Bond Vigilante : New Issue Nam Cheong 3Y SGD
This is not a fly by night shop although they are a Malaysian company listed in here 2011 via a reverse takeover of Eagle Brand Holdings. Bulky shareholders with 30% owned by one man it appears and very little else known. They are certainly moving in the right direction in securing longer term borrowings for themselves which will undoubtedly strengthen the balance sheet and, hopefully, be used to pay off their short term liabilities.
The icing on the cake is that their share price has doubled this year which doubled their market capitalisation to 459 million, allowing them to set up an EMTN programme for SGD 200 million. Thus please do not be disappointed if the issued size is not increased. THEY CAN ONLY BORROW SGD 200 MILLION via bonds.
I know the bankers are pushing hard for comparisons with the following.
ASLSP 4.25 2014: 101, Yield 3.73%
EZIONSP 5.25 15: 101.375, Yield 4.67%
EZRASP5 15: 100.75, Yield 4.71%
So 6.125% sure Boleh ! Even Banyan Tree 5Y is going at 5% handle, considering their financial health.
Afterall, there are only 13 issues this year that yield 6% or more and a 100 million is not that much to swallow these days. Do note that their net fixed assets is just about SGD 136 million so there will be some recovery value for bondholders if not the stockholders.
In my opinion, they could have probably cut a lower coupon deal and more rebates for the private bank sales rebate (40-50 cts ?) because I suspect most of this issue is going the way of retail buyers.
In the industy, there is the virgin issue bonus. And in Nam Cheong, I would say you are getting it, if the coupon is between 6 to 6.125%. Though I would not entertain the thought of making a leap in that direction.
Given the recent spate of issues in the corporate bond market it is easy to get lost in the scramble for yield. No doubt a 6% yield is a tempting place to ‘deposit’ capital. However, just a very preliminary glance at Nam cheong would spell dodgy for me. Even though it has been around since 1999, first thing that i noticed was the paid up capital was in hkd and this is for a malaysian company, whose revenue is in myr, that was initally listed under the name of ‘eagle brand holdings ltd’. It is obvious the ipo failed to soar despite its name. Of the 13 years it was listed, it paid out dividends a total of 8 times of varying degrees, and one of the
dividend in cny which occured in 2002. Just last year alone they had a share consolidation offer of 1 for 50 shares. Furthermore in the past 5 years, they made losses in 2 years making it kind of worrying for investing any capital into it be it bonds or equity.
No doubt perhaps demand for its services and products would lead to more revenue but given the issuance of a multi-currency paper sounds more like the company is generating returns based on financial engineering instead of focusing more on its actual business. Might be good to stay away although demand might prove otherwise.
Disclaimer: I do not own its shares and have no intention to. Conduct due diligence before jumping in.
Hey Pineapple
You are right. It is a reverse takeover case and I neglected to observe that when I was going through the stock records.
They sound more like a subcontractor because they do not own much assets and hive off their work to partner yards in China.
But really, they do have an advantage in their Malaysia roots. Most of their equity reports sound promising so I will not write them off immediately.
Nam Cheong 3Y trades at 100.50 today. Over 70% private bank demand. Not many banks have lines to bid this stuff.