: S$250.6m).
Basic earnings per share declined 33.5% to 12.7 cents (3Q18 re-
stated: 19.1 cents).
On the credit front, the group saw its net gearing ratio – net debt
(gross borrowings less cash and restricted deposits) over total as-
sets – increase slightly from 18.3% in December 2018 to 23.4%
in September 2019. CDL’s cash position improved, with the group
holding S$2.7 billion in cash and cash equivalents in September
2019, some S$400m compared to the end of 2018.
Of the S$8.4 billion in gross borrowings incurred by CDL, S$1.6
billion is repayable within a year.
The group also benefits from a liquid balance sheet. At the end
of September 2019, CDL had a current ratio – defined as current
assets over current liabilities - of 2.9x.
As a whole, the moderate level of gearing and ample cash deposits
provide CDL with a significant degree of financial flexibility, and
should provide investors with the assurance that the bonds are of
a lower risk investment compared with bonds issued by property
developers with higher leverage.
RecommendationGiven CDL’s low gearing and abundance of liquid assets, the com-
pany’s bonds are particularly suitable for investors looking for a
conservative investment option. The company has a number of
outstanding bonds that are traded on the secondary market and
we would recommend sticking to the near term issues, due to CDL’s
relatively flat yield curve.
We particularly like the CITSP 3.480% 03Apr2023 Corp (SGD)
and CITSP 3.750% 06Jul2022 Corp (SGD) issues, which carry
yields of 2.55% and 2.42% respectively.
Other bonds issued by CDL include the CITSP 2.800% 27Jun2023
Corp (SGD), CITSP 3.480% 15Jun2026 Corp (SGD) and CITSP
3.000% 17Jan2024 Corp (SGD) issues.
City Developments Limited (“CDL”)
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CITSP 3.750% 06Jul2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer City Developments Limited
Guarantor -
Maturity Date 06-Jul-2022
Next Call Date -
Years to Maturity (Approx.) 2.570
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.750
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.266INDICATIVE BID PRICE
103.024ASK YIELD TO WORST
2.423%BID YIELD TO WORST
2.519%
CITSP 3.480% 03Apr2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer City Developments Limited
Guarantor -
Maturity Date 03-Apr-2023
Next Call Date -
Years to Maturity (Approx.) 3.312
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.480
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.936INDICATIVE BID PRICE
102.648ASK YIELD TO WORST
2.545%BID YIELD TO WORST
2.635%
CITSP 2.800% 27Jun2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer City Developments Limited
Guarantor -
Maturity Date 27-Jun-2023
Next Call Date -
Years to Maturity (Approx.) 3.545
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 2.800
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Unsecured
Issue Size SGD 250,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.648INDICATIVE BID PRICE
100.423ASK YIELD TO WORST
2.606%BID YIELD TO WORST
2.673%
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CITSP 3.000% 17Jan2024 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer City Developments Limited
Guarantor -
Maturity Date 17-Jan-2024
Next Call Date -
Years to Maturity (Approx.) 4.104
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.000
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Unsecured
Issue Size SGD 250,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.161INDICATIVE BID PRICE
100.887ASK YIELD TO WORST
2.698%BID YIELD TO WORST
2.769%
CITSP 3.480% 15Jun2026 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer City Developments Limited
Guarantor -
Maturity Date 15-Jun-2026
Next Call Date -
Years to Maturity (Approx.) 6.515
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.480
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.164INDICATIVE BID PRICE
102.950ASK YIELD TO WORST
2.942%BID YIELD TO WORST
2.977%
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DBSSP 4.700% Perp/Callable 2020 Pref (SGD) - Retail
Bond Information
DATA AS AT 11-DEC-19
Issuer DBS Bank Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 22-Nov-2020
Years to Next Call (Approx.) 0.951
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.700
Bond Sub Sector Banks
Minimum Investment Quantity SGD 10,000
Bond Credit Rating (S&P/Fitch) BBB / BBB
Issuer Credit Rating (S&P/Fitch) AA- / AA-
Seniority Junior Subordinated
Issue Size SGD 800,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.230INDICATIVE BID PRICE
102.140ASK YIELD TO WORST
2.313%BID YIELD TO WORST
2.414%
Background¡ DBS Group Holdings Ltd (“DBS”) is the holding company of DBS
Bank, the largest bank in Southeast Asia, with S$581 billion in
assets as at 30 Sep 19.
¡ DBS provides a full range of services in consumer, SME, and cor-
porate banking. The bank’s long term ratings of ‘AA-’ (S&P and
Fitch) and ‘Aa2’ (Moody’s) indicate a very low default risk and
the bank has a strong capacity for payment of its financial obli-
gations.
¡ Established since 1968, DBS ranks as one of the strongest banks
regionally in terms of funding, liquidity and capital. Singapore’s
sovereign wealth fund, Temasek Holdings (Private) Limited, is
the bank’s largest shareholder with a 29.9% stake in the group.
Credit HighlightsIn 3Q19, DBS achieved strong profit on the back of improving loan
growth, as total income increased 13% YoY to S$3.8 billion. Com-
pared to a year ago, net profit gained 15% to S$1.6 billion, driv-
en by higher non-interest income. Gains on investment securities
and higher trading income contributed to a 35% YoY increase in
non-interest income. In the meantime, net interest margin (“NIM”)
expanded 4 basis points (“bps”) from a year ago to 1.9%.
The bank has a strong liquidity position and a market-leading
share of low-cost and stable SGD retail deposits. As of 3Q19, the
loan-to-deposit ratio was 88%, while its liquidity coverage and net
stable funding ratios maintained above 100%, at 131% and 110%
respectively.
The loan portfolio is well diversified across industries with no single
sector accounting for more than 24% of the total portfolio. Allow-
ances for credit and other losses climbed 8% YoY to S$254m due
to higher general allowances for credit losses as well as heightened
expected credit losses for loans in Greater China.
Nonetheless, asset quality remained sound as the non-perform-
ing loan (“NPL”) ratio dropped to 1.5% in 3Q19 from 1.6% in 3Q18.
Breaking down the NPLs across various geographies, NPLs in Sin-
gapore increased 5.7% YoY to S$3.6 billion, while NPLs in Hong
Kong dropped 8.5% YoY to S$494m.
As for next year’s projections, the group’s CEO Mr Piyush Gupta
expects a similar loan growth rate in 2020, although the NIM is
estimated to decline by 7 bps. Total income is projected to grow in
the low single-digit range and credit cost would stay at the same
level as 2019.
The bank’s capital adequacy ratios remained strong. As at 30 Sep
19, DBS’s Common Equity Tier-1 ratio was 13.8%, up from 13.3% a
year ago and well above the minimum regulatory requirement of
9.4%. Tier-1 capital adequacy ratio also improved to 14.7% from
14.4% a year ago.
RecommendationAmong the bank’s SGD capital instruments, we prefer the DBSSP
4.700% Perp/Callable 2020 Pref (SGD) - Retail (YTW: 2.31%) and
DBSSP 3.980% Perpetual Corp (SGD) (YTW: 1.81%). In the US
dollar space, we like the DBSSP 3.600% Perpetual Corp (USD)
(YTW: 2.88%) over other comparable USD-denominated notes.
These three notes are first callable in November 2020, September
2025 and September 2021 respectively.
DBS Group Holdings Ltd
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Reset Date: 12 Sep 2025 and every 7 years thereafter Reset Rate: Prevailing SGD 7Y SOR plus the Initial Spread (1.650%)
Reference Rate
DBSSP 3.980% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer DBS Group Holdings Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 12-Sep-2025
Years to Next Call (Approx.) 5.759
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 3.980
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB
Issuer Credit Rating (S&P/Fitch) N.R / AA-
Seniority Junior Subordinated
Issue Size SGD 1,000,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.317INDICATIVE BID PRICE
103.958ASK YIELD TO WORST
1.813%BID YIELD TO WORST
1.821%
Reset Date: 07 Sep 2021 and every 5 years thereafter Reset Rate: 5Y USD Swap Rate + Initial Spread (2.39%)
Reference Rate
DBSSP 3.600% Perpetual Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer DBS Group Holdings Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 07-Sep-2021
Years to Next Call (Approx.) 1.742
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 3.600
Bond Sub Sector Banks
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / BBB
Issuer Credit Rating (S&P/Fitch) N.R / AA-
Seniority Junior Subordinated
Issue Size USD 750,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.200INDICATIVE BID PRICE
100.784ASK YIELD TO WORST
2.879%BID YIELD TO WORST
3.127%
AVAILABLE ON BOND EXPRESS
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Background¡ A Chinese airline that provides passenger and cargo air
transportation services with a fleet size of 706 aircrafts as at
30 Sep 19.
¡ The company’s controlling shareholder is China Eastern Air
Holding Company Limited (56.4% stake), which is fully owned
by the State-owned Assets Supervision and Administration
Commission of China (“SASAC”).
¡ Market capitalisation: HKD86.1 billion.
Credit HighlightsIn 9M19, CEA’s revenue jumped 6.3% YoY to RMB93.4 billion,
boosted by an increase of 10.4% YoY in passenger traffic volume
to 166,562.82m passenger-kilometres. Available seat kilometres
(a measure of passenger carrying capacity) rose at a higher pace
of 10.9% YoY, and consequently the airline’s passenger load factor
fell 0.33 percentage points to 82.57%.
Total operating expenses rose 7.2% YoY to RMB79.8 billion, at a
faster pace than top-line growth. Operating profit hence fell 4.1%
YoY to RMB5.5 billion, and operating profit margin was lower at
5.9% (9M18: 6.6%). We think fuel cost was likely the biggest ex-
pense item that detracted from profitability, as Brent crude oil
prices rose 10.7% year-to-date September. CEA does not hedge
fuel costs, which is a significant operating risk in our view given
the volatile oil prices.
Meanwhile, finance costs increased to RMB5.6 billion (9M18:
RMB5.0 billion) and CEA recorded RMB6.0 billion of profit before
tax, down from RMB6.3 billion in 9M18. Based on the adjusted EBIT
(excluding non-operating income and expenses) of RMB11.1 billion
in 9M19 (9M18: RMB10.8 billion), we estimated that CEA’s interest
coverage ratio was ~2.0x in 9M19, down from 2.1x in previous year’s
corresponding period.
We estimated CEA’s total interest-bearing liabilities including fi-
nance leases at RMB122.5 billion as at 3Q19, down from RMB132.6
billion in 4Q18. Net gearing improved correspondingly to 1.6x in
3Q19 from 2.1x in 4Q18. Besides a lower debt load, the improved
net gearing also partly reflected the increased cash balance of
RMB4.5 billion (4Q18: RMB646m).
Liquidity risk was manageable with RMB2.2 billion of short-term
borrowings against RMB4.5 billion of cash as at 30 Sep 19. The
company also just recently in December issued KRW300 billion of
2.4% notes due 2022, which should help to improve its financial
liquidity.
RecommendationThe CHIEAS 2.800% 16Nov2020 Corp (SGD) carries an ask
YTM of 2.54% (Z-spread: 101bps), which we think provides a fair
compensation for CEA’s credit risk, after taking into account the
company’s strong track record of government support in times of
need. We note that the bond documentation contains a change-
of-control clause, which provides investors the option to sell the
bonds back to CEA at 101% if SASAC owns less than 50% of CEA.
Therefore, investors are protected against the unlikely event of
CEA losing its strong parental backing.
China Eastern Airlines Corporation Limited (“CEA”)
CHIEAS 2.800% 16Nov2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Eastern Air Overseas Hong Kong
Co Limited
Guarantor China Eastern Airlines Corp Limited
Maturity Date 16-Nov-2020
Next Call Date -
Years to Maturity (Approx.) 0.934
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 2.800
Bond Sub Sector Airlines
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.248INDICATIVE BID PRICE
99.837ASK YIELD TO WORST
2.539%BID YIELD TO WORST
3.002%
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ESR Cayman Limited (“ESR”)
Background¡ A logistics real estate developer and operator focused on the
Asia Pacific region, with interests across China, Japan, South
Korea, Singapore, Australia, and India.
¡ As of 30 Jun 19, the group has total assets under management
(“AUM”) of USD20.2 billion, almost tripled from USD7.4 billion in
December 2016.
¡ ESR’s key shareholders include Warburg Pincus, JD.com, and SK
Holdings.
Credit HighlightsRevenue for the six months ended June rose 66.3% YoY to
USD155.8m, following the acquisition and consolidation of Prop-
ertylink in April. An increase in management fee income, in line
with the growth in AUM, and the consolidation of Commercial &
Industrial Property Pty Ltd (“CIP”; acquired in August 2018) also
contributed to revenue growth.
The consolidation of CIP’s construction income and cost result-
ed in a significant jump in cost of sales from USD2.1m in 1H18 to
USD41.8m in 1H19. Gross profit margin (“GPM”) as a result fell from
97.8% to 73.2% over the same period. We are unperturbed by the
sharp fall in GPM as CIP operates a construction business that has
a different margin profile, and the current level of GPM remains
healthy in our opinion.
ESR reported adjusted EBITDA of USD125.2m, up 29.8% YoY.
Nonetheless, interest cover (adjusted EBITDA over interest ex-
pense) weakened to 1.5x (1H18: 2.1x) due to a bigger jump in finance
costs to USD83.4m (+81.4% YoY).
As at 31 Aug 19, ESR Cayman had total borrowings of USD3.04
billion, of which USD589.5m (19.4%) were short-term debt. Total
borrowings doubled from USD1.46 billion at the end of December
2018, following the drawdown of debt for the Propertylink acquisi-
tion and consolidation of Propertylink’s balance sheet.
Net debt over equity was 74% at the end of June, while we esti-
mated adjusted net gearing (including preference shares and per-
petual securities in debt) at 93%. We think ESR’s market capitali-
sation of HKD50.8 billion (~USD6.5 billion) provides ample equity
cushion behind its USD3.04 billion of debt. Furthermore, based on
the disclosed intended use of proceeds from ESR’s IPO in October,
we estimated pro forma adjusted net gearing to fall significantly to
approximately 61% post-IPO.
ESR Cayman had a comfortable liquidity position with USD1.16 bil-
lion of cash and bank balances and USD85.4m of unutilized bank-
ing facilities in August. The liquidity reserve was more than enough
to cover near-term obligations of USD589.5m and USD100m of
perpetual securities (assuming that they would be redeemed on
the first call date of 7 Jun 20).
RecommendationWe like ESR’s business model and the synergies between its devel-
opment and investment vehicles, which allow the group to monet-
ise matured assets and free up capital for growth deployment. We
think the ask YTM of 4.89% (Z-spread: 337bps) on the ESRCAY
6.750% 01Feb2022 Corp (SGD) provides decent compensation
for ESR’s credit risk. The ESRCAY 7.875% 04Apr2022 (USD)
offers even better value with its ask YTM of 6.50% (Z-spread:
488bps). As a pricing reference, the ARASP 4.15% ‘24s of ARA
Asset Management Limited (2Q19 adjusted net gearing: 1.0x) are
indicating at an ask YTM of 3.47% (Z-spread: 190bps).
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HIGH YIELD SEEKER DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
102.877INDICATIVE BID PRICE
102.560ASK YIELD TO WORST
6.499%BID YIELD TO WORST
6.648%
ESRCAY 7.875% 04Apr2022 Corp (USD)
Bond Information
Issuer ESR Cayman Limited
Guarantor -
Maturity Date 04-Apr-2022
Next Call Date -
Years to Maturity (Approx.) 2.315
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 7.875
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size USD 425,000,000
HIGH YIELD SEEKER DATA AS AT 11-DEC-19
INDICATIVE ASK PRICE
103.719INDICATIVE BID PRICE
103.318ASK YIELD TO WORST
4.885%BID YIELD TO WORST
5.082%
ESRCAY 6.750% 01Feb2022 Corp (SGD)
Bond Information
Issuer ESR Cayman Limited
Guarantor -
Maturity Date 01-Feb-2022
Next Call Date -
Years to Maturity (Approx.) 2.145
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.750
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 350,000,000
AVAILABLE ON BOND EXPRESS
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Background¡ ESR-REIT (“EREIT”) is one of Singapore’s largest industrial RE-
ITs with a market cap of S$1.9 billion.
¡ A pure-play industrial REIT, EREIT manages a portfolio of 57 in-
dustrial properties in Singapore as of 30 Sep 19, with an aggre-
gate property value of S$3.13 billion and total gross floor area of
approximately 15.1m square feet.
¡ EREIT is sponsored by ESR Cayman Limited, a logistics real es-
tate developer and manager.
Credit HighlightsEREIT delivered another quarter of decent portfolio performance.
In the three months ended September, EREIT’s portfolio occupan-
cy rate was stable at 91.0%, outperforming the industrial average
occupancy rate of 89.3% reported by JTC. Furthermore, EREIT’s
rental reversions swung to a positive 0.6% in year-to-date 3Q19
(2018: -2.9%). Tenant concentration risk was also well managed
with top 10 tenants (out of 332) accounting for about 30.7% of the
REIT’s rental income (2Q19: 31.1%).
We think a quarter-on-quarter comparison of EREIT’s 3Q19 re-
sults is more meaningful given the trust’s consolidation of Viva
Industrial Trust following their merger in October 2018. Despite
stable portfolio occupancy and good portfolio metrics, EREIT’s
gross revenue fell 2.8% QoQ to S$63.8m in 3Q19 from S$62.0m in
2Q19. Meanwhile, net property income was also down by 5.4% to
S$45.3m. Higher management fees due to the acquisition of 49%
interest in 48 Pandan Road in August 2019 were partly why NPI fell
at a faster pace than revenue.
Excluding non-operating items such as the change in fair value of
financial derivatives, we estimate EREIT’s adjusted interest cov-
erage ratio (EBIT over borrowing costs) at approximately 3.1x in
3Q19, weakening slightly from 3.0x in 2Q19 and reflecting the in-
crease in interest expenses (+3.8% from the previous quarter). As
of 3Q19, EREIT’s reported aggregate leverage ratio stood at 41.6%,
inched up from 39.0% in 2Q19, reflecting higher total borrowings
of S$1.24 billion (2Q19: S$1.18 billion). EREIT completed in Octo-
ber a preferential offering that raised S$50m of equity funding.
Assuming proceeds raised were used to pare down debt, EREIT’s
pro-forma aggregate leverage should fall to 40.1%.
As at 30 Sep 19, EREIT had S$178.4m of short-term debt. While the
amount of near-term obligations was significant as compared to
just S$17.6m of cash, we think the trust’s refinancing risk remained
manageable, as its enlarged property portfolio of S$3.13 billion was
fully unencumbered. In addition, EREIT had access to S$85m of
undrawn available committed facilities as at 30 Sep 2019.
RecommendationWe are positive on the EREIT 4.600% Perpetual Corp (SGD),
which carries a YTW (ask) of 4.31% (Z-spread: 319bps). A switch
from Mapletree Logistics Trust’s (aggregate leverage: 37.0% as at
30 Sep 19) MLTSP 3.65% perps (YTW: 3.39%) would offer a yield
pick-up of 92bps. We think this represents ample compensation
for EREIT’s smaller scale and higher leverage. For investors who
are adverse to extension and subordination risks, the plain vanilla
EREIT 3.950% 21May2020 Corp (SGD) also offers good value for
its short remaining maturity, indicating at an ask YTM of 2.74%
(Z-spread: 117bps).
ESR-REIT
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EREIT 3.950% 21May2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer ESR-MTN Private Limited
Guarantor ESR-REIT
Maturity Date 21-May-2020
Next Call Date -
Years to Maturity (Approx.) 0.444
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.950
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 130,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.506INDICATIVE BID PRICE
100.235ASK YIELD TO WORST
2.744%BID YIELD TO WORST
3.383%
Reset Date : 03 Nov 2022 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.6%)
Reference Rate
EREIT 4.600% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer ESR-REIT
Guarantor -
Maturity Date Perpetual
Next Call Date 03-Nov-2022
Years to Next Call (Approx.) 2.899
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.600
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 150,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
98.770INDICATIVE BID PRICE
98.448ASK YIELD TO WORST
4.312%BID YIELD TO WORST
4.327%
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Background¡ Fraser and Neave, Limited (“F&N”) is a SGX-listed (market cap:
~S$2.5 billion) consumer group with a strong foothold in South-
east Asia’s food and beverage (“F&B”) markets.
¡ The Sirivadhanabhakdi family of TCC Group controlled around
87.7% of F&N’s shares via Thai Beverage PLC and TCC Assets
Ltd.
¡ F&N’s beverages brands include such household names as
100PLUS, F&N SEASONS, OISHI, F&N NUTRISOY, and F&N MAG-
NOLIA.
¡ Geographically, F&N’s drinks are distributed mainly in Southeast
Asia across Singapore, Malaysia, Thailand, and Vietnam, with
Malaysia and Singapore being the anchor markets.
Credit HighlightsF&N delivered healthy results in FY19 ended 30 September, with
improvements in both top line and bottom line. During the year,
revenue jumped 3.7% YoY to S$1.90 billion led by broad-based
sales growth in the beverages and dairies segments, whose reve-
nue rose 6.5% YoY and 3.6% YoY to S$470.7m and S$1.15 billion
respectively. Meanwhile, its printing segment returned flattish re-
sults, achieving revenue of S$277.4m, down marginally by 0.6%
YoY.
Due to lower input costs for both dairies and beverages, F&N’s cost
of sales rose at a slower pace than revenue, resulting in a gross
profit margin of 32.8%, up from 31.8% in FY18. Operating profit
rose by an impressive 39.9% YoY to S$169.6m, supported by high-
er sales and favourable input costs. In addition, we note that rev-
enues have increased even as marketing expenses fell 1.2% YoY.
Profit before tax rose 33.9% YoY to S$267.5m, fuelled by an in-
crease in the share of results from associated companies (+16.6%
YoY to S$113.9m), as Vietnam Diary Products Joint Stock Company
(20%-owned by F&N) generated higher profits in the year.
We note that finance costs fell 29% YoY to S$21.7m in FY19, as total
borrowings fell to S$829.7m (4QFY18: S$871.4m). In line with high-
er earnings, F&N’s interest coverage (EBIT over interest expense)
improved to 14.1x in FY19 from 8.1x in FY18. However, net gearing
(net debt over equity) rose to 12.3% from 10.8% over the same
period, mainly due to the decrease in cash balances to S$420.3m
(4QFY18: S$530.1m). The company drew on its cash reserves to fi-
nance S$191.8m of investing cash outflow and S$128.5m of financ-
ing outflow (of which S$96.2m represented dividend payments),
which exceeded S$210.6m of net cash from operating activities.
F&N refinancing risk is minimal with only S$9.2m of debt due with-
in the next year. In addition, we continue to like F&N’s strong cash
generation, supported by quick cash collections typical in the F&B
sector. In FY19, net cash from operating activities rose 32.5% YoY
to S$210.6m.
RecommendationAs a beverage producer, F&N stands out among SGD bond issuers
as it offers a relatively rare diversification opportunity for inves-
tors. In addition, we think F&N’s bonds offer decent returns against
its healthy credit metrics and strong operating cash flow. We like
both the FNNSP 3.090% 23Mar2022 Corp (SGD) and FNNSP
3.800% 21Apr2027 Corp (SGD), which have ask YTMs of 2.62%
and 3.36% respectively, indicating spreads of 110bps and 165bps
above SGD swaps.
Fraser and Neave, Limited
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FNNSP 3.090% 23Mar2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer F&N Treasury Private Limited
Guarantor Fraser & Neave Limited
Maturity Date 23-Mar-2022
Next Call Date -
Years to Maturity (approx.) 2.282
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.090
Bond Sub Sector Beverages
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 160,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.020INDICATIVE BID PRICE
100.725ASK YIELD TO WORST
2.622%BID YIELD TO WORST
2.757%
FNNSP 3.800% 21Apr2027 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer F&N Treasury Private Limited
Guarantor Fraser & Neave Limited
Maturity Date 21-Apr-2027
Next Call Date -
Years to Maturity (approx.) 7.364
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.800
Bond Sub Sector Beverages
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.829INDICATIVE BID PRICE
102.548ASK YIELD TO WORST
3.362%BID YIELD TO WORST
3.405%
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Fosun International Limited
Background¡ Fosun International is a conglomerate headquartered in Shang-
hai and listed on the HKEX (0656.HK), with a market capitaliza-
tion of HKD 90.3 billion as at 11 Dec 19.
¡ The group consists of various business sectors in which all sub-
sidiaries, associates and joint ventures are categorized into
three ecosystems: Health (Pharmaceutical, Medical Services &
Health Management and Health Products), Happiness (Tourism
& Leisure, Fashion and Consumer & Lifestyle) and Wealth (Insur-
ance, Finance and Investment).
¡ Some notable companies under the Fosun umbrella include Fo-
sun Pharma and its affiliate Sinopharm, Luz Saúde, Gland Phar-
ma, Tsingtao Brewery, Baihe Jiayuan, AHAVA, Yuyuan Inc., Fos-
un Tourism Group, Premier League football club Wolverhampton
Wanderers, Forte Group, Fidelidade, Nanjing Nangang and Peak
Reinsurance. With its widely diversified portfolio of investments,
we believe the group has sufficient capacity to withstand geo-
graphical and cyclical risks.
Credit HighlightsIn 1H19, Fosun reported a record-high revenue of RMB 68.5 billion
(+57.4% YoY), which translated to an impressive 5-year compound-
ed annual growth rate of 16%. All three segments delivered strong
growth during the period: revenue from Health Business was RMB
16.5 billion (+17.7% YoY); the Happiness segment recorded RMB
30.9 billion of revenue (+128.1% YoY); and the Wealth segment’s
revenue was RMB 21.5 billion (+31.6% YoY). As a result, the profit
attributable to shareholders was RMB 7.6 billion, representing an
increase of 10.9% YoY.
With a current ratio of 1.10x in June, and cash over short-term bor-
rowings coverage ratio of 1.54x, we believe that the company has
enough liquidity for repaying short-term debt. The total amount of
interest-bearing debt and cash were around RMB 193 billion and
RMB 103 billion respectively in June, and translated to a manage-
able net gearing ratio of 53.3%. With the group’s strong profita-
bility, its net debt over trailing twelve month EBITDA was 1.42x
according to Bloomberg estimates, and reported interest coverage
(EBITDA over net interest expenditures) was at a decent 4.6x in
1H19, both indicating a healthy credit profile.
We believe that the management’s commitment to enhance the
overall financial profile of the company is carried out effectively, as
debt maturities are distributed quite evenly over the following five
years. The well-distributed maturity profile will provide flexibility
for the group in its budget planning and utilization of financial sur-
plus each year, without being bogged down by excessive refinanc-
ing risk due to the concentration of maturities in a single period.
RecommendationReferencing the pricings of similar bonds in the market, we think
the valuation of Fosun’s bonds are quite decent considering its
healthy credit profile relative to its double-B issuer rating. We be-
lieve the Fosun bonds provide an attractive choice for investors
who are looking for high-yield exposure with manageable risk. With-
in the FOSUNI curve, we think the FOSUNI 6.875% 31Jan2021
Corp (USD) (YTM: 4.56%) and FOSUNI 5.250% 23Mar2022 Corp
(USD) (YTM: 5.27%) offer more attractive yields relative to their
duration.
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FOSUNI 6.875% 31Jan2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Fortune Star (BVI) Limited
Guarantor Fosun International Limited
Maturity Date 31-Jan-2021
Next Call Date -
Years to Maturity (Approx.) 1.142
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.875
Bond Sub Sector Diversified Consumer Services
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) BB / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 500,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
102.490INDICATIVE BID PRICE
102.227ASK YIELD TO WORST
4.562%BID YIELD TO WORST
4.801%
FOSUNI 5.250% 23Mar2022 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Fortune Star (BVI) Limited
Guarantor Fosun International Limited
Maturity Date 23-Mar-2022
Next Call Date 23-Mar-2020
Years to Maturity (Approx.) 2.282
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 5.250
Bond Sub Sector Diversified Consumer Services
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) BB / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 1,400,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
99.947INDICATIVE BID PRICE
99.502ASK YIELD TO WORST
5.271%BID YIELD TO WORST
5.482%
AVAILABLE ON BOND EXPRESS
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FPLSP 2.500% 21Jul2021 Corp (USD) DATA AS AT 11-DEC-19
Bond Information
Issuer Frasers Property Treasury Private
Limited
Guarantor Fraser Centrepoint Limited
Maturity Date 21-Jul-2021
Next Call Date -
Years to Maturity (approx.) 1.611
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 2.500
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 200,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
99.390INDICATIVE BID PRICE
99.177ASK YIELD TO WORST
2.893%BID YIELD TO WORST
3.032%
Background¡ A diversified property company, Frasers Property Limited (‘FPL’)
operates across five asset classes – residential, hospitality, re-
tail, commercial & business parks, and logistics and industrial
properties.
¡ Total assets in excess of S$37.6 billion (as of 30 Sep 2019), with
approximately S$10.0 billion of retail assets under management
in Singapore.
¡ The sponsor of three REITs - Frasers Centrepoint Trust, Frasers
Commercial Trust, and Frasers Logistics & Industrial Trust, and
one stapled trust - Frasers Hospitality Trust.
¡ For a long time, FPL existed as a subsidiary of the Fraser and
Neave group. Its first development was The Centrepoint, a land-
mark shopping mall in Orchard Road, Singapore.
¡ In early 2014, Fraser and Neave spun off its property operations
as Frasers Centrepoint Limited. The company would later be re-
named Frasers Property.
Credit HighlightsFor the full year ended September 2019, FPL saw its revenue de-
cline 12% YoY to S$3.8 billion. Profit before interest, fair value
change, taxation and exceptional items declined to a lesser extent,
down 3% YoY to S$1.3 billion. After accounting for minority inter-
ests, attributable profit was down 25% YoY to S$560m.
Income from REITs and other fee income are recurring in nature:
these sources accounted for more than half of the group’s EBIT. For
the full year ended September 2019, FPL saw PBIT – profit before
interest, fair value changes, taxation and exceptional items - from
recurring income sources increase 16% YoY.
As of 30 September 2019, FPL held S$3.58 billion in cash, cash
equivalents and bank deposits, up 37.8% YoY. Gearing – debt over
total assets – rose slightly from 45.9% in September 2018 to
46.2% in September 2019.
FPL’s debt maturity profile remains well staggered with an average
debt maturity of 3.0 years (30 Sep 2018: 3.3 years). The average
cost of financing has declined for the group, with the average cost
of debt on a portfolio basis coming in at 2.9%, down 0.1 ppt from
the previous year.
RecommendationGiven FPL’s excellent credit profile and robust operating metrics,
we maintain a favourable disposition towards its bonds. We par-
ticularly favour the FPLSP 4.98% Perpetual Corp (SGD), which
carries a yield to call of 4.22%.
The issue has a first call date of 11 Apr 24, and a step-up margin of
100bps applies should the issue not be redeemed by the company
after that date. The coupon is resettable on 11 Apr 24 and every
five years subsequently to the sum of the prevailing 5-year SGD
swap offer rate, the initial spread of 3.04%, and the step-up margin
of 100 bps.
The other perpetual issued by FPL that provides an attractive yield
is the FPLSP 5.000% Perpetual Corp (SGD).
Among the fixed term bonds available on the secondary market,
investors might wish to consider the FPLSP 2.500% 21Jul2021
Corp (USD), and FPLSP 4.250% 21Apr2026 Corp (SGD) issue.
In addition, investors looking for a retail bond might consider the
FPLSP 3.650% 22MAY2022 CORP (SGD) – RETAIL issue.
Frasers Property Limited
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FPLSP 3.650% 22May2022 Corp (SGD) - Retail DATA AS AT 11-DEC-19
Bond Information
Issuer Frasers Property Treasury Private
Limited
Guarantor Fraser Centrepoint Limited
Maturity Date 22-May-2022
Next Call Date 22-May-2020
Years to Maturity (approx.) 2.447
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.650
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 1,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.790INDICATIVE BID PRICE
101.390ASK YIELD TO WORST
2.034%BID YIELD TO WORST
2.928%
FPLSP 4.250% 21Apr2026 Corp (SGD) DATA AS AT 11-DEC-19
Bond Information
Issuer Frasers Property Treasury Private
Limited
Guarantor Fraser Centrepoint Limited
Maturity Date 21-Apr-2026
Next Call Date -
Years to Maturity (approx.) 6.364
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 280,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.393INDICATIVE BID PRICE
103.158ASK YIELD TO WORST
3.646%BID YIELD TO WORST
3.687%
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Reset Date: 09 Mar 2020 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (3.015%) + 1% Coupon Step up (on 09 Mar 2025)
Reference Rate
FPLSP 5.000% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Frasers Property Treasury Private
Limited
Guarantor Fraser Centrepoint Limited
Maturity Date Perpetual
Next Call Date 09-Mar-2020
Years to Next Call (Approx.) 0.244
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 5.000
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 700,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.508INDICATIVE BID PRICE
100.372ASK YIELD TO WORST
2.745%BID YIELD TO WORST
3.337%
Reset Date: 11 Apr 2024 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (3.040%) + Step-Up Margin (100 bps)
Reference Rate
FPLSP 4.980% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Frasers Property Treasury Private
Limited
Guarantor Fraser Centrepoint Limited
Maturity Date Perpetual
Next Call Date 11-Apr-2024
Years to Next Call (Approx.) 4.337
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.980
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 600,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
102.955INDICATIVE BID PRICE
102.863ASK YIELD TO WORST
4.221%BID YIELD TO WORST
4.244%
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FWD Group Limited
Background¡ Established in 2013, FWD Group Limited (“FWDG”) is an insurer
that offers a wide range of insurance products including life and
medical insurance. As at 30 Jun 19, the fast-growing insurer has
total assets of USD17.1 billion.
¡ A privately held organisation, FWDG is mainly owned by Mr Rich-
ard Li (75.4% deemed interest) and Swiss Re Group (13.4%).
¡ FWDG operates primarily in Southeast Asia and Japan, and seg-
ments its business mainly by the geographical markets in which
it operates.
Credit HighlightsIn 1H19, FWDG’s net premiums rose 10.8% YoY to USD1.52 billion,
mainly led by increases from its operations in Thailand (+22.4%
YoY) and Other Markets (+25.2% YoY). Net premiums in the Japan
segment weakened slightly by 3.4% to USD631.6m over the same
period. Net premiums constituted 91% of total revenue in 1H19,
which grew 13.1% YoY to USD1.67 billion.
Meanwhile, total net benefits and claims, and other operating
and administrative expenses rose 15.9% YoY and 24.7% YoY to
USD1.36 billion and USD309.0m respectively in the six months
ended June. Overall, FWDG’s loss before tax widened to USD116.2m
in 1H19 (1H18: loss of USD28.0m), mainly because of heavy expens-
es and claims incurred that outpaced revenue growth.
We are not overly concerned over the mediocre results thus far
as FWDG is still in its early phase of building its business, and we
think the relatively high expenses incurred are needed to gain
market share. Nonetheless, investors should be aware that FWDG’s
acquisition-fuelled growth may increase operational risks and the
expected benefits of acquisitions could take significant time to ma-
terialise.
On the bright side, FWDG operates with a strong balance sheet,
with reported capital adequacy ratios that were well above regula-
tory requirements. Furthermore, the substantial amount of equity
capital already invested in the firm supports our belief that the
likelihood of shareholder support in times of need is high. As at 30
Jun 19, FWDG booked USD1.82 billion of share premium, account-
ing for 85.4% of its total equity.
RecommendationThe FWDGRP 5.750% 09Jul2024 Corp (USD) have an ask yield to
maturity (“YTM”) of 4.89%, representing 325bps above five-year
US Treasuries and 140bps more than the YTM of FWD Limited’s (a
sister company sharing common shareholders) FWDINS 5% ’24s
(ask YTM: 3.49%). We think the yield pick-up of 140bps provides
a generous compensation for FWDG’s unrated status and weaker
profitability.
At its ask yield to worst of 5.91% (Z-spread: 427bps), we think the
FWDGRP 6.375% Perpetual Corp (USD) also offers a lucrative
reward for its subordinated ranking, and presents an interesting
choice for more aggressive investors. The perps are first callable
on 13 Sep 24. If not redeemed at first call, the coupon rate on the
perps will reset to the sum of the prevailing 5-year US Treasury
yield plus the initial spread of 4.876%, giving it a decent likelihood
of being redeemed at first call.
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INDICATIVE ASK PRICE
101.875INDICATIVE BID PRICE
101.584ASK YIELD TO WORST
5.913%BID YIELD TO WORST
5.983%
Reset Date: 13 Sep 2024 and every 5 years thereafter Reset Rate: Prevailing 5 year UST rate + the initial spread (4.876%)
Reference Rate
FWDGRP 6.375% Perpetual Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer FWD Group Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 13-Sep-2024
Years to Next Call (Approx.) 4.762
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 6.375
Bond Sub Sector Insurance
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Subordinated
Issue Size USD 600,000,000
HIGH YIELD SEEKER
FWDGRP 5.750% 09Jul2024 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer FWD Group Limited
Guarantor -
Maturity Date 09-Jul-2024
Next Call Date -
Years to Next Call (Approx.) 4.581
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 5.750
Bond Sub Sector Insurance
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size USD 900,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
103.483INDICATIVE BID PRICE
103.264ASK YIELD TO WORST
4.888%BID YIELD TO WORST
4.941%
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Background¡ Listed on the Singapore stock exchange since 1978, GuocoLand
Limited (‘GuocoLand’) is a property development company op-
erating largely in Singapore, China, Malaysia and Vietnam.
¡ Primarily focused on property development, however the com-
pany also generates revenue from property investment and ho-
tel management.
¡ Key projects include Leedon Residence and the mixed use Tan-
jong Pagar Centre integrated development.
¡ Part of the Hong Leong Group, GuocoLand has a market capital-
ization of S$2.3 billion.
Credit HighlightsFor the first quarter ended September 2019 (“1QFY19”), top-
line revenue surged 62% to S$272.5m (1QFY18: S$168.0m), on
the back of higher progressive recognition of sales from Martin
Modern. Gross profit expanded 77% from S$50.3m in 1QFY18 to
S$88.9m for the quarter ended September 2019. Earnings be-
fore interest and taxes, excluding the share of profit of associates
and joint ventures, were S$73.1m. Earnings per ordinary share for
1QFY19 was 3.36 cents, almost double the 1.93 cents posted the
preceding year. The net asset value per ordinary share grew to
S$3.47 at the end of 1QFY19 (4QFY18: S$3.45).
Interest coverage – taken as EBIT over finance costs – improved
from 2.0x in 1QFY18 to 2.9x in 1QFY19.
Gearing – calculated by taking the ratio of debt to total assets –
edged up slightly to 44.9% at the end of September 2019 (4QFY18:
44.7%), but continues to remain at a relatively low level. Taking
the company’s outstanding perpetual securities into account,
group level gearing was 48.8%.
GuocoLand is the developer of the integrated mixed-use develop-
ment Tanjong Pagar Centre, comprised of five key elements: pre-
mium Grade A office space in Guoco Tower, a dynamic lifestyle and
F&B retail space, luxury apartments at Wallich Residence, the five-
star luxury hotel Sofitel Singapore City Centre and a 150,000 sq ft
landscaped park.
Guoco Tower provides office space for tenants seeking an exclu-
sive, prestigious address to operate from. The key selling point is
its central location — Guoco Tower is located directly above the
Tanjong Pagar MRT station. As at end-June 2019, Guoco Tower had
an occupancy rate of 100%.
GuocoLand is also the developer of Wallich Residence, which rose
to prominence after British billionaire James Dyson acquired a unit
within the development.
RecommendationWith an established track record and decent credit metrics, we are
of the opinion that investors open to exposure to the real estate
sector should consider GuocoLand bonds. Of particular interest
is the GUOLSP 4.600% Perpetual Corp (SGD) issue — which has
a first call date in January 2023 — and carries a yield to call of
3.76%. If the note is not redeemed on its first call date, the coupon
will reset in January 2025 (two years after the first call date) and
every seven years thereafter, to the sum of the 7-year SGD swap
offer rate, the initial spread of 260.9 basis points (‘bps’), plus a
step-up margin of 100 bps.
Investors looking for a fixed term note might wish to focus their
attention on GuocoLand’s GUOLSP 4.000% 31Jan2022 Corp
(SGD) issue, which matures in January 2022 and carries a yield to
maturity of 3.27%.
GuocoLand Limited
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GUOLSP 4.000% 31Jan2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer GLL IHT Private Limited
Guarantor GuocoLand Limited
Maturity Date 31-Jan-2022
Next Call Date -
Years to Maturity (Approx.) 2.142
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.000
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 285,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.491INDICATIVE BID PRICE
101.346ASK YIELD TO WORST
3.267%BID YIELD TO WORST
3.337%
Reset Date: 23 Jan 2025 and every 7 years thereafter Reset Rate: Prevailing SGD 7Y SOR + Initial Spread (2.609%) + 100bps Distribution Step-Up
Reference Rate
GUOLSP 4.600% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer GLL IHT Private Limited
Guarantor GuocoLand Limited
Maturity Date Perpetual
Next Call Date 23-Jan-2023
Years to Next Call (Approx.) 3.121
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.600
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 400,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.705INDICATIVE BID PRICE
100.571ASK YIELD TO WORST
3.756%BID YIELD TO WORST
3.761%
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GGRSP 4.750% 25Jan2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Golden Assets International
Investment Private Limited
Guarantor Golden Agri-Resources Limited
Maturity Date 25-Jan-2021
Next Call Date -
Years to Maturity (Approx.) 1.126
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.750
Bond Sub Sector Food Products
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
97.955INDICATIVE BID PRICE
96.629ASK YIELD TO WORST
6.798%BID YIELD TO WORST
8.136%
AVAILABLE ON BOND EXPRESS
Golden Agri-Resources Ltd
Background¡ Golden Agri-Resources Ltd (“GAR”) is Indonesia’s largest palm
oil plantation company.
¡ Listed on the Singapore Exchange with a market cap of S$2.87
billion as at 11 Dec 19.
¡ The firm’s businesses span two segments, namely its upstream
business in plantation and palm oil mills, and downstream oper-
ations in palm, laurics, and others.
¡ The Widjaja family, among Indonesia’s wealthiest, is GAR’s larg-
est shareholder and has a deemed interest of about 50% of the
company’s shares.
Credit HighlightsIn the quarter ended September (“3Q19”), total revenue dropped
15% to USD1.56 billion from a year ago as lower crude palm oil
(“CPO”) prices weighed on the firm’s performance. Gross profit de-
clined 32% YoY to USD188m while EBITDA — defined as earnings
before interest, taxes, depreciation and amortization, fair value
changes of biological assets, foreign exchange gains/losses and
exceptional items — dropped 19% to USD107m in the quarter.
Despite the drop in revenue and EBITDA, GAR’s swung from a net
loss of USD53m to a net profit of USD6m in 3Q19, on the back of a
34% drop in selling expenses and 5% decline in general & admin-
istrative expenses. In addition, foreign exchange gains and other
operating income, which mainly comprised of fair value changes
of biological assets, contributed to the positive bottom line for the
third quarter.
Gearing increased slightly with the debt-to-total assets ratio
climbing from 35% in 4Q18 to 37% in 3Q19. The higher gearing was
largely due to an increased debt load. Our measure of total debt —
the sum of short-term and long-term borrowings, bonds and notes
payables — expanded from USD3.01 billion at the end of December
to USD3.13 billion in September.
We think GAR has a decent liquidity profile considering that the
firm may liquidate its tangible short-term assets to meet its
short-term obligations. According to our estimates, the firm held
USD1.46 billion of tangible assets made up of USD143m of cash
and cash equivalents, USD370m of short-term investments and
USD950m of inventories. In aggregate, Golden Agri recorded
USD2.67 billion of current assets and USD2.61 billion of current
liabilities in 3Q19, translating to a modest current ratio of slightly
more than 1.0x in 3Q19.
The company’s cash flows improved in the nine-month period
ended September (“9M19”), notwithstanding a drop in net oper-
ating cash flow (“net CFO”) to USD95m in 3Q19 from USD191m in
3Q18. Overall, net CFO in 9M19 nearly doubled to USD305m from
USD153m in 9M18.
RecommendationGolden Agri’s credit strength remains at a satisfactory level
despite the slight rise in gearing during 2019. Relative to other
high-yield SGD credits, we think the market is ascribing a valuation
that is too punitive on the GGRSP 4.750% 25Jan2021 Corp
(SGD), which is indicating at an ask YTM of 6.80%. As a reference,
Olam International Limited’s (3Q19 debt/asset: 48%) OLAMSP 6%
‘22s are yielding 3.85%. While we acknowledge that Olam has a
significantly more diversified business and enjoys good access to
capital markets, we think the GGRSP 4.75% ‘21s offer good value
at their spread of 606bps above SGD swaps.
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Heeton Holdings Limited
Background¡ A real estate company headquartered in Singapore, Heeton
Holdings Limited (“Heeton”) focuses on property development,
investment, and management.
¡ Listed on the SGX in 2003 and has a market capitalization of
approximately S$150m.
¡ Maintains a global presence across Thailand, Australia, Japan,
Malaysia, Vietnam, and the UK.
¡ Owns a diversified hospitality property portfolio that includes
Luma London and Crowne Plaza London Kensington.
Credit HighlightsHeeton is an asset-rich company with ample cash resources and
property holdings. As of end September 2019, the company had
S$107.7m in cash and cash equivalents, up 43.6% YoY. Heeton also
has a significant amount of property and land assets. Excluding de-
velopment properties, the company had S$550.0m worth of land
and investment properties as of 30 September 2019. Development
properties included, this figure rises to S$583.2m.
Its current ratio, measured as the ratio of current assets over cur-
rent liabilities, was 1.37x in September 2019 (31 December 2018:
1.32x). The group’s cash ratio, defined as cash and cash equivalents
divided by current liabilities, stood at 0.80x (31 December 2018:
0.60x).
Heeton is conservatively geared in so far as the property develop-
ment space is concerned. Its gearing ratio, defined as total debt
over total assets, was 46.9% as of end September 2019 (Dec 2018:
37.9%). About a quarter of its debt matures within a year.
Heeton’s secured borrowings amounted to S$291.3m in Septem-
ber 2019 while the company aggregate carrying value of its land
and property assets (excluding development properties) was
S$550.0m. This translates to an implied loan to value ratio of 53%.
In August 2019, Heeton announced that Mr Eric Teng would be
stepping down as Chief Executive of the firm. He was replaced by
Mr Toh Giap Eng, Vince - Executive Deputy Chairman – who as-
sumes the responsibilities of the Chief Executive while the group
searches for Teng’s replacement.
A month later, Heeton announced the appointment of Mr Hoh Chin
Yiep as Chief Operating Officer of the Company. Hoh assumed the
said role on 14 October 2019.
RecommendationWe are of the opinion that Heeton is a company that investors
should consider including in their portfolios. Our confidence stems
from Heeton’s healthy balance sheet and a good track record es-
tablished over the years.
We like Heeton’s HTONSP 6.080% 19July2021 Corp (SGD). In
comparison with Chip Eng Seng’s CHIPEN 4.75% ‘21s, which yield
in the 5% range, the HTONSP 6.08% ‘21s yield of approximately
6.54% appears to be more attractive at the moment. Besides, Chip
Eng Seng is more highly geared than Heeton, with a debt-to-asset
ratio in excess of 50%.
Investors looking for bonds with a shorter tenure may wish to con-
sider Heeton’s HTONSP 6.100% 08May2020 Corp (SGD) (ask
YTM: 5.33%).
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HTONSP 6.100% 08May2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Heeton Holdings Limited
Guarantor -
Maturity Date 08-May-2020
Next Call Date -
Years to Maturity (Approx.) 0.408
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.100
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 75,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.283INDICATIVE BID PRICE
99.585ASK YIELD TO WORST
5.328%BID YIELD TO WORST
7.142%
HTONSP 6.080% 19July2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Heeton Holdings Limited
Guarantor -
Maturity Date 19-Jul-2021
Next Call Date -
Years to Maturity (Approx.) 1.605
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.080
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 118,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
99.314INDICATIVE BID PRICE
98.353ASK YIELD TO WORST
6.537%BID YIELD TO WORST
7.190%
AVAILABLE ON BOND EXPRESS
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Background¡ Hotel Properties Limited (“HPL”) is an owner and operator of
hotels with strong hospitality brands names in various locations.
The group has interests in 34 hotels under brands including
Four Seasons, InterContinental Hotels Group, and Hilton Inter-
national. Additionally, the company manages its own portfolio
of hotels under brands such as Hard Rock Hotels and Concorde
Hotels & Resorts.
¡ Founded in 1980, HPL is listed in Singapore with a market cap
of S$1.93 billion as of 11 Dec 19. The two largest shareholders in
the company are Mr Ong Beng Seng (with a deemed interest of
38.3%) and Wheelock and Company Limited (deemed interest
of 22.5%).
¡ The firm’s business activities include hotel ownership, manage-
ment and operation, property development, and investment
holding.
Credit HighlightsIn the quarter ended September (“3Q19”), HPL swung to a net loss
of S$2.4m from a net profit of S$20.4m a year ago due to low-
er contributions from the group’s share of profits from joint ven-
tures and associates. However, total revenue grew to S$134m from
$130m in the same period, resulting from stronger performance of
its Bali hotels in Indonesia. Looking ahead, management expects
higher hospitality revenue in 4Q19 as the fourth quarter is tradi-
tionally a holiday season for travellers.
The company’s cash position dropped to S$88m in the third quar-
ter, down from S$98m in 2Q19. At this level, the amount of cash
was insufficient to meet its short-term borrowings of S$257m.
Total current assets and current liabilities added to S$360m and
S$427m respectively in 3Q19, placing the firm in a negative work-
ing capital position.
Nevertheless, HPL intends to refinance its borrowings to alleviate
its debt burden. According to the group’s 3Q19 filing, most of its
short-term borrowings were eligible for refinancing. The firm also
raised S$160m through a perpetual note offering in October that
would help to lift its liquidity profile.
Cash flows on the other hand are healthy. Net cash flows from op-
erating activities (“CFO”) increased to S$49m in 3Q19, up from
S$40m in 3Q18. Free cash flow, defined as net CFO minus capi-
tal expenditures, more than tripled to S$21m in the third quarter
mainly due to lower spending on property, plant, and equipment.
HPL’s level of indebtedness is within an acceptable range in our
opinion. The proportion of total debt (including perpetual securi-
ties) to total assets increased to 32% in 3Q19 from 26% a year
ago. With a debt-to-asset ratio of 32%, we think the company’s
debt burden is reasonable among hotel operators.
RecommendationCompared with other SGD credits in the same sector, we think the
HPLSP 4.650% Perpetual Corp (SGD) is attractively priced at
a YTW of 4.16%. The HPLSP 4.65% perp is first callable in May
2022, which coincides with the first reset date. In addition, we also
like the HPLSP 3.850% 27May2021 Corp (SGD), a senior unse-
cured bond with a yield to maturity of 2.83%. The bond had a rel-
atively high yield compared to other notes along the HPLSP curve.
Hotel Properties Limited
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Reset Date: 05 May 2022 and every 5 years thereafterReset Rate: SGD 5Y SOR plus Initial Spread (268.5bps) + Initial Spread (2.685%) + 100bps on 05 May 2027
Reference Rate
HPLSP 4.650% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Hotel Properties Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 05-May-2022
Years to Next Call (Approx.) 2,400
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.650
Bond Sub Sector Hotels, Restaurants and Leisure
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
101.097INDICATIVE BID PRICE
100.909ASK YIELD TO WORST
4.163%BID YIELD TO WORST
4.246%
HPLSP 3.850% 27May2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Hotel Properties Limited
Guarantor -
Maturity Date 27-May-2021
Next Call Date -
Years to Maturity (approx.) 1.460
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.850
Bond Sub Sector Hotels, Restaurants and Leisure
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.438INDICATIVE BID PRICE
101.050ASK YIELD TO WORST
2.826%BID YIELD TO WORST
3.100%
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Background¡ British multinational banking and financial services company
established in 1865.
¡ A banking franchise that serves more than 39 million customers
through four global businesses: Retail Banking and Wealth Man-
agement, Commercial Banking, Global Banking and Markets, and
Global Private Banking.
¡ Shares in HSBC Holdings plc (“HSBC”) are held by around
200,000 shareholders in 130 countries and territories.
¡ Market capitalization: ~GBP 117.1 billion.
Credit HighlightsHSBC stands out amongst its peers with some of the most robust
credit metrics. For the quarter ended September 2019, the bank
reported a common equity tier 1 (CET1) ratio 14.3%, one of the
highest levels observed within the financial sector and unchanged
from the previous quarter. The group’s total capital ratio improved
0.1 ppt to 20.2% (June 2019: 20.1%) while the group’s liquidity cov-
erage ratio was unchanged QoQ at 136%. The liquidity coverage
ratio is the value of highly liquid assets over the bank’s total net
cash flows over a 30-day stress testing period.
Its strong capital position notwithstanding, HSBC is currently fac-
ing a challenging operating environment, with lower profits in cer-
tain regions within continental Europe and the United States. For
the quarter ended September, total reported revenue was down
3% YoY to USD 13.4 billion with profit after tax down 16% YoY to
USD 3.80 billion. Asia was a bright spot for the bank, with reported
profit before tax in Asia up 4% to USD 4.7 billion.
In response to the bank’s recent performance, HSBC group CFO
Ewen Stevenson has announced his intention to restructure the
bank’s US and UK businesses, and streamline its group operating
structure to cut costs. The bank is expected to rebalance its capital
away from low return businesses and review its restructuring plan
in early 2020.
RecommendationIn our view, the lackluster operating performance of HSBC is tran-
sitory in nature, and most likely reflects the cyclical nature of the
industry itself. Our continued confidence in HSBC stems from its
excellent capital position and established track record. Besides,
HSBC’s banking franchise benefits from an impeccable reputation,
a key asset which we believe has distinguished the institution from
its peers. We are also encouraged by its singular focus on main-
taining strong cost discipline and high capital ratios.
We strongly recommend the HSBC 4.700% Perpetual CORP
(SGD), which carries a yield to call of 3.96%. The issue has a first
call date of 8 Jun 22. Should the issue not be redeemed on first
call, the coupon rate will reset on that date and every five years
thereafter to the 5-year SGD swap offer rate (“SOR”) plus 2.87%.
We also recommend the HSBC 5.000% Perpetual CORP (SGD).
The bond has a first call date of 24 Sep 23 and provides a yield to
call of 4.26%. Should the issue not be redeemed on the first call
date, the coupon rate will reset on that date and every five years
subsequently to the prevailing 5-year SGD SOR plus 2.665%.
HSBC Holdings plc
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Reset Date: 24 Sep 2023 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.665%)
Reference Rate
HSBC 5.000% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer HSBC Holdings PLC
Guarantor -
Maturity Date Perpetual
Next Call Date 24-Sep-2023
Years to Next Call (Approx.) 3.789
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 5.000
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB
Issuer Credit Rating (S&P/Fitch) A / AA-
Seniority Junior Subordinated
Issue Size SGD 750,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.556INDICATIVE BID PRICE
102.422ASK YIELD TO WORST
4.259%BID YIELD TO WORST
4.282%
Reset Date: 08 Jun 2022 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.870%)
Reference Rate
HSBC 4.700% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer HSBC Holdings PLC
Guarantor -
Maturity Date Perpetual
Next Call Date 08-Jun-2022
Years to Next Call (Approx.) 2.493
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.700
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB
Issuer Credit Rating (S&P/Fitch) A / AA-
Seniority Junior Subordinated
Issue Size SGD 1,000,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.726INDICATIVE BID PRICE
101.628ASK YIELD TO WORST
3.958%BID YIELD TO WORST
4.000%
AVAILABLE ON BOND EXPRESS
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Reset Date: 20 Apr 2022 and every 5 years thereafter Reset Rate: Prevailing SGD 5Y SOR + Initial Spread (3.915%)
Reference Rate
BAERVX 5.750% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Julius Baer Group Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 20-Apr-2022
Years to Next Call (Approx.) 2.359
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 5.750
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 325,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.375INDICATIVE BID PRICE
103.323ASK YIELD TO WORST
4.238%BID YIELD TO WORST
4.215%
Background¡ A Swiss private banking group whose origins date back to 1890.
¡ Headquartered in Zurich, with offices in key locations including
Dubai, Frankfurt, Geneva, Hong Kong, London, Luxembourg,
Milan, Monaco, Montevideo, Moscow, Mumbai, Singapore and
Tokyo.
¡ Clientele consists of sophisticated private clients and family
offices across the globe.
¡ Market capitalization of CHF 10.7 billion.
Credit HighlightsDespite weaker global economic conditions and political tensions
resulting from the US-China trade dispute, Julius Baer posted solid
financial results for the first half of 2019. Half-yearly operating in-
come came in at CHF 1.7 billion, down 5.0% YoY but up 7.6% com-
pared to the second half of 2018. With half-yearly adjusted oper-
ating expenses of CHF 1.2 billion, profit before tax for the first half
of 2019 was CHF469.8m (1H18: CHF582.7m; 2H18: CHF394.4m).
For the first six months of 2019, the bank reported a cost-to-in-
come ratio of 71.0%, a significant improvement from the 74.3%
figure reported for the second half of 2018. In terms of profitabil-
ity, Julius Baer posted an annualized return on tangible equity of
25% in the period, some 3 percentage points higher than the 22%
posted for the six months ended December last year.
For the first half of this year, Julius Baer continued to maintain an
excellent solvency profile. Its BIS core equity tier 1 (‘CET1’) ratio
was 13.1%, up 30 bps from the 12.8% reported in December 2018.
Julius Baer makes most of its money through commission and fee
income derived from its suite of private banking services. For the
first half of 2019, a full CHF955.9m, or 56.3% of operating income
was categorized as net commission and fee income. Commission
and fee income is especially valuable and important to a bank like
Julius Baer. The value of this income lies in its recurring nature,
and its intrinsic attribute of bearing lower correlation with mac-
roeconomic factors, as compared to other sources of income for
a bank.
30.3% of total operating income came from net interest and divi-
dend income. Net trading income made up 11.6% of the bank’s ag-
gregate operating income.
Julius Baer maintains an exceedingly conservative debt profile,
with an overwhelming proportion of debt bearing no maturity i.e.
they are perpetual. Of the CHF 1.88 billion in total debt issued,
only CHF325.5m (carrying value) bears a fixed maturity date. It is
this conservative profile that leads us to be positively predisposed
towards Julius Baer bonds.
RecommendationAt this juncture, perpetual securities issued by Julius Baer ap-
pear to be attractively priced. In particular, we favour the BAERVX
5.750% Perpetual Corp (SGD) issue, which appears to be more at-
tractively priced vis-à-vis the bank’s other notes.
The BAERVX 5.750% Perpetual Corp (SGD) issue has a first call
date of 20 Apr 22 and has a YTC of 4.24%. The yield is decent for a
private bank with a conservative balance sheet. Moreover, with just
2.4 years before the first call date, investors can strike a balance
between mitigating reinvestment risk and duration risk.
Julius Baer Group
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Background¡ A Straits Times Index constituent, Keppel Corporation Limited
(“Keppel Corp”) has a market capitalization value of S$12.2 bil-
lion and a book equity value of S$11.5 billion as of September
2019.
¡ A Singapore-based conglomerate with a number of business
arms including offshore & marine, property, infrastructure, and
investments.
¡ Temasek Holdings (Private) Limited, Singapore’s sovereign
wealth fund, is the company’s largest shareholder with a share-
holding of 20.45%.
Credit HighlightsKeppel Corp reported a 60% YoY gain in revenue to S$2.1 billion
during the three months ended September (“3Q19”). Depreciation
and amortization expenses, a non-cash item, surged 144% YoY to
S$105m resulting in a net profit of S$165m in 3Q19, down from
S$229m in 3Q18.
Nonetheless, we are not too concerned about the drop in profit as
Keppel Corp is a well-diversified conglomerate that operates sev-
eral business units with recurring incomes. These income streams
come from investment properties held under its portfolio of REITs
and business trusts, including Keppel REIT, Keppel-KBS US REIT,
and Keppel Infrastructure Trust.
Excluding lease liabilities, the group’s aggregate leverage ratio
(debt over total assets) increased from 27% in 3Q18 to 35% in
3Q19. Total debt climbed to S$10.80 billion, up from S$6.85 bil-
lion a year ago, outpacing the rate of growth in total assets from
S$25.60 billion to S$30.83 billion. Subtracting cash from total
debt and including lease liabilities, we find the group’s net debt at
S$10.05 billion.
Even though gearing was significantly higher, Keppel Corp is able
to tap on its large tangible asset base that should help to reduce
refinancing risk. The group’s S$1.35 billion of cash and cash equiv-
alents, together with its S$5.54 billion of inventories (composed
largely of held-for-sale properties), should help it tide over its
S$4.26 billion of near-term maturities.
We think Keppel Corp would be able to maintain its financial health
in the foreseeable future, in spite of the increase in gearing and
working capital requirements. Additionally, we feel that the group
should continue to enjoy good access to capital markets with Te-
masek as a controlling shareholder.
RecommendationThe bonds of Sembcorp Industries Ltd (“SCI”) provide a good pric-
ing reference for the KEPSP curve. SCI is also a Singapore-based
conglomerate operating in many of the same areas (O&M, property
development, and utilities), although it has a less diversified busi-
ness profile with most of its revenue coming from the energy and
marine sectors. Among credits in the industrial space, we would
prefer the KEPSP curve over the SCISP curve, as SCI had a higher
credit risk.
Within the KEPSP curve, we prefer the S$300m KEPSP 3.800%
23Apr2027 Corp (SGD) with an ask yield to worst of 2.55%. If
the bond is not redeemed on its first call date of 23 Apr 22, the
coupon rate would increase from 3.8% to 4.2%. We also like the
shorter-dated KEPSP 3.100% 12Oct2020 Corp (SGD) that offers
a yield to maturity of 2.10%, representing a decent return for a
remaining maturity of less than a year.
Keppel Corporation Limited
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KEPSP 3.100% 12Oct2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Keppel Corp Limited
Guarantor -
Maturity Date 12-Oct-2020
Next Call Date -
Years to Maturity (approx.) 0.838
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.100
Bond Sub Sector Industrial Conglomerates
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.820INDICATIVE BID PRICE
100.695ASK YIELD TO WORST
2.097%BID YIELD TO WORST
2.252%
KEPSP 3.800% 23Apr2027 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Keppel Corp Limited
Guarantor -
Maturity Date 23-Apr-2027
Next Call Date 23-Apr-2022
Years to Maturity (approx.) 7.370
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.800
Bond Sub Sector Industrial Conglomerates
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 300,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.840INDICATIVE BID PRICE
102.532ASK YIELD TO WORST
2.547%BID YIELD TO WORST
2.680%
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Lippo Malls Indonesia Retail Trust
Reset Date: 19 Dec 2022 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (4.755%)
LMRTSP 6.600% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Lippo Malls Indonesia Retail Trust
Guarantor -
Maturity Date Perpetual
Next Call Date 19-Dec-2022
Years to Next Call (Approx.) 3.025
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 6.600
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / BB
Seniority Subordinated
Issue Size SGD 120,000,000
HIGH YIELD SEEKER
Reference Rate
INDICATIVE ASK PRICE
82.793INDICATIVE BID PRICE
80.814ASK YIELD TO WORST
7.866%BID YIELD TO WORST
8.062%
AVAILABLE ON BOND EXPRESS
Background¡ LMIRT is a REIT that invests in retail and retail-related assets
in Indonesia, and its portfolio comprises of 23 retail malls and
seven retail spaces located within other retail malls.
¡ PT Lippo Karawaci Tbk is the sponsor and biggest shareholder
of LMIRT (~32% stake).
¡ The REIT is rated ‘Ba3’ and ‘BB’ with stable outlooks by Moody’s
and Fitch respectively.
Credit HighlightsLMIRT reported an overall positive set of results for the nine
months ended September, supported by stable portfolio perfor-
mance, a recovering IDR (+0.8% YoY against SGD as at 30 Sep
19), and improvement on rental collections. Net property income
increased slightly by 1.6% YoY to S$128.6m in 9M19 (9M18:
S$126.6m). The REIT booked a net reversal of allowance for doubt-
ful debts of S$1.9m in 3Q19, versus a net allowance of S$2.1m in
3Q18, which contributed to the decrease in other property operat-
ing expenses to S$6.6m in 9M19 (9M18: S$8.7m).
The trend in trade receivables also indicated better collections
on rental payments, as trade and other receivables dropped from
S$40.5m to S$38.9m in the nine months ended September. Subse-
quent to September, LMIRT has collected approximately S$7.6m of
receivables. The REIT maintains that sponsor lessees of the Lippo
group of companies have never missed any rental payments.
Finance expenses rose 18.0% YoY to S$29.9m in 9M19 (9M18:
S$25.4m), following the issuance in June of USD250m 7.25%
notes due 2024, which carried substantially higher interest rate
than the loans that were repaid with the bond proceeds. Oth-
er losses shrank to just S$1.6m in 9M19 (9M18: S$8.6m), mostly
because of favorable foreign exchange movements, and LMIRT’s
total income before tax expanded 4.8% YoY to S$85.9m (9M18:
S$82.0m). Overall, the REIT’s interest coverage (EBIT over finan-
cial expenses) reduced from 4.2x in 9M18 to 3.9x in 9M19.
Meanwhile, LMIRT’s total borrowings increased from S$680.0m to
S$729.2m in the nine months ended September, while its reported
gearing ratio was up marginally from 34.6% to 34.7%. Including
the REIT’s S$260m of perpetual securities, we note that its adjust-
ed gearing ratio actually improved from 47.8% to 47.1% over the
same period, although the figure is still high relative to most other
Singapore REITs.
RecommendationDespite their price rally over the past year, LMIRT’s LMRTSP
7.000% Perpetual Corp (SGD) (YTW: 7.868%), and LMRTSP
6.600% Perpetual Corp (SGD) (YTW: 7.866%) are still the high-
est-yielding bonds in the SGD REIT sector. We acknowledge the
substantial extension risk (the risk of a non-call) on the perps as
indicated, for instance, by their lower initial spreads versus that of
the new USD notes due 2024 (reoffer yield: 7.5%). However, yields
on the LMRTSP 7.25% ‘24s have plunged since their issuance,
and we think there is a good chance that LMIRT would be able
to refinance the perps at reasonable cost. In any case, we believe
at current bond valuations, investors are fairly compensated for
the perps’ extension risk. The LMRTSP 4.100% 22Jun2020 Corp
(SGD) also looks interesting at its YTM of 4.489%, with just about
six months to maturity.
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LMRTSP 7.000% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Lippo Malls Indonesia Retail Trust
Guarantor -
Maturity Date Perpetual
Next Call Date 27-Sep-2021
Years to Next Call (Approx.) 1.797
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 7.000
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / BB
Seniority Subordinated
Issue Size SGD 140,000,000
HIGH YIELD SEEKER
Reset Date : 27 Sep 2021 and every 5 years thereafterReset Rate : Prevailing SGD 5Y SOR + Initial Spread (5.245%)
Reference Rate
INDICATIVE ASK PRICE
88.542INDICATIVE BID PRICE
85.816ASK YIELD TO WORST
7.868%BID YIELD TO WORST
8.121%
LMRTSP 4.100% 22Jun2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer LMIRT Capital Pte Limited
Guarantor Lippo Malls Indonesia Retail Trust
Maturity Date 22-Jun-2020
Next Call Date -
Years to Maturity (Approx.) 0.532
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.100
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 75,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
99.828INDICATIVE BID PRICE
98.824ASK YIELD TO WORST
4.489%BID YIELD TO WORST
6.560%
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LOGPH 6.125% 16Apr2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Logan Property Holdings Co Limited
Guarantor Subsidiaries
Maturity Date 16-Apr-2021
Next Call Date 16-Apr-2020
Years to Maturity (Approx.) 1.348
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.125
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BB
Issuer Credit Rating (S&P/Fitch) BB / BB
Seniority Senior Unsecured
Issue Size SGD 200,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
102.235INDICATIVE BID PRICE
101.796ASK YIELD TO WORST
4.421%BID YIELD TO WORST
4.767%
AVAILABLE ON BOND EXPRESS
Logan Property Holdings Company Limited
Background¡ Logan Property Holdings Company Limited (“Logan Property”)
is a Chinese property developer founded in 1996. The company
is publicly listed in Hong Kong with a market capitalization of
HKD66.4 billion as at 11 Dec 19.
¡ The company focuses on residential property development in
China, mainly in the Guangdong-Hong Kong-Macao Greater Bay
Area (“GBA”), and has a total land bank of 35.9m square meters
(as of end-June).
¡ Logan Property is rated ‘BB’ by S&P and Fitch and ‘Ba3’ by
Moody’s. Moody’s has a positive outlook on the issuer, while S&P
and Fitch have stable outlooks on their ratings.
Credit HighlightsLogan Property reported strong growth in 1H19, with revenue up
78% YoY to RMB27.0 billion (1H18: RMB15.1 billion). Gross profit
increased 67% YoY to RMB9.4 billion, which translated to a high
gross profit margin of 35%.
Logan Property became the top Shenzhen developer in sales last
year. Contracted sales increased 28% YoY to RMB45.3 billion in
1H19, driven mainly by developments in the GBA. In the first six
months of this year, the company achieved 53% of its 2019 sales
target of RMB85 billion. Contracted sales are a key indicator of
future revenue, suggesting that Logan Property may continue to
report higher top-line growth, which is not unlikely considering the
company’s strong track record of sales execution and reputation
as a fast-growing residential property developer.
The company has ample cash resources and a strong liquidity pro-
file. At the end of June 2019, Logan recorded RMB34.4 billion of
cash and cash equivalents, sufficient to cover its short-term debt
of RMB11.1 billion. Free cash flow more than doubled from ~RMB4.5
billion in 2018 to ~RMB10.4 billion in the trailing twelve months to
June, driven by significantly higher operating cash flows and low
capital spending.
The group’s credit profile remained healthy as its interest cover-
age and gearing ratios stayed nearly unchanged. Relative to its as-
sets, Logan has a modest amount of debt on its balance sheet. Its
gearing ratio, defined as total debt as a percentage of total assets,
maintained at 34% in 1H18 and 1H19.
Logan Property’s ability to pay its interest expense, represented
as earnings before interest and taxes over interest expense, fell
slightly from 4.8x to 4.5x in the same period. In our view, the de-
cline is insubstantial as the company’s interest coverage is close to
its 2017 level of 4.6x. We think Logan is able to keep a stable credit
profile moving forward with its continued revenue momentum and
liquidity.
RecommendationThe LOGPH 6.125% 16Apr2021 Corp (SGD) offers some of the
best value in the SGD-denominated property developer credit
sector. The bond matures in less than 1.5 years but is callable at
a redemption price of 103.063 on or after 16 Apr 20. At their ask
YTM of 4.42%, we think the LOGPH 6.125% ‘21s are attractive
compared to other SGD high-yield alternatives in the property
sector, given Logan’s large operating scale and high earnings
visibility.
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Background¡ Manulife Financial Corporation (“MFC”) is a Canadian insurer
with an operating history of over 100 years.
¡A constituent member of the S&P/TSX 60 Index with a huge
market capitalisation of CAD49.6 billion.
¡ Well diversified by geography, products, and distribution chan-
nels, MFC has more than 34,000 employees serving almost 28
million customers worldwide.
¡ MFC has CAD1.2 trillion of assets under management and ad-
ministration as of 3Q19.
¡ MFC is rated ‘A’ and ‘A-’ by S&P and Fitch respectively. Its main
operating entity, The Manufacturers Life Insurance Company
(“MLI”), has financial strength rating of ‘AA-’, ‘A1’, and ‘AA-’ by
S&P, Moody’s, and Fitch respectively.
Credit HighlightsMFC’s results in 3Q19 were overall steady and the group continued
to achieve a strong set of capital ratios. Core earnings fell 2% YoY
to CAD1.5 billion in 3Q19, as lower new business volumes in Ja-
pan and earnings impact from actions taken to improve the capital
efficiency of legacy businesses overshadowed business growth in
Asia. Core return on equity therefore contracted slightly to 13.0%
from 14.8% in 3Q18.
Meanwhile, MFC’s expense efficiency ratio inched slightly upwards
to 51.4% in 3Q19 (3Q18: 49.5%). Per MFC, the group is on track to
deliver expense efficiencies of CAD700m pre-tax in 2019 and tar-
gets to improve its efficiency ratio to below 50% by 2022.
The group has a solid set of capital ratios and exhibits strong capi-
tal management. Its main operating company, MLI, reported a Life
Insurance Capital Adequacy Test (“LICAT”) ratio of 146% in 3Q19,
up from 144% in 2Q19. The stronger LICAT at MLI was primarily
driven by favourable impact from lower risk-free rates and capital
initiatives.
MFC’s LICAT ratio similarly improved to 136% from 133% over the
same period. Both reported LICAT ratios sit well above Canada’s
regulatory minimum requirement of 90%, and indicate that MFC
has sufficient cushion to pay off liabilities after meeting its obli-
gations to policyholders. The company also reported a better fi-
nancial leverage ratio of 26.1%, down from 26.4% in the previous
quarter. The positive impact of earnings and higher values of avail-
able-for-sale securities, partially offset by the impact of dividend
payments and the net impact from share buybacks and dividend
reinvestment programs, contributed to the improvement in finan-
cial leverage ratio.
MFC maintains a high quality investment portfolio to ensure the
sustainability of its investment income. It manages a diversified
asset portfolio of CAD380.1 billion that mainly comprises of various
types of fixed income instruments, alternative long-duration
assets, and public equities. More than 84% of the portfolio are
fixed income securities, of which 98% are investment-grade
holdings.
RecommendationIn view of MFC’s strong credit profile, we recommend the MFCCN
3.850% 25May2026 Corp (SGD) (first call date: 25 May 21). The
bonds are indicating at an ask YTW of 2.32%, representing spreads
of 80bps over SGD swaps. They are rated ‘A-’ and ‘BBB+’ by S&P
and Fitch respectively, and offer attractive yields relative to MFC’s
solid capital position and strong investment-grade issuer profile.
Manulife Financial Corporation
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MFCCN 3.850% 25May2026 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Manulife Financial Corporation
Guarantor -
Maturity Date 25-May-2026
Next Call Date 25-May-2021
Years to Maturity (approx.) 6.458
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 3.850
Bond Sub Sector Insurance
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) A- / BBB+
Issuer Credit Rating (S&P/Fitch) A / A
Seniority Subordinated
Issue Size SGD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.158INDICATIVE BID PRICE
101.945ASK YIELD TO WORST
2.319%BID YIELD TO WORST
2.468%
AVAILABLE ON BOND EXPRESS
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Background¡ MCT is a SGX-listed REIT (market cap: S$7.7 billion as at 11 Dec
19) that holds a portfolio of income-producing real estate in Sin-
gapore across the retail, office, and business park segments.
The REIT owned five properties as at September, with a total
appraised value of S$7.35 billion.
¡ The sponsor, Mapletree Investments Pte Ltd (“MIPL”), is a
leading real estate firm headquartered in Singapore and 100%
owned by Temasek Holdings (Private) Limited. Mostly through
its ownership of MIPL, Temasek has a deemed interest of 33.18%
in MCT as at 29 Nov 19.
Credit HighlightsMCT continued to deliver steady results in the six months ended
September (“1HFY20”), driven by higher contributions from all
properties except Mapletree Anson. Total revenue and net property
income (“NPI”) were up 2.6% YoY and 2.2% YoY at S$224.2m and
S$176.1m.
Robust performance at MCT’s flagship property, VivoCity, was
the main growth driver. Following the progressive opening of
new stores including NTUC FairPrice, VivoCity’s revenue and NPI
increased 5.1% YoY and 4.5% YoY to S$103.6m and S$83.3m
respectively in 1HFY20. This was partly offset by weaker results
at Mapletree Anson, which recorded a slide of 14.3% YoY in NPI to
S$11.4m. Results from Mapletree Anson should gradually recover
in the quarters ahead, given that its committed occupancy of
99.0% was much higher than the actual occupancy rate of 75.1%.
Finance expenses increased 3.0% YoY to S$35.6m in 1HFY20
(1HFY19: S$34.6m), in line with slightly higher weighted average
borrowing cost of 3.00% as at 2QFY20 (2QFY19: 2.93%) and
total debt outstanding over 1HFY20 versus previous year’s
corresponding period. Nonetheless, MCT’s steady earnings
performance helped to maintain its EBIT (excluding fair value gains
on investment properties) over finance expenses at a healthy 4.5x
(1HFY19: 4.5x). Other credit metrics were also healthy, with the
reported gearing ratio declining from 33.1% to 31.7% in the six
months ended September, mostly due to the increase in property
values to S$7.35 billion (31 Mar 19: S$7.04 billion).
In September, MCT announced the acquisition of Mapletree
Business City (Phase 2) from MIPL at an agreed property value
of S$1.55 billion. To finance the deal, which was completed in
November, the REIT undertook an equity fund raising exercise
that raised approximately S$918.5m. We view the acquisition as
credit positive, as it will improve significantly MCT’s earnings and
asset diversification, and NPI is expected to grow 22.2%, while we
estimate that its gearing ratio would increase to just 33.6%.
RecommendationMCT’s (Moody’s: Baa1) bonds look mostly fairly priced relative
to other investment-grade REIT credits such as CapitaLand
Commercial Trust (S&P: BBB+; Moody’s: Baa2) and CapitaLand
Mall Trust (Moody’s: A2), providing reasonable value. Within the
MCTSP curve, we continue to prefer notes in the intermediate
range of duration, including the MCTSP 3.250% 03Feb2023
Corp (SGD) (YTM: 2.42%) and MCTSP 3.280% 23Sep2024 Corp
(SGD) (YTM: 2.58%). As a reference, CCT’s CCTSP 2.77% ‘22s and
CMT’s CAPITA 3.48% ‘24s are indicating at ask YTMs of 2.32%
and 2.44% respectively.
Mapletree Commercial Trust (“MCT”)
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DATA AS AT 11-DEC-19MCTSP 3.280% 23Sep2024 Corp (SGD)
Bond Information
Issuer Mapletree Commercial Trust
Treasury Co Private Limited
Guarantor Mapletree Commercial Trust
Maturity Date 23-Sep-2024
Next Call Date -
Years to Maturity (approx.) 4.789
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.280
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 120,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.120INDICATIVE BID PRICE
102.854ASK YIELD TO WORST
2.580%BID YIELD TO WORST
2.639%
DATA AS AT 11-DEC-19MCTSP 3.250% 03Feb2023 Corp (SGD)
Bond Information
Issuer Mapletree Commercial Trust
Treasury Co Private Limited
Guarantor Mapletree Commercial Trust
Maturity Date 03-Feb-2023
Next Call Date -
Years to Maturity (approx.) 3.151
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.486INDICATIVE BID PRICE
102.251ASK YIELD TO WORST
2.421%BID YIELD TO WORST
2.498%
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Background¡ Mapletree Industrial Trust (“MIT”) is a real estate investment
trust (“REIT”) that invests in a portfolio of industrial real estate,
data centres, and other real-estate related assets.
¡ As at 30 Sep 19, the REIT’s property portfolio was made up of
87 industrial properties in Singapore and 14 US-based data cen-
tres, and its total assets under management were S$4.8 billion.
The portfolio stretched across five different property types in-
cluding flatted factories, stack-up buildings, hi-tech buildings,
light industrial buildings, and business park buildings.
¡ The trust is sponsored and majority owned by Mapletree Invest-
ments Pte Ltd (“MIPL”), which has a 32% stake in MIT (as of
May 2019). MIPL is in turn indirectly wholly owned by Temasek
Holdings.
¡ Fitch Ratings has assigned an investment-grade credit rating of
‘BBB+’ to MIT.
Credit HighlightsIn its second financial quarter ended 30 Sep 19 (“2QFY20”), MIT’s
net property income grew 13.3% YoY to S$80m on the back of a
10.5% YoY gain in revenue. This was due to higher occupancies
in the business park buildings, flatted factories, and 30A Kallang
Place. Borrowing costs were 10.0% higher than the corresponding
quarter last year due to the recognition of interest cost in relation
to 7 Tai Seng Drive. In spite of higher borrowing costs, MIT recorded
a net profit of S$64m for the quarter, up 13.8% from 2QFY19.
After the increase in net property income, MIT’s interest coverage
ratio climbed to 6.6x in 2QFY20 from 6.4x in 2QFY19. According
to the REIT, the weighted average all-in funding cost also dropped
to 2.9% from 3.0% over the same period.
Occupancy rates in the portfolio were excellent as they exceeded
the 90% level as at 2QFY20. The occupancy rate among US data
centre especially, stayed at 97.4%. Additionally, the REIT has a
diversified tenant base across various trade sectors, and no single
trade sector accounted for more than 21% of gross rental income.
There is also a healthy tenant retention rate in the REIT as 64.5%
of the tenants have leased the properties for more than 4 years.
The retention rates varied across different building types. Hi-
tech and light industrial buildings had a retention rate of 100% in
2QFY20, exceeding the 80% average for the portfolio.
MIT’s leverage profile improved in the recent quarter as the
aggregate leverage ratio, which included the proportionate share
of borrowings of joint ventures and deposited property values, fell
to 29.2% in 2QFY20 from 35.1% in 2QFY19. During the quarter,
MIT repaid some of its borrowings with proceeds from its equity
fund raising exercise. The amount of outstanding debt position
decreased to S$1.25 billion with a weighted average debt tenor of
4.2 years.
RecommendationWe like the MINTSP 3.020% 11May2023 Corp (SGD) as it offers
one of the better value among other SGD notes due 2023. The
bond is reasonably priced at its YTM of 2.44% for an approximate
3.4-year tenor. As a pricing reference, Ascendas REIT’s AREIT
2.47% ‘23s are yielding 2.38%. Investors looking for longer-dated
bonds may also consider the MINTSP 3.160% 28Mar2024 Corp
(SGD) (YTM: 2.60%).
Mapletree Industrial Trust
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MINTSP 3.020% 11May2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree Industrial Trust Treasury
Co Private Limited
Guarantor Mapletree Industrial Trust
Maturity Date 11-May-2023
Next Call Date -
Years to Maturity (approx.) 3.416
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.020
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB+
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 75,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.894INDICATIVE BID PRICE
101.600ASK YIELD TO WORST
2.436%BID YIELD TO WORST
2.525%
MINTSP 3.160% 28Mar2024 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree Industrial Trust Treasury
Co Private Limited
Guarantor Mapletree Industrial Trust
Maturity Date 28-Mar-2024
Next Call Date -
Years to Maturity (approx.) 4.299
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.160
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB+
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.269INDICATIVE BID PRICE
102.078ASK YIELD TO WORST
2.596%BID YIELD TO WORST
2.643%
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Background¡ Mapletree Logistics Trust (“MLT”) is a SGX-listed real estate in-
vestment trust (“REIT”) with a portfolio of income-producing
Asian logistics properties. The company was publicly listed in
2005 with an initial portfolio of 15 Singapore properties.
¡ Since then, the REIT has expanded its portfolio to 137 proper-
ties with S$8.0 billion of assets under management. Among its
real estate assets, the REIT has 52 properties that are located
in Singapore, 20 in China, 16 in Japan, 14 in Malaysia and 12 in
South Korea.
¡ The REIT’s sponsor is Mapletree Investments Pte Ltd (“MIPL”),
an indirect wholly-owned subsidiary of Temasek Holdings (Pri-
vate) Limited. MIPL held a deemed interest of ~32% in MLT as
at 31 May 19.
¡ MLT was rated Baa2 by Moody’s Investors Service with a stable
outlook on the credit rating.
Credit HighlightsIn the second financial quarter ended September (“2QFY20”),
MLT’s gross revenue and net property income staged strong
double-digit gains, having increased by 14% YoY and 21% YoY to
S$122m and S$109m respectively. This was largely attributed to
greater contributions from the Hong Kong portfolio and completed
developments in China. Property expenses declined on the
recognition of lower land rent (due to the adoption of SFRS(I) 16)
and portfolio divestments, while borrowing costs increased 26%
YoY to S$21m.
The management was somewhat cautious about the outlook for its
exposures in Singapore and Hong Kong as customers are cautious
and slower to commit to long leases. In view of the uncertain
economic outlook, the REIT’s manager will proactively manage the
portfolio. On that note, the REIT has hedged 83% of its total debt
into fixed-rate payments, while also hedging 80% of its property
income for the next 12 months into SGD.
MLT’s portfolio occupancy had maintained at a high level of 97.5%
in 2QFY20, nearly at the same level of 97.6% a year ago. The
average rental reversion reached 1.8% in the second financial
quarter, up from 1.3% in 2QFY19. In addition, the weighted average
lease expiry of the portfolio increased to 4.6 years in September,
up from 3.8 years in 2QFY19.
The REIT’s credit profile improved as its aggregate leverage ratio
dropped from 38.1% a year ago to 37.0% in 2QFY20. On the other
hand, MLT’s average debt duration declined from 4.3 years to 3.7
years, and its reported interest cover ratio, defined as EBITDA over
interest expense, fell marginally from 5.1x to 5.0x over the same
period.
RecommendationWe like the MLTSP 4.180% Perpetual Corp (SGD) (ask YTW:
3.31%) and MLTSP 3.650% Perpetual Corp (SGD) (ask YTW:
3.39%) as they offer decent value in the SGD REIT credit sector.
As a reference, Ascott Residence Trust’s (Fitch issuer rating: BBB)
ARTSP 3.88% perp, which has a longer first call date of September
2024, is indicating at an ask YTW of 3.54%. The MLTSP 4.18%
perp and MLTSP 3.65% perp are first callable in November 2021
and March 2023 respectively.
Mapletree Logistics Trust
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MLTSP 4.180% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree Logistics Trust
Guarantor -
Maturity Date Perpetual
Next Call Date 25-Nov-2021
Years to Next Call (Approx.) 1.959
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.180
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Junior Subordinated
Issue Size SGD 250,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.619INDICATIVE BID PRICE
101.417ASK YIELD TO WORST
3.313%BID YIELD TO WORST
3.420%
Reset Date : 28 Mar 2023 and every 5 years thereafterReset Rate : Prevailing SGD 5Y SOR + the Initial Spread (1.815%)
Reference Rate
MLTSP 3.650% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree Logistics Trust
Guarantor -
Maturity Date Perpetual
Next Call Date 28-Mar-2023
Years to Next Call (Approx.) 3.296
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 3.650
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 180,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.446INDICATIVE BID PRICE
100.077ASK YIELD TO WORST
3.387%BID YIELD TO WORST
3.400%
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Background¡ Hong Kong-centric retail and office REIT with a portfolio of
prime property developments in HK, China, and Japan.
¡ Fourth REIT sponsored by Mapletree Investments Pte Ltd, which
fully owns the REIT Manager, Mapletree North Asia Commercial
Trust Management Ltd.
¡ Festival Walk is the REIT’s flagship property in Hong Kong, ac-
counting for slightly more than 60% of total revenue. Other key
property assets include Gateway Plaza in Beijing and Sandhill
Plaza in Shanghai.
Credit HighlightsFor 1H FY19/20, Mapletree North Asia Commercial Trust (‘MNACT’)
saw its gross revenue increase 5.7% YoY to S$210.4m, while net
property income rose 5.8% YoY to reach S$169.8m. Accordingly,
the REIT saw its distributable income grow 5.3% YoY to S$123.8m.
MNACT’s robust results were underpinned by high occupancy
rates across its properties, integration of revenue from its recently
acquired Japan properties and the continued strength of the Hong
Kong dollar against the Singapore dollar. As the bulk of MNACT’s
revenue is derived from Festival Walk in Hong Kong, much of the
REIT’s revenue is in HKD.
For the quarter ended September, MNACT reported an interest
coverage ratio of 4.2x, down slightly from the 4.3x posted in March
2019. Interest coverage ratio is defined as profit before income
tax not taking into account net finance costs, foreign exchange
differences, depreciation and changes in fair value of derivatives
and investment properties, and over net finance costs.
The average term to maturity for debt was 3.21 years, versus 3.70
years recorded in March this year. The proportion of debt with fixed
interest costs was 89%, compared to 86% reported in March 2019.
MNACT’s cornerstone property is Festival Walk in Hong Kong, from
which the REIT derives more than 60% of its revenue. At the end
of the quarter ended September 2019, Festival Walk recorded an
occupancy rate of 100% and achieved positive rental reversions of
12% and 6% for its retail and office components.
Festival Walk sustained extensive damage in November after anti-
government protestors went on a rampage in the mall, as violent
protests roiled the city. Glass panels on various levels of the mall
were smashed, while the property’s Christmas tree was set ablaze.
The extensive damage prompted the mall’s management to close
the property to evaluate the damage caused.
In so far as MNACT’s credit quality is concerned, we see little cause
for disquiet. Festival Walk is covered by insurance for damages and
loss of income. Furthermore, most of its rental income revenue
comes from base rent. Turnover rent accounts for less than 5% of
its total revenue.
RecommendationAmong MNACT’s outstanding bonds, we favour its near-term
issues: the MAGIC 3.200% 08Sep2021 Corp (SGD) and the
MAGIC 3.430% 09Mar2022 Corp (SGD); these issues yield
2.30% and 2.31% respectively. While there are other issues that
trade further out on the curve, the nearer term notes offer better
value in terms of yield at this current juncture.
Mapletree North Asia Commercial Trust
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MAGIC 3.200% 08Sep2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree North Asia Commercial
Treasury Co HKSAR Limited
Guarantor Mapletree North Asia Commercial
Trust
Maturity Date 08-Sep-2021
Next Call Date -
Years to Maturity (approx.) 1.745
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.200
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 75,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.510INDICATIVE BID PRICE
101.263ASK YIELD TO WORST
2.303%BID YIELD TO WORST
2.448%
MAGIC 3.430% 09Mar2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Mapletree North Asia Commercial
Treasury Co HKSAR Limited
Guarantor Mapletree North Asia Commercial
Trust
Maturity Date 09-Mar-2022
Next Call Date -
Years to Maturity (approx.) 2.244
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.430
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.426INDICATIVE BID PRICE
102.194ASK YIELD TO WORST
2.305%BID YIELD TO WORST
2.411%
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CMA CGM S.A. (Parent of Neptune Orient Lines)
Background¡ Neptune Orient Lines Limited (“NOL”) is a container shipping
company headquartered in Singapore. Operating primarily
through the APL brand, NOL offers container transportation
services in the world’s major trade lanes.
¡ CMA CGM—the fourth largest container liner globally by capaci-
ty—acquired the company in 2016.
¡ As a private subsidiary, APL/NOL’s publicly available financial
results are limited. We will therefore refer primarily to CMA
CGM’s financials as a proxy for NOL’s performance.
Credit HighlightsCMA CGM’s operating performance improved in the nine months
ended September, with strong top-line growth of 32.3% YoY to
USD 22.73 billion. The acquisition of CEVA contributed the bulk of
the revenue growth. Excluding the transaction, a 5.3% YoY growth
in shipping volumes pushed revenue higher by 2.5% YoY.
Profitability was also gradually recovering, with adjusted EBITDA
jumping 245% YoY to USD 2.74 billion in 9M19. Adjusting for the
CEVA acquisition and impact from IFRS 16 implementation, adjust-
ed EBITDA was up 18% YoY at USD 939.4m. As a result, the adjust-
ed EBITDA margin for shipping activity (excluding IFRS 16 impact)
climbed from 4.7% in 9M18 to 5.3% in 9M19. The management
attributed the improved operational performance to their cost cut-
ting program, which had already achieved 73% completion.
CMA CGM’s total borrowings stood at USD 19.71 billion as at
end-September. Financial liquidity seemed to have tightened, with
short-term borrowings of USD 4.14 billion against just USD 1.35
billion of group liquidity (USD 1.27 billion of available cash and USD
86.3m of undrawn committed credit facilities.
However, CMA CGM has shared a detailed disposal and liquidity
enhancement plan, which should raise USD 2.08 billion of liquidity,
extend the group’s debt maturity profile, and reduce its net debt by
more than USD 900m. Under the plan, CMA CGM undertook ves-
sel sale and leaseback (“S&LB”) transactions totaling USD 860m,
with USD 550m already completed as of September. CMA CGM
also revealed that it was in the process of selling ten port termi-
nals to Terminal Link, a 51:49 joint venture between the group and
China Merchant Ports, for USD 968m.
Putting aside USD 1.86 billion of lease liabilities and USD 141.6m of
securitized loans, which we assume would be essentially covered
by operating cash flow, CMA CGM had around USD 2.14 billion of
refinancing needs in the upcoming year. The firm had disclosed its
refinancing and repayment plans for its near-term debt maturities.
Essentially, CMA CGM had planned to repay USD 757m of its 2020
maturities, including the S$280m NOLSP 4.65% notes, and refi-
nance or roll over the remaining maturities.
RecommendationWith the immediate enhancement of liquidity expected from the
disposal and refinancing transactions, we continue to like the
NOLSP 4.650% 09Sep2020 Corp (SGD) (ask YTM: 11.2%). The
NOLSP 4.400% 22Jun2021 Corp (SGD) also looks interesting
with its YTM of 15.9%, though investors should bear in mind
headwinds facing the container shipping industry—new sulfur-cap
regulations, slowing global growth, and trade tensions.
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NOLSP 4.400% 22Jun2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Neptune Orient Lines Limited/
Singapore
Guarantor -
Maturity Date 22-Jun-2021
Next Call Date -
Years to Maturity (Approx.) 1.532
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.400
Bond Sub Sector Marine
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 300,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
85.066INDICATIVE BID PRICE
81.729ASK YIELD TO WORST
15.872%BID YIELD TO WORST
19.697%
NOLSP 4.650% 09Sep2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Neptune Orient Lines Limited/
Singapore
Guarantor -
Maturity Date 09-Sep-2020
Next Call Date -
Years to Maturity (Approx.) 0.748
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.650
Bond Sub Sector Marine
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 280,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
95.678INDICATIVE BID PRICE
94.428ASK YIELD TO WORST
11.234%BID YIELD TO WORST
13.258%
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Background¡ A real estate developer and landlord with a portfolio comprising
of mainly hotel, commercial, and retail properties, located most-
ly in Singapore.
¡ Listed on the SGX with a market capitalisation of S$1.5 billion.
¡ OUE held an equity stake of ~48% in OUE Commercial REIT
(“OUE C-REIT”) subsequent to the latter’s merger with OUE
Hospitality Trust (“OUE-HT”).
¡ The Riady family and Mr Kin Chan (chairman of TIH Limited)
are majority shareholders of OUE, together controlling about
68.6% of the company’s shares.
Credit HighlightsIn 3Q19, OUE’s revenue was up 54.1% YoY to S$282.5m, mainly
led by growth in the development properties division. The segment
recorded S$133.9m of revenue during the quarter (+207% YoY),
with most of the increase coming from the sale of the property
development at 26A Nassim Road, which was disposed for S$95m
to OUE’s Executive Chairman Dr Stephen Riady.
During the quarter, OUE recorded S$81.7m of share of results of
equity-accounted investees, up significantly from S$9.8m in 3Q18.
The increase was mainly due to inclusion of contribution from
Gemdale Properties and Investment Corporation Limited. During
the year, OUE acquired additional equity interest in Gemdale to
bring its stake up to 27.9%. Thanks to the profit contribution from
Gemdale, OUE’s operating profit surged 59.7% YoY to S$90.4m.
OUE reported a one-off item of S$75.4m in other gains from de-
recognition of right-of-use assets and lease liabilities during the
quarter, which were related to merger effects from the merger
between OUE-HT and OUE C-REIT. This non-cash item sent profit
before tax significantly higher to S$143.6m (3Q18: S$12.7m).
We estimated adjusted EBIT (excluding other gains/losses) at
S$97.8m in 3Q19, which covered about 2.5x of interest expenses,
improved from 1.7x in 3Q18 and despite finance costs climbing
11.4% YoY to S$39.3m. The increase in finance costs were, however,
due to the adoption of accounting standards that required the
recognition of amortisation of lease liabilities as finance expenses,
and borrowing costs actually fell 5.7% YoY to S$33.1m.
OUE’s net debt over equity rose to 0.65x in 3Q19 (4Q18: 0.60x).
Out of OUE’s total borrowings of S$4.21 billion (4Q18: S$3.50
billion), S$989.4m would come due within the next twelve months.
Liquidity seemed tight if we compared the short-term obligations
with cash balance of S$262.0m.
Increased debt load aside, we are still comfortable with OUE’s
liquidity position given expected cash receipts from the fully-sold
OUE Twin Peaks in the near future (book value of development
properties was S$206m in 3Q19). OUE could also receive potential
liquidity boost from its planned sale of US Bank Tower (4Q18
valuation: S$893.6m), as well as proceeds from the disposal
of serviced apartments at OUE Downtown for an aggregate
consideration of S$289m (completed in November).
RecommendationWithin the OUE curve, we like the OUESP 3.750% 17Apr2022
Corp (SGD) that is currently indicating at an ask YTM of 3.24%.
The OUESP 3.550% 10May2023 Corp (SGD) (YTM: 3.38%) offers
a decent yield pick-up of ~14bps against the shorter-dated OUESP
3.75% ’22s, which we think is a fair compensation for its ~1 year
longer tenure.
OUE Limited
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OUESP 3.750% 17Apr2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer OUE Treasury Private Limited
Guarantor OUE Limited
Maturity Date 17-Apr-2022
Next Call Date -
Years to Maturity (approx.) 2.351
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.750
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 200,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.131INDICATIVE BID PRICE
100.812ASK YIELD TO WORST
3.241%BID YIELD TO WORST
3.384%
OUESP 3.550% 10May2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer OUE Treasury Private Limited
Guarantor OUE Limited
Maturity Date 10-May-2023
Next Call Date -
Years to Maturity (approx.) 3.414
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.550
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 200,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.552INDICATIVE BID PRICE
100.219ASK YIELD TO WORST
3.376%BID YIELD TO WORST
3.480%
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OHLSP 5.150% 18May2020 Corp (SGD) - Retail
Bond Information
DATA AS AT 11-DEC-19
Issuer Oxley MTN Private Limited
Guarantor Oxley Holdings Limited
Maturity Date 18-May-2020
Next Call Date -
Years to Maturity (Approx.) 0.436
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 5.150
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 1,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
101.649INDICATIVE BID PRICE
100.647ASK YIELD TO WORST
1.295%BID YIELD TO WORST
3.610%
Oxley Holdings Limited
Background¡ Oxley Holdings Limited (“Oxley”) is an international property
developer that has launched a portfolio of 38 projects since its
incorporation in 2010.
¡ Oxley is listed on the Singapore stock exchange with a market
cap of S$1.48 billion (as at 11 Dec 19). The firm owns the Novotel
and Mercure hotels on Stevens Road, Singapore, and an approx-
imate 10% interest in Aspen (Group) Holdings Limited.
Credit HighlightsOxley’s revenue in the first financial quarter ended September
(“1QFY20”) grew 66% YoY to S$283m (1QFY19: S$170m), mainly
due to higher revenue contribution from developments in Singa-
pore and the Royal Wharf project in the UK. Financing costs in-
creased 21% YoY primarily due to increased borrowings to finance
the group’s Singapore development projects, advances to joint
ventures, and additions to an investment property.
Profit before tax (“PBT”) nearly quintupled to S$18m in 1QFY20
from S$3.6m in 1QFY19. However, we noted that PBT included
S$33m of “other gains”, which mainly related to a revaluation gain
of an investment property in Cambodia and mark-to-market net
gains in derivative financial instruments.
Nonetheless, we think Oxley has a decent earnings profile in view
of the company’s healthy sales progress in its development pro-
jects. Since 2018, 66% of Oxley’s residential units in Singapore,
which constituted more than half of the total gross development
value (“GDV”) of the company’s Singapore projects, had been sold.
The group’s development portfolio had a total estimated GDV of
S$23.5 billion as at 28 Oct 29, of which it had already secured
S$7.5 billion of sales. Its attributable unbilled contracts of S$2.3
billion provided substantial earnings visibility going forward.
Oxley’s net debt over equity remained elevated at 2.25x in 1QFY20,
albeit lower from 2.27x in FY2018. Furthermore, the developer’s
S$1.45 billion of short-term borrowings exceeded its cash balance
of S$449m at the end of September.
However, we think that Oxley will be able to meet its short-term
maturities and improve its credit metrics considerably in the near
future. The management has already laid out their debt repayment
plans until 2023, and made it clear that they intend to deleverage.
Recent actions taken provide high credibility in our opinion that
the firm is serious in cutting down its credit risk.
Oxley likely refinanced and extended the maturity of S$525m of in-
vestment property loan. Subsequent to 1QFY20, the group should
have collected proceeds from the sale of Dublin Landings Block
A4 and A5 together with the sale of its ~19% stake in United En-
gineers Limited. By the end of 2020, the firm should receive funds
from the sale of its Cambodian residential units and remaining
sales consideration from the sale of Chevron House.
RecommendationIn our view, Oxley bonds are attractively priced in the real estate
sector. We like the OHLSP 5.150% 18May2020 Corp (SGD) -
Retail (YTM: 1.30%), OHLSP 5.700% 31Jan2022 Corp (SGD)
(YTM: 6.54%), and OHLSP 6.375% 21Apr2021 Corp (USD) (YTM:
7.42%). Keeping in mind the company’s improved credit profile, we
think the OHLSP bonds still provide good risk-reward opportunities.
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OHLSP 5.700% 31Jan2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Oxley MTN Private Limited
Guarantor Oxley Holdings Limited
Maturity Date 31-Jan-2022
Next Call Date -
Years to Maturity (Approx.) 2.142
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 5.700
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
98.358INDICATIVE BID PRICE
96.548ASK YIELD TO WORST
6.535%BID YIELD TO WORST
7.481%
OHLSP 6.375% 21Apr2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Oxley MTN Private Limited
Guarantor Oxley Holdings Limited
Maturity Date 21-Apr-2021
Next Call Date -
Years to Maturity (Approx.) 1.362
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 6.375
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 355,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
98.680INDICATIVE BID PRICE
97.675ASK YIELD TO WORST
7.415%BID YIELD TO WORST
8.226%
AVAILABLE ON BOND EXPRESS
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PREHSP 4.550% 29Apr2020 Corp (SGD) - Retail
Bond Information
DATA AS AT 11-DEC-19
Issuer Perennial Real Estate Holdings
Limited
Guarantor -
Maturity Date 29-Apr-2020
Next Call Date -
Years to Maturity (Approx.) 0.384
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.550
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 1,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 280,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.439INDICATIVE BID PRICE
99.939ASK YIELD TO WORST
3.355%BID YIELD TO WORST
4.688%
Perennial Real Estate Holdings Limited
Background¡ Perennial Real Estate Holdings Limited (“Perennial”) is a health-
care and integrated real estate company. Its property portfolio
comprises of offices, retail spaces, and healthcare facilities that
are located in Singapore and China. Some of its iconic proper-
ties include the AXA Tower, CHIJMES, Capitol Singapore, and
TripleOne Somerset.
¡ Investments in associates and joint ventures constitute a signif-
icant part of the company’s portfolio (32% of total assets as of
end-September), including several healthcare and commercial
integrated developments connected to high-speed railway sta-
tions in China, and its eldercare and senior housing business
unit in China, Renshoutang.
¡ Perennial is sponsored by Kuok Khoon Hong, Ron Sim, Wilmar
International, and Pua Seck Guan, who collectively hold an ef-
fective ownership of 82.4% in the company (as of end-June).
Credit HighlightsPerennial’s revenue jumped 64.9% YoY to S$91.2m in the nine
months ended September (9M18: S$55.3m), mainly due to con-
tributions from Capitol Singapore (consolidated since May 2018)
and Perennial International Health and Medical Hub (“PIHMH”; of-
ficially opened in June 2018), as well as the sale of a unit in Eden
Residences. Excluding other income (mostly disposal and fair value
gains), we estimated that Perennial’s adjusted EBIT jumped 52.7%
YoY to S$46.9m (9M18: S$30.7m).
However, Perennial’s adjusted EBIT was still insufficient to cover
S$87.7m of net finance costs in 9M19 (9M18: S$58.6m). Net fi-
nance costs were significantly higher as Perennial incurred a high-
er weighted average interest rate of 4.0% (9M18: 3.8%), took on
additional loans to fund new investments, and started to expense
PIHMH’s interest expenses upon completion of the project.
Total borrowings increased 4.2% from S$2.94 billion to S$3.06
billion in the nine months ended September. The reported net
debt-to-equity ratio rose correspondingly from 0.72x to 0.77x over
the same period.
More worryingly, Perennial faced a refinancing wall of S$1.09
billion over the next year, while its cash was just S$99.6m as of
end-September. Although S$68m out of S$76m due in 4Q19 had
been refinanced, the company still had to tackle S$1.31 billion of
maturities in 2020, including S$560m of bonds.
Nonetheless, we believe management is focused on deleveraging
and refinancing short-term maturities. In October, Perennial fully
divested its 32.5% effective equity stake in Yanlord Investment
(Singapore) Pte Ltd for S$202.7m.
While the transaction is still insufficient to pay off near-term debt,
we take comfort that Perennial has taken constructive steps to ad-
dress its refinancing wall. The company has indicated the intention
to sell its 31.2% interest in AXA Tower, which should fetch a good
price given the buoyant office market in Singapore. Also, Perennial
should be able to monetize most of its S$3.3 billion of investment
properties if needed.
RecommendationGiven that Perennial has taken proactive actions to improve its
credit metrics, we continue to see value in the company’s bonds,
which offer relatively attractive yields in the SGD real estate
sector. The PREHSP 4.550% 29Apr2020 Corp (SGD) - Retail,
PREHSP 3.850% 03Jul2020 Corp (SGD), and PREHSP 3.900%
12Jan2021 Corp (SGD) are offering YTMs of 3.36% (based on
exchange price), 7.09%, and 8.87% respectively.
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PREHSP 3.900% 12Jan2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Perennial Real Estate Holdings
Limited
Guarantor -
Maturity Date 12-Jan-2021
Next Call Date -
Years to Maturity (Approx.) 1.090
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.900
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 120,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
95.187INDICATIVE BID PRICE
94.618ASK YIELD TO WORST
8.873%BID YIELD TO WORST
9.490%
PREHSP 3.850% 03Jul2020 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Perennial Treasury Private Limited
Guarantor Perennial Real Estate Holdings
Limited
Maturity Date 03-Jul-2020
Next Call Date -
Years to Maturity (Approx.) 0.562
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.850
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
98.357INDICATIVE BID PRICE
97.182ASK YIELD TO WORST
7.089%BID YIELD TO WORST
9.476%
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Background¡ Established in 1988, Ping An Insurance (Group) Company of
China, Ltd (“Ping An”) is one of the largest financial services
provider in China. Its businesses include insurance, banking,
healthcare, and asset management, conducted across a num-
ber of subsidiaries including Ping An Life, Ping An Property &
Casualty, and Ping An Bank.
¡ Ping An is listed in Hong Kong and Shanghai with a market capi-
talization of RMB1.7 trillion as of 13 Dec 19. The Financial Stabil-
ity Board and the International Association of Insurance Super-
visors have identified Ping An as one of the Global Systemically
Important Insurers.
Credit HighlightsPing An continued to deliver strong results in 2019 amid a
burgeoning insurance sector in China. Operating profit rose 21.0%
YoY to RMB116.0 billion in the nine months ended September, led
by a 30.5% YoY growth in the group’s core life and health insurance
business. During the period, Ping An adjusted its product portfolio
to shift its sales focus toward high-value, high-protection products.
Consequently, new business value (“NBV”) of the life and health
insurance business climbed 4.5% YoY to RMB58.8 billion, mainly
due to a 5.3 percentage-point improvement in the NBV margin to
48.1%.
Ping An’s property and casualty insurance business has a decent
capital buffer. The division’s core solvency margin ratio improved
to 217.0% in 3Q19 from 201.5% in 4Q18. The strong capital buffer
suggests that Ping An has the financial strength to withstand the
cyclical nature of the property and casualty insurance business. In
addition, its life insurance business (Ping An Life), likewise reported
a higher core solvency margin ratio of 224.9% (4Q18: 212.2%).
Ping An’s investment income grew by almost three times to
RMB76.9 billion in 9M19 from RMB26.6 billion a year earlier. The
group achieved the strong result even as it strengthened asset and
risk management during the period, increasing allocation to tax-
exempt bonds and long-duration low-risk bonds. According to its
3Q19 results filing, the firm also narrowed the duration gap between
assets and liabilities for better asset/liability management.
Revenue from Ping An’s banking subsidiary grew 18.8% YoY
to RMB103.0 billion, supported by its retail transformation.
Meanwhile, Ping An Bank’s net profit rose 15.5% YoY to RMB23.6
billion, reflecting a higher net interest margin of 2.62% (9M18:
2.29%). The bank has a healthy capital position, with its core tier 1
capital adequacy ratio (“CAR”) and tier 1 CAR improving to 9.75%
(4Q18: 8.54%) and 10.54% (4Q18: 9.39%) respectively in 3Q19.
RecommendationWe like Ping An’s PINGLI 2.875% 19Jan2021 Corp (USD) (YTM:
2.62%) and PINGIN 4.375% 10Sep2023 Corp (USD) (YTM: 3.03%)
as they are reasonably priced against other insurance credits in
our view. For instance, Prudential PLC’s 6.75% Sep’23s and AIA’s
3.125% Mar’23s are yielding 2.33% and 2.43% respectively. The
yield pick-ups from Ping An’s aforementioned bonds represent
a good compensation for Ping An’s lack of a global scale credit
rating, which is mitigated by its strong capital position and large
operating scale.
Ping An Insurance (Group) Company of China, Limited
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PINGLI 2.875% 19Jan2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Ping An Life Insurance Co of China
Limited
Guarantor -
Maturity Date 19-Jan-2021
Next Call Date -
Years to Maturity (approx.) 1.110
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 2.875
Bond Sub Sector Insurance
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.269INDICATIVE BID PRICE
100.249ASK YIELD TO WORST
2.622%BID YIELD TO WORST
2.640%
PINGIN 4.375% 10Sep2023 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Vigorous Champion International
Limited
Guarantor China Ping An Insurance Overseas
Holdings Limited
Maturity Date 10-Sep-2023
Next Call Date -
Years to Maturity (approx.) 3.751
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.375
Bond Sub Sector Insurance
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size USD 500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.724INDICATIVE BID PRICE
104.623ASK YIELD TO WORST
3.025%BID YIELD TO WORST
3.053%
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CTRAIJ 4.850% 20Sep2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Ciputra Development Tbk PT
Guarantor -
Maturity Date 20-Sep-2021
Next Call Date -
Years to Maturity (Approx.) 1.778
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.850
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BB-
Issuer Credit Rating (S&P/Fitch) N.R / BB-
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.545INDICATIVE BID PRICE
99.908ASK YIELD TO WORST
4.521%BID YIELD TO WORST
4.901%
PT Ciputra Development Tbk
Background¡ PT Ciputra Development Tbk (“Ciputra”) is one of Indonesia’s
largest property developers by assets. The group has developed
over 75 projects in 33 cities across the country, with a majority
of its portfolio in the Greater Jakarta and Greater Surabaya re-
gions.
¡ With an overall land bank of 2,334 hectares, the group has suf-
ficient land to implement real estate developments for at least
another 15 years.
¡ Having survived the Asian Financial Crisis, the firm has accu-
mulated more than 30 years of experience in the Indonesian
property business.
Credit HighlightsIn the nine months till September 2019 (“9M19”), the group’s over-
all revenue was slightly lower than a year ago at IDR4.66 trillion.
Gross and operating profits also fell slightly to IDR2.26 trillion and
IDR1.13 trillion, although both gross profit and operating profit mar-
gins continued to remain high at 49% and 24% respectively.
Ciputra’s pre-sales declined from IDR5.15 trillion in 9M18 to
IDR4.15 trillion in 9M19. In spite of the drop in pre-sales, we think
the firm will recognise a greater proportion of recurring revenue
moving forward. Recurring revenue accounted for 30% of total
revenue in 9M19, up from 23% in full-year 2018. The developer’s
recurring revenue had improved from IDR1.28 trillion in 9M18 to
IDR1.38 trillion in 9M19 due to higher hospital patient volume and
new contribution from Tokopedia Care Tower. The three shopping
malls that are presently under construction, CitraRaya Tangerang,
CitraLand Surabaya and Ciputra World Surabaya should lift recur-
ring revenues in future.
In support of the group’s healthy liquidity profile, Ciputra’s cash
level of IDR3.24 trillion was more than sufficient to cover its short-
term maturities of IDR1.41 trillion. Total debt rose from IDR8.35
trillion to IDR8.91 trillion in the twelve months ended September,
although the debt-to-total capital ratio was stable at 34% in 3Q19
(3Q18: 34%). In addition, the group’s current assets have climbed
to a level more than twice that of its current liabilities at the end
of September.
Ciputra’s borrowing cost including capitalized interest had been
on a downtrend. In 2014, borrowing cost increased to 12.7%, but
had since declined over the last 5 years, falling to as low as 10.2%
at the end of 2018. Most borrowings were pegged to IDR floating
rates, while 21% of debt was denominated in Singapore dollar. Most
of these SGD borrowings comprised of the S$150m CTRAIJ 4.85%
‘21s, of which the principal Ciputra had hedged at IDR12,520/SGD.
RecommendationThe macro environment in Indonesia is favourably set as interest
rates could drop and interest rate-sensitive plays such as property
developers, could continue to outperform. Consequently, we see
value in Ciputra’s SGD bond. The CTRAIJ 4.850% 20Sep2021
Corp (SGD) had a yield to maturity of 4.52% as of 11 Dec 19. We
prefer the CTRAIJ 4.85% ’21 over bonds of Ciputra’s peers such as
Lippo Karawaci and Bumi Serpong, as the latter two issuers have
weaker credit quality in our opinion.
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Ronshine China Holdings Limited
Background¡ Ronshine was founded in 2003 in Fujian as a Chinese real estate
developer. The company is listed on the HKEX with a market
cap of about HKD 17.4 billion (as of 11 Dec 2019). It ranked 32nd
among all Chinese developers in terms of 1H19 contracted sales.
Credit HighlightsRonshine’s development projects are concentrated in first- and
second-tier cities. In 2018, Hangzhou (2nd tier) and Shanghai (1st
tier) contributed over 50% of the company’s total sales.
Ronshine also mainly develops high-end residential buildings. In
2018, the average selling price (“ASP”) of its sales reached RMB
21,672 per sqm. According to GuanDian data, only 12 of the top
100 developers in China managed to achieve the RMB 20,000/sqm
mark. Furthermore, 12 of the top developers recorded ASPs below
RMB 10,000/sqm, and have their projects distributed in third- to
fifth-tier cities.
In 1H19, Ronshine delivered mediocre sales performance. Attrib-
utable contracted sales were RMB 34.5 billion (1H18: RMB 38.9
billion), representing a 12.8% YoY drop. However, the company
bounced back recently, having achieved contracted sales of RMB
13.5 billion and RMB 15.0 billion in September (+83.2% YoY) and
October (+20.8% YoY) respectively.
In 1H19, Ronshine recorded a revenue of RMB 26.6 billion, up
86.3% YoY. The core profit attributable to shareholders was RMB
1.96 billion, representing a 26.0% YoY growth.
As of 30 Jun 19, the total book value (at cost) of land reserve at-
tributable to Ronshine was RMB 66.3 billion, and approximately
60% of the land bank was located in prime areas of first- and sec-
ond-tier cities. Ronshine’s land reserve was quite large relative to
the company’s operating scale, and we believe that the sizeable
land bank should help Ronshine to remain resilient under the cur-
rent contractionary funding environment.
As of June, the company was holding a cash balance of RMB 31.9
billion, which was 1.66x more than its short-term debt. The re-
ported net gearing ratio improved from 105% to 77% in the six
months ended June, primarily attributable to a private placement
of shares in April 2019 that raised ~RMB 1 billion. We believe that
Ronshine’s ability to meet its short-term financial obligations re-
mains adequate.
Ronshine’s financial discipline had been recognized by major rating
agencies. In 2019, Moody’s and S&P upgraded the company’s issu-
er ratings to ‘B1’ (from ‘B2’) and ‘B+’ (from ‘B’) respectively.
RecommendationThe valuation of Ronshine’s bonds seems fair to us when compared
to their peers in the B-to-BB- range. Taking into account Ronshine’s
recent deleveraging efforts, we think the RONXIN bonds are
offering attractive yields. Within the RONXIN curve, we would
recommend the RONXIN 8.250% 01Feb2021 Corp (USD) (YTM:
6.89%) and RONXIN 10.500% 01Mar2022 Corp (USD) (YTM:
7.49%).
RONXIN 10.500% 01Mar2022 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Ronshine China Holdings Limited
Guarantor Subsidiaries
Maturity Date 01-Mar-2022
Next Call Date -
Years to Maturity (Approx.) 2.222
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 10.500
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / BB-
Issuer Credit Rating (S&P/Fitch) B+ / BB-
Seniority Secured
Issue Size USD 500,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
105.998INDICATIVE BID PRICE
105.758ASK YIELD TO WORST
7.488%BID YIELD TO WORST
7.603%
AVAILABLE ON BOND EXPRESS
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RONXIN 8.250% 01Feb2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Ronshine China Holdings Limited
Guarantor Subsidiaries
Maturity Date 01-Feb-2021
Next Call Date -
Years to Maturity (Approx.) 1.145
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 8.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / BB-
Issuer Credit Rating (S&P/Fitch) B+ / BB-
Seniority First Lien
Issue Size USD 344,589,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
101.431INDICATIVE BID PRICE
101.064ASK YIELD TO WORST
6.891%BID YIELD TO WORST
7.233%
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Background¡ Sembcorp Industries Ltd (“SCI”) is a Singapore-based industrial
conglomerate with three main business segments namely ener-
gy, marine, and urban development.
¡ Listed on the SGX Mainboard and sported a market cap of S$4.0
billion.
¡ Temasek Holdings (Private) Limited is the company’s largest
shareholder with a shareholding of 49.5% (as at 31 Mar 19).
¡ Owns a 61% stake (as of March 2019) in SGX-listed Sembcorp
Marine Ltd, which operates the group’s offshore and marine en-
gineering business.
Credit HighlightsIn 9M19, SCI’s revenue fell 20.0% YoY to S$7.30 billion mainly due
to poor performance in the marine segment, which continued to
turn in operating loss (9M19: S$54m) as lower business volume
and loss upon the sale and delivery of certain rigs detracted from
performance. SCI is expecting the trend of losses in the marine
segment to continue into the fourth quarter, and for full-year loss-
es to be higher than last year.
Meanwhile, revenue from the energy segment fell 3% to S$4.81
billion. The energy segment remained as the group’s profit anchor,
reporting profit from operations (“PFO”) of S$687m, up 6% YoY.
The segment PFO was higher despite lower turnover, thanks to im-
provement in its operations in Myanmar, Bangladesh, China, and
India. The urban segment contributed S$31m of PFO, down 47%
from S$59m in 9M18 due to the absence of commercial and resi-
dential land sales in China.
Despite substantially lower revenue, SCI’s profit before tax was
overall steady at S$317m (-2% YoY), which from our observations
was primarily due to a 23% YoY decline in cost of sales. Report-
ed EBITDA excluding major non-cash items (e.g. fair value ad-
justments) was S$1.05 billion in 9M19 (9M18: S$854m). Although
reported EBITDA rose 22.0% YoY, finance costs also increased
24.0% YoY to S$440.0m. As a result, SCI’s interest coverage ratio
(EBITDA over finance costs) was flattish at 2.4x in 9M19 (9M18:
2.4x).
As at 30 Sep 19, SCI’s net debt over equity rose marginally to 1.14x
(4Q18: 1.11x), even though total debt was largely unchanged at
S$10.74 billion (4Q18: S$10.73 billion). A decrease in SCI’s cash bal-
ance from S$1.93 billion to S$1.70 billion in 9M19 led to the slight
deterioration in net gearing, as the company spent S$696m in cap-
ital expenditures related to property, plant, equipment, and invest-
ment properties. Treating the company’s perpetual securities as
debt, we find adjusted net gearing at 1.38x (4Q18: 1.35x).
RecommendationWe are positive on the SCISP 4.750% Perpetual Corp (SGD),
which is first callable on 20 May 20 and offers a YTW of 3.04%
(Z-spread: 147bps). The distribution reset date is 20 May 25 (and
every ten years thereafter), when the distribution rate will reset
to the sum of the prevailing ten-year SGD SOR and a reset spread
of 311 basis points. Even if we assume conservatively that SCI will
redeem the perps only in May 2025, we think the yield to reset of
4.65% provides a good compensation for the extension risk and
the perps’ subordinated ranking. Among SCI’s straight bonds, we
see value in the SCISP 4.250% 30Aug2025 Corp (SGD), which
offers a YTM of 3.17% (Z-spread: 160bps).
Sembcorp Industries Limited
SCISP 4.250% 30Aug2025 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Sembcorp Financial Services
Pte Limited
Guarantor Sembcorp Industries Limited
Maturity Date 30-Aug-2025
Next Call Date -
Years to Maturity (approx.) 5.723
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.250
Bond Sub Sector Industrial Conglomerates
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 100,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
105.593INDICATIVE BID PRICE
105.283ASK YIELD TO WORST
3.170%BID YIELD TO WORST
3.228%
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Reset Date: 20 May 2025 and every 10 years thereafter Reset Rate: Prevailing SGD 10Y SOR + Initial Spread (2.11%) + Step-Up Margin (100bps)
Reference Rate
SCISP 4.750% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Sembcorp Industries Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 20-May-2020
Years to Next Call (Approx.) 0.441
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.750
Bond Sub Sector Industrial Conglomerates
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 600,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.717INDICATIVE BID PRICE
100.631ASK YIELD TO WORST
3.044%BID YIELD TO WORST
3.248%
AVAILABLE ON BOND EXPRESS
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Background¡ Commenced operations since 1972, Singapore Airlines Limited
(“SIA”) is Singapore’s national carrier that serves 137 destina-
tions in 37 countries and territories.
¡ A constituent of the Straits Times Index, SIA has a market cap-
italisation of S$10.8 billion as at 13 Dec 19.
¡ Besides operating under its eponymous flagship carrier, SIA
also fully owns local aviation brands “SilkAir” and “Scoot”. It
also owns a 20.0% stake in Virgin Australia Holdings Limited
and 49.0% of both TATA SIA Airlines Limited (operates the In-
dian domestic airline, Vistara) and NokScoot Airlines Co., Ltd
(Thailand-based low-cost carrier).
¡ SIA’s biggest shareholder is Temasek Holdings (Private) Limit-
ed, which controls around 56% of the company’s shares.
Credit HighlightsSIA’s revenue in 1HFY20 increased 5.3% YoY to S$8.3 billion. Per
SIA, revenue increased on the back of strong growth in passenger
flown revenue, partially offset by a reduction in cargo flown reve-
nue. Meanwhile, total expenditure climbed at a higher pace of 5.8%
YoY to S$7.9 billion, primarily due to an expansion in non-fuel ex-
penditures. Operating profit margin therefore fell to 5.0% (1HFY19:
5.4%).
SIA continued to rely heavily on its anchor brand, Singapore Air-
lines, in 1HFY20. The parent airline company’s operating profit rose
11.2% YoY to S$465m, while SilkAir and Scoot reported larger op-
erating losses of S$19m and S$77m respectively. SilkAir continued
to be adversely affected by the global grounding of the Boeing 737
MAX 8 aircrafts, despite achieving passenger flown revenue growth
of S$4m (+0.9% YoY). Meanwhile, Scoot’s operating performance
was dragged down by weaker revenue per available seat-kilometre
(-2.1% YoY) and higher unit costs due to lower utilisation.
Nonetheless, SIA’s reported net profit was higher at S$226m
(+5.2% YoY), boosted by a reduction in share of losses from asso-
ciated companies (mostly from Virgin Australia) and higher share
of profits from joint venture companies. In 1HFY20, SIA’s reported
EBIT over interest expense was 3.5x. The current level of interest
coverage is still healthy in our opinion, although substantially low-
er than 6.1x in 1HFY19 following the adoption of IFRS 16 Leases.
Net debt (including lease liabilities) over equity increased from
51.5% in 1QFY20 to 61.2% in 2QFY20, as SIA spent S$2.78 billion
in capital expenditure (“capex”). The group is in the midst of a pe-
riod of elevated capex, with 159 outstanding aircraft deliveries and
a total of S$5.7 billion capex spending projected for FY20 (FY21:
S$6.0 billion). As such, we expect its net gearing to climb further
in the near-to-medium term.
RecommendationSIA’s status as Singapore’s flag carrier and the controlling stake of
~56% held by Temasek suggest a good likelihood of parental sup-
port in times of need. The link to Temasek also benefits SIA by pro-
viding it easier access to capital markets. Within the SIASP curve,
we see value in the SIASP 3.145% 08Apr2021 Corp (SGD), SIASP
3.160% 25Oct2023 Corp (SGD), SIASP 3.750% 08Apr2024
Corp (SGD), and SIASP 3.035% 11Apr2025 Corp (SGD). They are
indicating at ask YTMs of 2.29%, 2.47%, 2.52%, and 2.68% re-
spectively, offering fair term premiums along the curve.
Singapore Airlines Limited
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SIASP 3.160% 25Oct2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Singapore Airlines Limited
Guarantor -
Maturity Date 25-Oct-2023
Next Call Date -
Years to Maturity (approx.) 3.874
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.160
Bond Sub Sector Airlines
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 600,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.518INDICATIVE BID PRICE
102.345ASK YIELD TO WORST
2.471%BID YIELD TO WORST
2.518%
SIASP 3.145% 08Apr2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Singapore Airlines Limited
Guarantor -
Maturity Date 08-Apr-2021
Next Call Date -
Years to Maturity (approx.) 1.326
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.145
Bond Sub Sector Airlines
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 200,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.114INDICATIVE BID PRICE
101.042ASK YIELD TO WORST
2.288%BID YIELD TO WORST
2.344%
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SIASP 3.750% 08Apr2024 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Singapore Airlines Limited
Guarantor -
Maturity Date 08-Apr-2024
Next Call Date -
Years to Maturity (approx.) 4.329
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.750
Bond Sub Sector Airlines
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 300,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.985INDICATIVE BID PRICE
104.722ASK YIELD TO WORST
2.522%BID YIELD TO WORST
2.585%
SIASP 3.035% 11Apr2025 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Singapore Airlines Limited
Guarantor -
Maturity Date 11-Apr-2025
Next Call Date -
Years to Maturity (approx.) 5.337
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.035
Bond Sub Sector Airlines
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 700,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
101.753INDICATIVE BID PRICE
101.642ASK YIELD TO WORST
2.679%BID YIELD TO WORST
2.701%
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Background¡ Singapore Post Limited (“SingPost”) is the city-state’s national
postal service provider with over 160 years of history.
¡ An established provider of postal and logistics services in Singa-
pore and around the world.
¡ Listed on the SGX with market capitalization of approximately
S$2.07 billion.
¡ Major shareholders include Singapore Telecommunications Lim-
ited (22.0%) and Alibaba Group Holding Limited (14.6%).
Credit HighlightsFollowing a failed attempt to sell its ailing US e-commerce
businesses, SingPost announced in September that the group’s
US subsidiaries, Jagged Peak and TradeGlobal, filed voluntary
petitions for relief under Chapter 11 of the US Bankruptcy Code. The
US subsidiaries intend to pursue asset sales under the Chapter 11
proceedings. SingPost had substantially written down the carrying
value of its US businesses after taking impairments of S$185.0m
in FY17 (ended 31 March) and S$98.7m in FY19. As such, we expect
limited financial impact from the event.
After exiting the US market, SingPost had deconsolidated the
US subsidiaries starting in the financial quarter ended 30 Sep
19. Revenue of continuing operations increased 1.0% YoY to
S$645.6m in the six months ended September (“1HFY20”),
supported by the 2.9% YoY growth in post and parcel revenue.
Higher cross-border e-commerce deliveries contributed to the
post and parcel segment’s growth, which was partially offset by a
2.4% YoY decline in revenue from the logistics division.
Overall profit on operating activities fell by 16.5% YoY to S$81.0m
in 1HFY20, dragged down by a 14.9% decline in the post and
parcel segment’s operating profit. The management attributed the
slowdown to an accelerated decline in domestic business letter
volumes and the partial cessation of advertising mail volumes.
Meanwhile, the group incurred higher costs for initiatives to
improve service quality standards, including the hiring of additional
postmen and enhancement of their remuneration.
Finance expenses including distribution of perpetual securities
remained low at S$13.8m in 1HFY20, although somewhat higher
than the S$11.3m recorded in previous year’s corresponding period,
after the adoption of new accounting rules for the treatment of
leases. SingPost remained in a net cash position of S$39.3m as
of end-September (31 Mar 19: S$101.3m). Counting the company’s
lease liabilities and S$350m of 4.25% perpetual securities as
borrowings, we find its adjusted net debt over equity still healthy
at around 31%. SingPost’s financial flexibility remained ample with
its comfortable liquidity position and secured borrowings totaling
just S$10.2m, while investment properties amounted to S$1 billion.
Starting from December, SingPost adjusted some of its existing
products and services, and introduced two new postal service
categories—Basic Package and Tracked Package. The company
also raised its international airmail rates after having absorbed the
yearly increase in payment made to foreign postal operators since
2014. The adjustments should improve SingPost’s profitability
by transferring higher international postal settlement rates to
consumers.
RecommendationThe SPOST 4.250% Perpetual Corp (SGD) is ranked senior
unsecured and has a first call date of 2 Mar 22. At their YTW of
2.82%, we think the SPOST 4.25% perpetual notes offer a good
return for their ‘BBB’ issue rating.
Singapore Post Limited
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Reset Date: 02 Mar 2022 and every 10 years thereafter Reset Rate: Prevailing SGD 10Y SOR plus Initial Spread (2.192%) + Step-Up Margin (1.500%)
Reference Rate
SPOST 4.250% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Singapore Post Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 02-Mar-2022
Years to Next Call (Approx.) 2.225
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.250
Bond Sub Sector Air Freight and Logistics
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) BBB / N.R
Issuer Credit Rating (S&P/Fitch) BBB+ / N.R
Seniority Senior Unsecured
Issue Size SGD 350,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
103.042INDICATIVE BID PRICE
102.883ASK YIELD TO WORST
2.820%BID YIELD TO WORST
2.894%
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Reset Date: 27 Sep 2021 and every 3 years thereafter Reset Rate: Prevailing SGD 3Y SOR + Initial Spread (3.790%)
SBREIT 6.000% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Soilbuild Business Space REIT
Guarantor -
Maturity Date Perpetual
Next Call Date 27-Sep-2021
Years to Next Call (Approx.) 1.797
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 6.000
Bond Sub Sector Real Estate Investment Trusts
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 65,000,000
HIGH YIELD SEEKER
Reference Rate
INDICATIVE ASK PRICE
100.597INDICATIVE BID PRICE
99.223ASK YIELD TO WORST
5.423%BID YIELD TO WORST
5.538%
Soilbuild Business Space REIT
Background¡ Soilbuild Business Space REIT (“SB REIT”) is a real estate in-
vestment trust that invests in a portfolio of industrial properties
in Singapore and Australia. As at 11 Dec 19, it has a market capi-
talisation of S$656.0m.
¡ As at 30 Sep 19, SB REIT owns 13 properties with a total net let-
table area of 4.03m square feet and a portfolio value of S$1.26
billion.
¡ The trust is sponsored by Soilbuild Group Holdings Ltd, which
is in turn wholly owned by Mr Lim Chap Huat, the sponsor’s
co-founder. The sponsor, Mr Lim, and his family members con-
trolled 29.1% of SB REIT’s units as of 31 Dec 18.
Credit HighlightsAs at 30 Sep 19, SB REIT’s portfolio occupancy rate fell to 88.4%
(4Q18: 89.5%), slightly below the JTC industrial average of 89.3%.
The occupancy weakness mainly came from the trust’s Singapore
portfolio, which reported occupancy of 87.4%. Nonetheless, we
noted that SB REIT achieved positive rental reversion for lease
renewals in 9M19.
In the nine months ended September, gross rental income rose
14.2% YoY to S$66.2m, lifted by higher contribution from Solaris
and the Australia properties. Net property income correspondingly
rose 8.3% YoY to S$53.6m.
Although SB REIT’s Australia properties had helped to offset weak-
nesses at some of its Singapore properties, we remained aware
increasing competition in Singapore’s industrial space market and
the tenant default situation surrounding NK Ingredients may con-
tinue to weigh on the REIT’s performance. On the other hand, the
acquisition of 25 Grenfell Street in Australia (expected to complete
in 4Q19) should increase SB REIT’s resilience and portfolio diver-
sification.
SB REIT’s outstanding debt increased from S$465.1m to S$491.5m
in the nine months ended September, partly due to the drawdown
of loans for the payment of deposit for the acquisition of 25 Gren-
fell Street. Despite a heavier debt load, SB REIT reported an ag-
gregate leverage ratio of 36.5%, improved from 39.1% as at 4Q18.
We continue to like SB REIT’s low refinancing risk as there is no
debt maturity until 2021. SB REIT also had S$45m of undrawn
committed credit facilities, and unencumbered investment prop-
erties and a property held for sale totalling S$881m, which should
provide the REIT with sufficient financial flexibility to meet its fi-
nancial obligations and fund growth opportunities.
RecommendationThe SBREIT 6.000% Perpetual Corp (SGD) has a yield to worst of
5.42% (Z-spread: 390bps) at its indicative ask price of 100.60. The
perp is callable first on 27 Sep 21 and every six months thereafter
at par. If not called in September 2021, its coupon rate will reset to
the sum of the prevailing 3-year SGD swap offer rate and the initial
spread of 3.79%.
The SBREIT 6% perps had an issue size of S$65m, of which
S$30m and S$2m were subscribed by Mr Lim Chap Huat and Mr
Ho Toon Bah (non-executive director) respectively. Taking into
consideration the large insider holdings that should lower the
perp’s extension risk and SB REIT’s overall moderate credit profile,
we have an overweight rating on the SBREIT 6% perp.
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Reset Date: 16 Jun 2027 and every 10 years thereafter Reset Rate: Prevailing SGD 10Y SOR plus Initial Spread (1.715%) + Step Up margin (100bps)
Reference Rate
STHSP 3.950% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer StarHub Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 16-Jun-2022
Years to Maturity (approx.) 2.515
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 3.950
Bond Sub Sector Diversified Telecommunication
Services
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size SGD 200,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.573INDICATIVE BID PRICE
100.311ASK YIELD TO WORST
3.705%BID YIELD TO WORST
3.816%
Background¡ StarHub Ltd is one of Singapore’s largest telecommunications
providers.
¡ As at 12 Mar 19, Singapore Technologies Telemedia Pte Ltd (a
wholly-owned subsidiary of Temasek Holdings) controls Star-
Hub via its 75% indirect stake in Asia Mobile Holdings Pte Ltd,
which in turn owns an approximate 56% stake in Starhub.
¡ Ensign InfoSecuity (Systems) Pte Ltd (“Ensign”), a subsidiary of
StarHub, is Southeast Asia’s largest cybersecurity provider.
Credit HighlightsStarHub’s revenue for the quarter ended September (“3Q19”)
came in at S$573m, almost unchanged from 3Q18. Within the
company’s various divisions, enterprise business sales increased
17% YoY to S$146m, primarily from growth in cyber security and
managed services. Revenue from its cybersecurity unit alone wit-
nessed a 135% YoY growth to S$39m. Overall net profit during the
quarter was S$57m, similar to the level a year ago.
Cash and bank balances held by the company totaled S$154m in
3Q19, down from S$249m in 3Q18. Nonetheless, the level of cash
still exceeded its current borrowings and lease liabilities of S$110m,
translating to a healthy liquidity profile for the telco operator.
Net cash from operating activities improved from S$152m in 3Q18
to S$155m in 3Q19. Free cash flow, on the other hand, soared 35%
YoY to S$107m due to meaningfully lower capital expenditures
(“capex”). As of 3Q19, StarHub’s total outstanding capex commit-
ments amounted to S$428m, which included outstanding commit-
ments of S$282 for 4G spectrum rights.
As of September 2019, total unsecured borrowings added to
S$1.03 billion, comprising of S$50m of short-term debt, S$520m
of medium term notes and S$458m of long-term bank loans. As a
result of a lower cash balance, StarHub’s net debt position climbed
to S$874m in 3Q19. When expressed as a percentage of trailing-12-
month (“TTM”) EBITDA, the company’s reported gearing ratio —
net debt over TTM EBITDA — increased to 1.48x in 3Q19 from 1.23x
a year ago. On the other hand, our measure of total debt (including
perpetual securities) over total assets registered a decline from
46% in 3Q18 to 44% in 3Q19.
The outlook for StarHub’s mobile business may be challenging due
to the competitive telecommunication industry, and the firm may
invest a considerable amount of cash in 5G infrastructure over the
next few years. We suspect StarHub may increase borrowings to
pay for its 5G bid, but we think there is limited downside as the
firm has relatively stable credit and liquidity profiles. We also view
the tie-up with a Temasek unit to set up Ensign as a credit-positive
development.
RecommendationStarHub has one perpetual bond outstanding — the STHSP 3.950%
Perpetual Corp (SGD). The perp has a subordinated ranking and
a first call date of 16 Jun 22. At its yield to worst of 3.71%, we
recommend investing in the perp as we think it represents a decent
return for a SGD telecommunication credit with a healthy liquidity
position.
StarHub Limited
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STDCTY 7.250% 30Nov2021 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Studio City Co Limited
Guarantor Multiple Guarantors
Maturity Date 30-Nov-2021
Next Call Date 27-Dec-2019
Years to Maturity (Approx.) 1.973
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 7.250
Bond Sub Sector Hotels Restaurants and Leisure
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) BB- / N.R
Issuer Credit Rating (S&P/Fitch) BB- / N.R
Seniority Secured
Issue Size USD 850,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
102.292INDICATIVE BID PRICE
102.098ASK YIELD TO WORST
0.603%BID YIELD TO WORST
3.247%
AVAILABLE ON BOND EXPRESS
Studio City International Holdings Limited
Background¡ Studio City International Holdings Limited provides hotel ser-
vices. The company’s primary business pertains to the Studio
City resort, a world-class gaming, retail and entertainment re-
sort located in Cotai, Macau.
¡ Studio City was listed on the NYSE in October 2018. The compa-
ny is strongly supported by its single largest shareholder, Melco
Resorts & Entertainment Limited (“Melco”).
Credit HighlightsTotal operating revenues for 3Q19 were USD158.1m, up 9.9% YoY
from USD143.8m in 3Q18. The increase in total operating revenues
was mainly due to the increase in revenues from the provision
of gaming-related services. Operating revenues from gaming-re-
lated services expanded 17.8% YoY from USD82.0m in 3Q18 to
USD96.7m in 3Q19, despite the market-wide VIP weakness in Ma-
cau that adversely affected rolling chip volume.
The mass market table games segment delivered a better perfor-
mance with a 9.0% YoY growth in mass table drop, offsetting the
weakness in the rolling chip segment. As a result, Studio City’s re-
ported adjusted EBITDA increased 21% YoY to USD90.9m.
Studio City’s cash and bank balances totalled USD670.9m (2018:
USD377.4m) at the end of September, including USD49.8m of
restricted cash (2018: USD31.6m). The amount of liquidity was
sufficient to meet short-term maturities of USD349.6m (2018:
USD347.7m). Total debt was USD1.78 billion at the end of 3Q19
(2018: USD1.61 billion), which translated to a net debt-to-equity ra-
tio of 100% (2018: 112%) and a debt-to-annualized adjusted EBIT-
DA ratio of 4.9x (2018: 5.4x) in 3Q19.
Although Studio City’s operating performance and credit profile
had improved significantly, the company’s interest coverage ra-
tio—as measured by operating income over interest expenses—re-
mained relatively weak at 1.4x in 3Q19 (3Q18: 0.8x). Furthermore,
we think Studio City’s financial leverage is likely to increase moving
forward because of the phase two expansion project of its resort.
On the other hand, Studio City’s liquidity position improved sub-
stantially in 2019 as its cash ratio rose from 0.86x to 1.49x in the
nine months ended September. Over the same period, the compa-
ny’s current ratio increased from 1.05x to 1.66x.
RecommendationStudio City has continued to deliver growing earnings and cash flow
along with robust financial performance. Also, with the support of
Melco, the company is undertaking continuous asset enhancement
with a series of property upgrades, which should further improve
its market position. Given the abovementioned factors, we hold a
positive credit outlook on Studio City.
The STDCTY 7.250% 30Nov2021 Corp (USD) is offering a yield
to maturity of 5.99%. Although Studio City may redeem the notes
at 101.813 prior to 30 Nov 20, we think the likelihood of a call event
is low, taking into consideration the bond redemption price and our
estimated financing cost of the company. Balancing Studio City’s
improved business operations and healthy earnings expectation
against its high leverage and revenue concentration, we think the
notes provide a decent return relative to their ‘BB-’ credit rating
by S&P.
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Reset Date: 21 March 2022 and every 5 years thereafter Reset Rate: USD 5Y SWAP + Initial Spread (4.647%) + Step Up Margin (2%)
TRAFIG 6.875% Perpetual Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Trafigura Group Private Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 21-Mar-2022
Years to Next Call (Approx.) 2.277
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 6.875
Bond Sub Sector Metals and Mining
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Subordinated
Issue Size USD 800,000,000
HIGH YIELD SEEKER
Reference Rate
INDICATIVE ASK PRICE
93.618INDICATIVE BID PRICE
93.150ASK YIELD TO WORST
8.774%BID YIELD TO WORST
8.817%
Trafigura Group Private Limited
Background¡ Trafigura is a global commodities trader, with an industry-lead-
ing position in oil and metals trading.
¡ In FY2018, Trafigura traded an average of 5.8 million barrels per
day of oil and petroleum products, making it one of the world’s
largest oil traders.
¡ The company is exclusively owned by its management and ac-
tive employees.
Credit HighlightsEven though Trafigura’s top-line revenue was almost unchanged
for 1H2019 (the 6 month period ended 31 Mar 2019) , earnings be-
fore interest, taxes, depreciation, and amortization climbed close
to a record high of USD 1.1 billion (1HFY18: USD 658m), while earn-
ings before interest and taxes (‘EBIT’) surged 55.4% to reach USD
893.7m (1HFY18: USD 575.2m).
The sharp increase in profits was largely due to a stellar perfor-
mance by the group’s oil trading division, which saw significantly
improved margins. Gross profit in oil and petroleum products more
than tripled to USD 1.04 billion, and the company reported signif-
icantly improved performance at its crude oil, gasoline, LNG, and
wet freight divisions.
For the six months ended March 2019, the EBIT-to-net financing
costs ratio improved to 2.8x from 2.4x reported in the comparable
period in 2018. The improvement in interest coverage was primar-
ily due to the earnings component, not the financing component.
Gearing – defined as the sum of short term debt, long term debt
and finance leases – was 58.3% of total assets as of 31 Mar 19,
down 1.5 percentage points compared to the level reported as of
30 Sep 18. Taking the group’s substantial operating leases and per-
petual securities into account, group gearing was 72.3%. These
ratios might appear high, however it is important to note that Tra-
figura held total credit lines of USD 59 billion from a record total of
some 135 banks, constituting a significant buffer of unused credit
to meet its ongoing debt obligations.
Trafigura has had little difficulty in the area of refinancing thus
far. In fact, financing costs have declined for the group, possibly
reflecting increased market confidence in Trafigura. In March 2019,
Trafigura refinanced a 365-day European revolving credit facility
worth USD 2.05 billion, which saw the participation of a larger and
more diverse syndicated lending group.
RecommendationTrafigura’s TRAFIG 6.875% Perpetual Corp (USD) bond issue has
a first call date in March 2022 (more accurately, the security is
first callable within the 90 days ending 21 Mar 22) and carries a
yield to call (“YTC”) of 10.1% (the yield to worst is 8.77%). The
attractive yield in excess of 10% reflects Trafigura’s higher gearing
relative to its peers.
Even though Trafigura has an outstanding fixed term note — the
TRAFIG 5.250% 19Mar2023 Corp (USD) — we underline our
preference for the company’s perpetual security as it carries a
significant yield premium of some 450 bps (based on YTC) over the
fixed-term bond. This is much higher than the typical subordinated
spread we observe in the market, even for speculative-grade
credits, which leads us to believe that the perpetual security would
be a better choice for investors.
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UBER 8.000% 01Nov2026 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Uber Technologies Inc
Guarantor Subsidiaries
Maturity Date 01-Nov-2026
Next Call Date 01-Nov-2021
Years to Maturity (Approx.) 6.896
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 8.000
Bond Sub Sector Road and Rail
Minimum Investment Quantity USD 2,000
Bond Credit Rating (S&P/Fitch) CCC+ / N.R
Issuer Credit Rating (S&P/Fitch) B- / N.R
Seniority Senior Unsecured
Issue Size USD 1,500,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
102.865INDICATIVE BID PRICE
102.600ASK YIELD TO WORST
7.288%BID YIELD TO WORST
7.352%
Uber Technologies Inc.
Background¡ Arguably the most dominant player in the ride-hailing sector,
Uber Technologies Inc. (“Uber”) provides a mobile app that al-
lows users to order taxis, private hire cars and food delivery on
demand.
¡ Approximately three quarters of its revenue comes from ride
hailing with the remainder derived from Uber Eats – its food de-
livery service.
¡ Even though Uber is not present in South East Asia, it owns a
23.2% stake in Singapore based Grab.
¡ Uber is rated B2 and B- by Moody’s and S&P respectively. It has
a market capitalization of USD 48.9 billion.
Credit HighlightsUber is a company that is on the path to profitability but has yet to
achieve it. Uber saw its operating loss narrow from USD 5.5 billion
in the second quarter of 2019 to USD 1.1 billion in the third quarter
ended September 2019. A large part of the mind-boggling USD 5.5
billion loss which the company had recorded in the second quarter
was in large part due to stock option related expenses which is
unlikely to be of a similar magnitude going forward. For the most
recent quarter ended September 2019, the company only reported
USD 401m in stock based compensation expenses. In contrast, the
company reported stock based compensation expenses in excess
of USD 3 billion in the preceding quarter.
Revenue continues to grow at a rapid clip. For the third quarter of
2019, gross bookings grew 29% YoY to reach USD 16.5 billion. On
a constant currency basis, gross bookings increased by 32% YoY.
The company’s fastest growing division is its Uber Eats division.
Adjusted net revenue for Uber Eats grew 109% YoY to USD 392m,
for the third quarter of 2019. Uber currently derives approximately
17% of its revenue from Uber Eats.
Uber’s revenue pie is geographically diversified. Of the USD 3.8 bil-
lion in revenue recorded in the third quarter, USD 2.4 billion came
from North America, while USD 527m and USD 534m came from
the Latin America and Europe, Middle East and Africa (EMEA) re-
gions, respectively.
As of September 2019, the company had USD 12.7 billion in unre-
stricted cash and cash equivalents, up USD 900m largely due to
the issuance of USD 1.2 billion worth of senior unsecured notes.
The cash reserves compare favorably with the company’s total lia-
bilities of USD 16.2 billion, and demonstrates the inherently liquid
nature of Uber’s balance sheet.
RecommendationUber might have been the subject of much controversy and
negative headlines over the years, not least due to its association
with its flamboyant co-founder Travis Kalanick. However, the
numbers tell us that the company’s fundamentals are strong and
its business is growing at a decent clip.
For bond investors, we recommend the UBER 8.000% 01Nov2026
Corp (USD). The bond currently carries a yield to maturity of
7.46% and matures in 6.9 years.
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Background¡ One of the two Globally Systematically Important Banks in
Switzerland.
¡ Product of the 1997 merger of Swiss Banking Corporation and
Union Bank of Switzerland.
¡ Market capitalisation of CHF 44 billion.
¡ Primary driver of earnings is the Global Wealth Management
division.
Credit HighlightsAmidst a challenging operating environment, UBS saw its operat-
ing income slip 4.58% YoY to USD 7.09 billion for the third quar-
ter ended September 2019 (3Q18: USD 7.43 billion). Group profit
before tax declined 21% YoY to USD 1.35 billion (3Q18: USD 1.70
billion).
In the cost domain, the Swiss banking behemoth reported a cost to
income ratio of 80.6%, up from 76.5% reported in the preceding
quarter ended June 2019.
Capitalization and solvency wise, UBS disclosed a Common Equity
Tier 1 (CET1) of 13.1%, down slightly from the previous quarter when
the bank reported a CET1 ratio of 13.3%.
Global Wealth Management, the mainstay of the UBS Group, con-
tinues to thrive despite dampened economic sentiment. The divi-
sion attracted USD 16 billion in net new money, representing annu-
alized growth of some 2.6%. Transaction-based income grew 14%
YoY. The Global Wealth management is of outsized importance in
the context of UBS, given that this division accounts for over half
of the bank’s total revenue.
UBS is also active in the traditional Personal and Corporate Bank-
ing segment, whose activities are primarily confined to UBS’s
domestic market in Switzerland. For the third quarter ended Sep-
tember 2019, the division posted a profit before tax of USD 360m,
declining 10% YoY (3Q18: USD 399 billion). The division’s cost to
income ratio held steady at 59%.
For bond investors, one of UBS’ key strengths is its excellent sol-
vency profile and above average capitalization ratios. With a CET1
ratio of 13.1%, UBS surpasses its closest ranked Swiss peer Credit
Suisse, who reported a CET1 ratio of just 12.4%. Within continental
Europe, Societe Generale had a CET1 ratio of 12.5%, while Unicred-
it reported a ratio of 12.6%.
RecommendationFew banks in Switzerland, or the world for that matter, have quite
the cachet of UBS. With an excellent credit profile, an impeccable
reputation in the marketplace and a renowned wealth management
franchise existing within a diversified global business, UBS is a
company which offers much to clients and investors alike.
In the context of bond investing, we particularly like the UBS
5.875% Perpetual Corp (SGD). With a first call date in November
2023 and carrying a yield to next call of 4.53%, which is attractive
given the excellent credit metrics of the issuer. Another option to
consider is the UBS 4.850% Perpetual CORP (SGD) issue, which
is first callable in September 2024 and bears a yield to next call
of 4.69%.
Other bonds that might be of interest include the UBS 6.875%
Perpetual CORP (USD), UBS 4.125% 24SEP2025 CORP (USD)
and UBS 4.253% 23Mar2028 Corp (USD) issues.
UBS AG
UBS 4.253% 23Mar2028 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer UBS Group AG
Guarantor -
Maturity Date 23-Mar-2028
Next Call Date 23-Mar-2027
Years to Next Call (Approx.) 8.288
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.253
Bond Sub Sector Banks
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) A- / A+
Issuer Credit Rating (S&P/Fitch) A- / A+
Seniority Senior Unsecured
Issue Size USD 2,000,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
110.020INDICATIVE BID PRICE
109.645ASK YIELD TO WORST
2.723%BID YIELD TO WORST
2.778%
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Reset Date: 04 Sep 2024 and every 5 years thereafter Reset Rate: Prevailing SGD 5Y SOR + Margin (3.372%)
Reference Rate
UBS 4.850% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer UBS Group AG
Guarantor -
Maturity Date Perpetual
Next Call Date 04-Sep-2024
Years to Next Call (Approx.) 4.737
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.850
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB-
Issuer Credit Rating (S&P/Fitch) A- / A+
Seniority Junior Subordinated
Issue Size SGD 750,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.690INDICATIVE BID PRICE
100.620ASK YIELD TO WORST
4.685%BID YIELD TO WORST
4.702%
Reset Date: 28 Nov 2023 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (3.605%)
Reference Rate
UBS 5.875% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer UBS Group AG
Guarantor -
Maturity Date Perpetual
Next Call Date 28-Nov-2023
Years to Next Call (Approx.) 3.967
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 5.875
Bond Sub Sector Banks
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / BBB-
Issuer Credit Rating (S&P/Fitch) A- / A+
Seniority Junior Subordinated
Issue Size SGD 700,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.833INDICATIVE BID PRICE
104.720ASK YIELD TO WORST
4.525%BID YIELD TO WORST
4.556%
AVAILABLE ON BOND EXPRESS
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Reset Date: 22 Mar 2021 and every 5 years thereafter Reset Rate: USD 5Y ICE SWAP Rate + Margin (5.497%)
Reference Rate
UBS 6.875% Perpetual Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer UBS Group AG
Guarantor -
Maturity Date Perpetual
Next Call Date 22-Mar-2021
Years to Next Call (Approx.) 1.279
Coupon Frequency Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 6.875
Bond Sub Sector Banks
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) BB / BBB-
Issuer Credit Rating (S&P/Fitch) A- / A+
Seniority Junior Subordinated
Issue Size USD 1,500,000,000
INDICATIVE ASK PRICE
104.427INDICATIVE BID PRICE
104.126ASK YIELD TO WORST
3.201%BID YIELD TO WORST
3.434%
HIGH YIELD SEEKER
UBS 4.125% 24Sep2025 Corp (USD)
Bond Information
DATA AS AT 11-DEC-19
Issuer UBS Group AG
Guarantor -
Maturity Date 24-Sep-2025
Next Call Date -
Years to Next Call (Approx.) 5.792
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.125
Bond Sub Sector Banks
Minimum Investment Quantity USD 200,000
Bond Credit Rating (S&P/Fitch) A- / A+
Issuer Credit Rating (S&P/Fitch) A- / A+
Seniority Senior Unsecured
Issue Size USD 2,500,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
108.962INDICATIVE BID PRICE
108.591ASK YIELD TO WORST
2.449%BID YIELD TO WORST
2.515%
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UEMSP 3.680% 01Jun2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer United Engineers Limited
Guarantor -
Maturity Date 01-Jun-2021
Next Call Date -
Years to Maturity (approx.) 1.474
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 3.680
Bond Sub Sector Construction and Engineering
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
100.548INDICATIVE BID PRICE
99.647ASK YIELD TO WORST
3.291%BID YIELD TO WORST
3.931%
Background¡ Founded in 1912, United Engineers Limited (“United Engineers”)
is one of Singapore’s oldest home-grown companies. Over the
years, United Engineers has evolved from an engineering and
construction firm to become a dynamic corporation with busi-
nesses spanning across property rental and hospitality, proper-
ty development, engineering and distribution, and manufactur-
ing.
¡ After selling in 2016 its 42.2% stake in Multi-Fineline Electro-
nix, a manufacturer of flexible printed circuits and component
assemblies, United Engineers’s non-property businesses have
diminished in terms of revenue and profit contributions.
¡ In 2019, Chinese real estate player Yanlord Land Group Limited
(“Yanlord Land Group”) announced a takeover offer for all the
ordinary shares of United Engineers, offering to acquire the lat-
ter at an initial bid of S$2.60 per share.
¡ United Engineers currently carries a market capitalization of
S$1.7 billion
Credit HighlightsUnited Engineers saw its revenue increase 38% YoY to S$112.4m
for the third quarter ended September, due to greater revenue
contributions from property development, property rental and
hospitality activities. The increase was partially offset from lower
contributions from the firm’s manufacturing and engineering
arms. Operating profit before revaluation of investment properties
almost tripled to S$24.4m (3Q18: S$8.67m).
United Engineers is conservatively geared with a gearing ratio of
just 27.7% as of end September 2019, down from 30.0% in end
December 2018. Gearing is defined as debt over total assets.
That said, United Engineers is not a cash rich company. As of 30
September 2019, it had S$253.7m in cash and cash equivalents,
versus around S$1.0 billion in borrowings. One key advantage
that the firm possesses though, is the abundance of development
properties held for sale (a current asset). As of September 2019,
United Engineers had S$986.6m in properties held for sale. With
these assets taken into account, United Engineers had a current
ratio of 4.55x.
In October 2019, Yanlord Land Group — through its subsidiary
Yanlord Investment (Singapore) — announced an offer to acquire
shares in United Engineers for S$2.60 apiece. In 2017, a consortium
comprising Yanlord Land, Perennial Real Estate and Heng Yue
Holdings had launched a similar takeover bid, offering to acquire
shares in United Engineers for the same price.
Since the October offer, Yanlord Land Group has brought its stake
in United Engineers over the 50% threshold, an event which
caused its offer to turn unconditional. We also understand that
Yanlord Land Group has raised its offer price to S$2.70 per share.
In addition, Yanlord Land Group has announced a mandatory
unconditional cash offer for WBL at S$2.5947 per share, pursuant
to a ruling by the Securities Industry Council of Singapore. United
Engineers owns a 69.14% stake in WBL, a property development
and engineering firm which was delisted from the Singapore
Exchange in 2014.
RecommendationWe recommend United Engineer’s UEMSP 3.680% 01Jun2021
Corp (SGD), which carries a yield to maturity of 3.29%. With the
inevitable acquisition by Yanlord Land Group, a firm with a market
capitalization of S$2.3 billion, United Engineers should benefit
from being part of a larger and more established group.
United Engineers Limited
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WINGTA 4.700% 28Feb2024 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date 28-Feb-2024
Next Call Date -
Years to Maturity (approx.) 4.219
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.700
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 80,000,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
106.545INDICATIVE BID PRICE
106.210ASK YIELD TO WORST
3.029%BID YIELD TO WORST
3.111%
Background¡ Wing Tai Holdings Limited (“Wing Tai”) is a leading property
developer and lifestyle company listed on the SGX Mainboard
since 1989, with a market capitalisation of S$1.49 billion on 11
Dec 19.
¡ The group is led by Mr Cheng Wai Keung, who sits on the board
as chairman and managing director. The founding Cheng family
controls around 51% of the group’s shares (excluding treasury
shares).
¡ Wing Tai operates mainly in property development and retail
operations across Asian markets including Singapore, Malaysia,
Australia and China.
¡ As at 30 Jun 19, Wing Tai’s retail footprint extends to over 243
stores with 17 brands in Singapore and 14 brands in Malaysia.
Credit HighlightsIn the first financial quarter ended September (“1QFY20”), Wing
Tai’s revenue was largely stable at S$79m (+2% YoY). Meanwhile,
cost of sales plunged 20% YoY to S$37m. Together with lower
rental costs for retail stores in Singapore, the group managed to
grow its net profit from S$2.3m in 1QFY19 to S$6.8m in 1QFY20.
Wing Tai’s cash position fell to S$212m as at 1QFY20, which was
substantially lower from S$856m in September last year. The
group, however, maintained a comfortable liquidity profile as it had
no debt due within the 12-month period from 1QFY20. Current as-
sets of S$1.4 billion, including development properties of approxi-
mately S$1.1 billion, significantly exceeded the group’s current lia-
bilities of S$124m.
Net cash generated from operating activities remained positive,
although it decreased modestly from S$72m in 1QFY19 to S$53m
in 1QFY20. Meanwhile, net cash from investing activities declined
from positive S$16m in 1QFY19 to an outflow of S$46m due to the
group’s acquisition of a data centre in Australia.
In addition to its strong liquidity position, Wing Tai also carried a
low debt-to-total assets ratio. Pursuant to its 1QFY20 filing, Wing
Tai recorded S$628m of long-term borrowings and S$300m of per-
petual securities. The level of financial obligations nearly matched
aggregate debt of a year ago, when the developer held S$781m of
long-term debt and S$150m of perpetual securities on its balance
sheet. Including perpetual capital securities, the company’s debt
over assets remained at 21% in both 1QFY20 and 1QFY19.
RecommendationAmong Wing Tai’s straight bonds, we recommend investing in the
WINGTA 4.000% 07Oct2021 Corp (SGD) and WINGTA 4.500%
26Sep2022 Corp (SGD) with their YTMs of 2.59% and 2.77%
respectively. Investors who are interested in a longer-dated
exposure may consider the WINGTA 4.250% 15Mar2023 Corp
(SGD) and WINGTA 4.700% 28Feb2024 Corp (SGD), which are
yielding 2.87% and 3.03% respectively.
We also like Wing Tai’s perpetual bonds, the WINGTA 4.080%
Perpetual Corp (SGD) and WINGTA 4.480% Perpetual Corp
(SGD), which have indicative ask YTWs of 4.00% and 4.19%
respectively. Both perps are ranked pari passu with the senior
unsecured bonds. The WINGTA 4.08% perp and WINGTA 4.48%
perp are first callable in June 2022 and May 2024 respectively,
which are also the first reset dates. With reference to the WINGTA
4.08% perp, we note that a coupon step-up margin of 100bps will
kick in only five years after the first call date.
Wing Tai Holdings Limited
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WINGTA 4.500% 26Sep2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date 26-Sep-2022
Next Call Date -
Years to Maturity (approx.) 2.795
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.500
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 93,750,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.584INDICATIVE BID PRICE
104.259ASK YIELD TO WORST
2.773%BID YIELD TO WORST
2.892%
WINGTA 4.000% 07Oct2021 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date 07-Oct-2021
Next Call Date -
Years to Maturity (approx.) 1.825
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.000
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 117,250,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
102.475INDICATIVE BID PRICE
102.181ASK YIELD TO WORST
2.588%BID YIELD TO WORST
2.753%
WINGTA 4.250% 15Mar2023 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date 15-Mar-2023
Next Call Date -
Years to Maturity (approx.) 3.260
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 81,500,000
STABLE INCOME SEEKER
INDICATIVE ASK PRICE
104.258INDICATIVE BID PRICE
103.981ASK YIELD TO WORST
2.865%BID YIELD TO WORST
2.953%
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Reset Date: 24 May 2024 and every 5 years thereafter
Reset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.562%) + Change of Control Margin (if applicable)
Reference Rate
WINGTA 4.480% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 24-May-2024
Years to Next Call (Approx.) 4.455
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.480
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
INDICATIVE ASK PRICE
100.743INDICATIVE BID PRICE
100.600ASK YIELD TO WORST
4.192%BID YIELD TO WORST
4.198%
Reset Date: 28 Jun 2022 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.370%) + Change of Control Margin (if applicable) + Step-Up Margin (100bps on 28 Jun 2027)
Reference Rate
WINGTA 4.080% Perpetual Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 28-Jun-2022
Years to Next Call (Approx.) 2.548
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.080
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
ASK YIELD TO WORST
4.195%BID YIELD TO WORST
4.242%
Reset Date: 28 Jun 2022 and every 5 years thereafterReset Rate: Prevailing SGD 5Y SOR + Initial Spread (2.370%) + Change of Control Margin (if applicable) + Step-Up Margin (100bps on 28 Jun 2027)
Reference Rate
WINGTA 4.080% Perpetual Corp (SGD)
Bond Information
Issuer Wing Tai Holdings Limited
Guarantor -
Maturity Date Perpetual
Next Call Date 28-Jun-2022
Years to Next Call (Approx.) 2.548
Coupon Frequency Semi-Annually
Coupon Type Variable
Annual Coupon Rate (% p.a.) 4.080
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 150,000,000
HIGH YIELD SEEKER
ICNDIINDICAATIVE ATIVE ASK PSK PRICE RICE
999..471INDICINDICATIVE BID PRICEATIVE BID PRICE
99.3.301ASK YIELD TO WORST
3.997%BID YIELD TO WORST
4.004%
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WINGTA 4.250% 29Nov2022 Corp (SGD)
Bond Information
DATA AS AT 11-DEC-19
Issuer Wing Tai Properties Finance Limited
Guarantor Wing Tai Properties Limited
Maturity Date 29-Nov-2022
Next Call Date -
Years to Next Call (Approx.) 2.970
Coupon Frequency Semi-Annually
Coupon Type Fixed
Annual Coupon Rate (% p.a.) 4.250
Bond Sub Sector Real Estate Management
and Development
Minimum Investment Quantity SGD 250,000
Bond Credit Rating (S&P/Fitch) N.R / N.R
Issuer Credit Rating (S&P/Fitch) N.R / N.R
Seniority Senior Unsecured
Issue Size SGD 170,000,000
INDICATIVE ASK PRICE
103.293INDICATIVE BID PRICE
102.769ASK YIELD TO WORST
3.075%BID YIELD TO WORST
3.258%
STABLE INCOME SEEKER
Background¡ Wing Tai Properties Limited (“WTP”) is an investment holding
company listed on the HKEX. Its subsidiaries are principally in-
volved in the areas of property development, investment, and
management; as well as hospitality investments and manage-
ment.
¡ WTP is an associated company of Wing Tai Holdings, which held
a 34% interest in the company as of June 2019. Sun Hung Kai
Properties Limited also held an approximate 14% stake in the
firm.
¡ In accordance with its 1H19 report, WTP recorded a total asset
value of HKD36 billion and book equity value of HKD29 billion.
Credit HighlightsIn the six months ended June 2019, WTP generated HKD424m and
HKD285m of revenue and profit before tax (“PBT”) respectively,
which translated to an impressive PBT margin of 67.3%. Gross
profit margin remained at a very healthy level of 80.5%, up from
78.8% in 1H18. We think these high margins were a result of the
expensive rental market in Hong Kong, which largely benefitted
property owners. However, management expected for the Hong
Kong property market to become more challenging in the near
term, in view of the ongoing political and societal upheaval in Hong
Kong and US-China trade tensions.
Despite the recent social turmoil in Hong Kong, WTP’s hospitality
business achieved a respectable performance in 1H19. Revenue
from the hospitality investment and management segment rose
slightly to HKD71m in 1H19 from HKD68m a year ago. Excluding fair
value changes in investment properties and financial instruments,
the segment swung to an operating profit of HKD19m (1H18: loss
from operations of HKD10m).
WTP has a high interest coverage ratio. We estimated that the
company’s EBITDA was 5.1 times its interest expense (including
distributions paid on perpetual capital securities). This is a healthy
level in our opinion despite the drop from 6.7x in 1H18.
Similarly, WTP’s adjusted net debt over equity (treating perps as
borrowings) remained healthy at 14.5%. Even if we conservatively
included the whole of HKD8.1 billion of contingent liabilities
(guarantees granted on bank loans of joint ventures), we estimated
that the company’s adjusted net gearing would increase to 53%,
which was still a manageable level.
RecommendationIn view of WTP’s decent credit profile backed by a low refinancing
risk and strong asset base, we remain confident of the company’s
debt-servicing capability. The WINGTA 4.250% 29Nov2022
Corp (SGD) carried an ask YTM of 3.08% on 11 Dec 19. The note
looked comparatively more attractive to Wing Tai Holdings’ 4.5%
notes due September 2022, which had an ask YTM of 2.77%.
We think the yield spread between the two bonds offers a good
compensation for a two-month maturity difference in favour of the
WINGTA 4.25% ‘22s.
The WINGTA 4.25% ‘22s also arguably offer better value against
Wheelock & Co Ltd’s SGD 4.5% notes due 2021 (YTM: 2.38%).
In our opinion, the yield pickup from the WINGTA 4.25% ‘22s
compensates well for their 1-year longer maturity and WTP’s
smaller operating scale.
Wing Tai Properties Limited
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