New Issue Review : Guocoland 7Y SGD 4.5%
ALERT : Below is the email I received from my banker and the next one was sent to me by my fund manager friend.
NOTICE THE DIFFERENCE ?
NEW ISSUE: GUOCOLAND SGD 7Y – INITIAL GUIDANCE 4.5% AREA
ISSUER: GLL IHT Pte Ltd
GUARANTOR: GuocoLand Limited
STATUS: Fixed Rate, Senior Unsecured
FORMAT: Regulation S Bearer
ISSUE SIZE: S$100mm off its S$1.5bn Multicurrency MTN Programme
(with option to upsize)
TENOR: 7 Years Bullet
INITIAL GUIDANCE: 4.5% area
DAY COUNT: ACT/365, Modified Following
DETAILS: S$250k by S$250k / Singapore Law / CDP / Unlisted
SELLING RESTRICTIONS: Under Section 274 and 275 of the Singapore SFA
$$$ NEW ISSUE: GUOCOLAND SGD 7Y – INITIAL GUIDANCE 4.5% AREA $$$
ISSUER: GLL IHT Pte Ltd
GUARANTOR: GuocoLand Limited
STATUS: Fixed Rate, Senior Unsecured
FORMAT: Regulation S Bearer
ISSUE SIZE: S$100mm off its S$3bn Multicurrency MTN Programme (with option to upsize)
TENOR: 7 Years Bullet
INITIAL GUIDANCE: 4.5% area
DAY COUNT: ACT/365, Modified Following
DETAILS: S$250k by S$250k / Singapore Law / CDP / Unlisted
SELLING RESTRICTIONS: Under Section 274 and 275 of the Singapore SFA
Market Cap : SGD 2.72 bio therabouts.
Current Outstanding Bonds : SGD 1.43 bio.
My first question, if not yours ?
Why keep issuing and borrowing ? This company is not really growing even if they are building the tallest building in Singapore above Tanjong Pagar MRT station right now. The only thing that appears growing on their income statement at a glance, would be their interest expense (up 60% yoy) which is not too unmanageable at 168 mio, as compared to Raffles Education where interest payments take up >90% of revenue.
Answer : Cheap funding and since it is 65% owned by Guocogroup, better borrow than risk the share price.
Their debts (incl loans) due in a table.
| mio SGD | |
| 2013 | 50 |
| 2014 | 305 |
| 2015 | 1,194 |
| 2016 | 333 |
| 2017 | 2,069 |
Headlines
Guocoland (GUOL SP): 3Q revenue S$92.4m vs S$104.5m yr ago
Risks
Parent going private. “Dec. 13 (Bloomberg) — Malaysian billionaire Quek Leng
Chan’s HK$8.25 billion ($1.1 billion) offer to take Guoco Group Ltd. private.”
This means even less transparency and heightened risk of increased leverage for the subsidiary.
Nonetheless, buyers rejoice. You will be making history by buying this bond.
This will be the longest tenor they have tried to issue and so this will be the lowest coupon every paid for 7 years.
Yet it is no reason not to buy if you have to buy something.
HPL just did a 7Y at 3.9% (price going 101/101.50 now), although Guocoland is twice as leveraged as HPL. Thus, 4.5% is decent premium to pay for the increased leverage and the risk of parentage change.
But a 3 bio MTN programme, means they can borrow another 1.5 bio more if they like.
VERDICT : Not compelling.
PS : By the way, this is expected to be an easy private bank sell. They are paying just as much as Courts did to bankers who close a deal.
Related Articles :
Analysis : Guocoland and Petra Foods – Bonds Not In The News : tradehaven
They are still at it. LYING.
$$$ NEW ISSUE: GUOCOLAND SGD 7Y – FINAL GUIDANCE 4.1% (the number) $$$
ISSUER: GLL IHT Pte Ltd
GUARANTOR: GuocoLand Limited
STATUS: Fixed Rate, Senior Unsecured
FORMAT: Regulation S Bearer
FINAL ISSUE SIZE: S$125mm off its S$1.5bn Multicurrency MTN Programme
TENOR: 7 Years Bullet
The people have spoken. They want 4.1% and they want more ! Good luck !
FINAL GUIDANCE: 4.1% (the number)
Oh well, this is better than the recent courts issuance isn’t it.
As for Mr Quek taking the company private, I would still bet on his companies’ solvency than on Courts.
The group is raising cash because it is cheap?? Can’t really comment on the intent as I have not had a close look at their balance sheet. Reckon the construction cost would be finance by the buyers who would snap up the property. Commercial properties is the new black!
I just think bond buyers sold themselves too cheaply.
Too little buffer for any contingencies. And after tonight’s UST sell off ? Lets see what happens in the next 7 years.
Oh well.
Tradehaven has correctly pointed out to avoid the lowest yield/coupon bonds. They are the ones that are going to hurt the most especially during steep market correction. It does not matter whether they are US Treasuries or SGS bonds, “AAA” or “ÄA”.
We don’t have to buy everything that are been thrown to us.
Do watch out for corporates as well. Hurdle rates for accepting projects have been plummeting due to the low rate environment. Historically, companies make extremely poor investment decisions during periods of low rate.
On a broader picture, low rates are hurting banks as well. What do they primarily earn with their capital? With rates so low, does it make sense to lend money when they might be facing loses when rates rises?