New Issue Review : ASL Marine 4.75% 4Y SGD
Should be a small issue (<100 mio).
Small company (mkt cap SGD 293 mio which is smaller than Swiber) and very much family owned which is why it is does not prefer to dilute equity.
ASL Marine Holdings Ltd. is a dynamic offshore and marine company listed on SGX Mainboard since 2003. ASL Marine is principally engaged in shipbuilding, shiprepair and conversion, shipchartering and other marine related services, catering to customers from Asia Pacific, South Asia, the Middle East and Europe and Australia.
– Comps:
ASLSP 4.5 2014
SGD 50 mio issued in 2011 at 4.5% 3Y.
Current price 100.50/101.00 (3.96/3.43%)
Family owned is good because major stakeholders would be perceived to do the right thing.
Pet Peeves
– lien-ed assets as how all shipping companies work so only the photocopy machines are left in the end
– cyclical market risks such as the cancelled contracts eg. Keppel’s recent headlines
– illiquidity which is a major problem for Swiber bondholders now
I think the best comparable would be Nam Cheong NCL 6% 11/2015 which is trading at 101.00/101.50 (5.581/5.375%) given that ship building is their mainstay.
Nam Cheong is less leveraged and a bigger operation (mkt cap 536 mio, although they are in the O&G space.
Swiber would make everything else look bad, to be honest. Just take a look at this.
| ISSUE | CPN | MATURITY | BID | ASK | CCY | SIZE |
| Swiber Holdings Ltd | 9.75 | PERP/CALL | 92 | 94 | SGD | 80 MIO |
| Swiber Holdings Ltd | 5.9 | 25-Jul-14 | 100.59 | 100.9 | SGD | 120 MIO |
| Swiber Holdings Ltd | 7 | 6-Jul-16 | 99.25 | 100 | SGD | 75 MIO |
| Swiber Holdings Ltd | 6.25 | 8-Jun-15 | 99.75 | 100.5 | SGD | 95 MIO |
| Swiber Holdings Ltd | 5.8 | 6-Aug-13 | 100.5 | 101 | SGD | 150 MIO |
| Swiber Holdings Ltd | 5 | 16-Oct-14 | 102.492 | 103.8 | USD | 35.6 MIO |
| Swiber Holdings Ltd | 5.8 | 11-Oct-13 | N/A | N/A | SGD | 80 MIO |
Verdict : Not my cup of tea.
Hi Tradehaven
What do you think of the shorter term swiber bonds? I was thinking about getting into them as well. Liquidity is less of a concern if holding to maturity.
They have big re-financing coming up 2H this year and market appetite looks weak.
The conspiracy theorist in me says there is something strange going on if the insiders (bankers) have stopped providing liquidity.
Price wise, I think 6% for 2Y senior (not perp) could be a starting point to explore.
RedBar, I tend to agree with tradehaven. Swiber’s financial leverage is 4x, almost double that of its peers. Loan convenants by banks are usually much stricter, compared to bonds. One should expect them to have first claims on existing assets. If you have access to leverage, you could potentially lever up on better quality names to get similar returns. ( I don’t suppose any bank would offer LTV on Swiber)
Tradehaven, I just chanced about your blog and have spent the past hour reading it. It’s very well done indeed!
Hi AltFin
Welcome on board and thanks for the compliment and feedback.
I cannot say more about Swiber. In my past life I was privy to information that made me uncomfortable just like in Olam’s case. But as you can see, its market cap is way smaller than their bonds outstanding which says something.
Good luck !
Hello Tradehaven,
Indeed the slug of re-financings that Swiber is confronted with in August and October of this year appears onerous. Two things I would say in Swiber’s favour:
i) As I recall, Swiber put away one-year debt paper (the 5.8%’s) last August without too much difficulty – so couldn’t they atleast refinance the one year paper that matures in early August in a similar manner? I believe it is the longer tenor stuff that the market has indicated it would find challenging to digest.
ii) Swiber is the majority shareholder of Kreuz, an SGX listed O&G service company focused on niche subsea engineering service provision. Kreuz, which was spunoff from Swiber, has had a pleasing share price appreciation over the last year, up ~ 85%; market cap now ~S$ 250 Mln. A sell down of their shareholding in Kreuz could be an appealing possibility for Swiber. Just conjecture on my behalf.
I realise that I’m prejudiced: I have both Swiber 5.8%’s and 6.25%’s amongst my bond holdings. I have no intention of adding to them – I’m much keener on getting more Nam Cheong’s 6.0%’s – maturing in November 2015. Nam Cheong is nowhere near as levered as Swiber (and Ezra for that matter) and Nam Cheong’s business model involves much less lengthy lead times for revenue generation.
To my simple mind the biggest threat to the likes of Ezra, Swiber, Ezion, Kreuz and Nam Cheong, is a major reduction in the oil price. Once we see a major price drop, a great deal of offshore drilling and engineering activity in South East Asia and Australia will rather quickly come to a halt. That will hurt.
Hi There,
Thanks everyone for your advice, agree with JC, Swiber’s holdings in Kreuz probably gives some comfort. The search for good bond investment continues!
Cheers
Hi JC
Yes. No harm diversifying in these names if you have a sizeable portfolio.
A good word in for Nam Cheong – Petronas support for local Malaysian ship builders.
OCBC Research did a credit piece on ASL just this afternoon citing the over leverage problem.
Swiber should be under pressure until 2H when they try to refinance that 150 mio chunk in Aug and another 80 mio in Oct.
Good luck !
A. I have just re-read my posting of 4.59 p.m. yesterday afternoon, 20th March. On reflection, it looks like I was preaching – and I must apologise for this. I was expressing my (very) amateur view. To be clear: Tradehaven, Asianmacro and other contributors know far more about Debt markets in their big toes than I’ll ever hope to know and readers should put far more weight on what they state rather than what yours truly states.
B. Looks like I have been allocated some of ASL Marine’s paper – my RM just informed me. Reasonably pleased. I have too much in perpetuals and I’m looking to swap out into shorter tenor stuff. I agree that Nam Cheong’s paper is probably better – but my banks’ asking price for the 6.0%’s is somewhat too high at the moment, at least for me.
C. Reflecting on recent issues, the one that I’m most pleased to have gotten into is Biosensors 4-year 4.875%’s. But Ezra’s 8.75% perpetual has been a stinker for me. I hear from a former colleague that some banks are now trying to flog to their private clients O&G related perpetuals. My amateur advice ………….. do not do what I did.
Thanks again Tradehaven
Hey JC,
You give yourself too little credit.
I do not know what your background is but you definitely know a lot about investing compared to many others out there including me. And your insights are invaluable to us all.
I may know a little about bonds but I invest very little, preferring to punt the rest of the time. That is a big flaw. That’s because I used to make the prices for these things .. hahah and I used to see the spreads the private bankers take and I am slightly traumatised over the years.
Glad you got what you wanted with ASL.
Good luck !!
Hi JC,
Your views are definitely appreciated. We are all here to share. I queued and got into the Swiber 2014. Happy with the risks, NamCheong is my only other marine related bond. Biosensors price for me was too rich from my PB unfortunately. I also got into a lot of AMD’s 2015 @ 6% / par. this week.