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
Rating: Unrated
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)
Tenor: 5-year
Denomination: SGD250K
Governing Law: Singapore Law
Listing: SGX-ST
Clearing:  CDP

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.