New Issue Review – First Reit 5Y SGD Bond
*** First REIT 5-yr SGD – PRICE GUIDANCE ***
Issuer: HSBC Institutional Trust Services (Singapore) Limited
(in its capacity as trustee of First REIT)
Status: Senior, unsecured
Issue Size: TBD
Format/Docs: Issuer’s S$500M Multicurrency Medium Term Note Programme dated 11 April 2013
Price Guidance: 4.375% area, Semi-annual, ACT/365 (Fixed)
Governing Law: Singapore Law
** KEY COMPS
LMIRT 4.88% 2015 @ 103.5 / 3.2%
AAREIT 4.9% 2016 @ 105 / 3.26%
First issue for First Reit which is 22.4% owned by the Lippo consortium, Lippo Karawaci and a couple of funds = strong backing. Mkt cap SGD 934 mio vs MTN SGD 500 mio.
Assets are 12 healthcare related properties = non cyclical and mostly located in the new darling of EM – Indonesia.
Cash flow management has been prudent and stable although secured debt jumped >300% last year to SGD 212 mio, probaby due to the SGD 168 mio term loan facility from OCBC.
They have been on a buying spree buying 2 Indonesian hospitals from Lippo in Mar and 2 more last Nov. Typical I sell you and you sell to me deals ?
I think this bond should sell itself and again, will be a private bank deal with retail investors making up the bulk. Fees offered to bankers are marginally less than Trikomsel.
Not much worries with Lippo 21% share sealed in a convenant for their term loan, which is an overall plus.
Risk ahead would be further expansion plans which would require additional fund raising. Yet this current spread of 5Y + 3.5% is generous enough (5Y interest rate is 0.83/0.81% today).
I was going through the LMRT bonds and realise that they have rallied alot, particularly, the LMRT 5.875% 07/2017 paper which is trading at 106 handle (yield 4.2ish%).
Why not a switch into First Reit ? which looks like a better credit and is yielding more for less than a year difference in maturity ? Switching out of the other Lippos is not a bad idea.
|Issuer Name||Coupon||Maturity||Bid Price||Ask Px|
|LMIRT Capital Pte Ltd||4.48||11/28/17||101.59||102.8|
|LMIRT Capital Pte Ltd||4.88||07/06/15||103.25||103.8|
|LMIRT Capital Pte Ltd||5.875||07/06/17||106||106.5|
Verdict : Buy or switch but do not expect a massive rally. Issue size should be small ie. 50-100 mio and potentially pose liquidity problems in the secondary market.