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.