3 New Issue Reviews : Amtek Engineering, UOB USD 10.5NC5.5 Tier 2 and Sabana Reit

NEW ISSUE: AMTEK ENGINEERING LTD SGD 5NC3 YR ISSUE

ISSUER: Amtek Engineering Ltd
SERIES: 001
STATUS: Direct, unconditional, unsubordinated and unsecured Notes
RATING: Unrated
FORMAT: Reg S, S274 & 275 of SFA, issuance off S$500 Million Multicurrency Medium Term Note Programme
ISSUE SIZE: TBD
TENOR:  5NC3 years
ISSUE DATE: 20 Mar 2014
MATURITY DATE: 20 Mar 2019
FIRST CALL DATE: 20 Mar 2017
COUPON: From, and including, the Issue Date to, but excluding, the First Call Date: Fixed Rate of [●]% p.a.           From, and including, the First Call Date to, but excluding, the Maturity Date: Fixed Rate of [●]% p.a. + Step-up Margin
STEP-UP MARGIN:  2.00% if not called on the First Call Date
ISSUER’S REDEMPTION OPTION:  At par, in whole or in part, at First Call Date and at every interest payment date thereafter
UOP: In accordance with the Programme
PAYMENT:  Semi-annual, actual/365 (fixed)
DETAILS:  SGD250K/Singapore Law/CDP
LISTING: SGX-ST

Small Name Going Big Places
Maiden issue for current stock market darling whose share price has risen 25% in 2014. One of the many suppliers counting on Tesla, Apple, Dell and Phillips as their large customers, Amtek has decided to go on an expansion spree and we cannot really blame them because it is a do or die mission and that is why they are paying up for the risk they are about to take. http://www.businessweek.com/news/2014-03-09/tesla-supplier-amtek-spurs-sales-with-takeovers-southeast-asia

5 Year Stock Price

They have strong backing in Stanchart private equity as a shareholder, holding 29% of outstanding stock (mkt cap SGD 321.5 mio), and who have lost quite a bit on their investment although Temasek holds about 4.9% too and Temasek is known for their really long term investment horizon (which means I would probably be dead before you can have your last laugh).

The Value of Stanchart’s holdings of Amtek

The expected coupon is in the low 7%, which is reflective of the risk we should associate with their business model and their sudden and aggressive business stance. 500 mio of borrowings, assuming the MTN is fully utilised, would up their gearing substantially and as it is, their financial leverage is at 3 times as of Jun 13.

And before you start getting soft and sentimental, this is what their revenue looks like.

And my conclusion is ?

A SELL OUT ISSUE.
The fees the RMs are getting is quite an INCENTIVE and equivalent to selling 3-4 times as many Mustafas for each Amtek.

Next please….

UOB Tier 2 10.5NC5.5yr USD Basel Compliant @ 4.1%

Bond Type : Sub-ordinated Bond
Tenor : 10.5NC5.5yr
Product Risk Rating : > This product may only be offered :- (i) in Hong Kong to qualified Private Banking Customers and Professional Investors (as defined under the Securities and Futures Ordinance), and (ii) in Singapore to Accredited Investors (as defined under the Securities and Futures Act).
* For types of bonds other than Vanilla/Straight Bonds (e.g. Callable/Putable/ Perpetual/ High Yield/ Convertible/ Contingent Convertible/Extendable/ Variable-Rate/ Subordinated Bond), we draw your attention to the corresponding risk elements in the  “Additional Risks Associated with Certain
Types of Bonds” section under Risk Disclosures.

ISSUER:  United Overseas Bank Limited
ISSUER RATINGS: Aa1 (Moody’s) / AA- (S&P) / AA- (Fitch)- all stable
EXP ISSUE RATINGS: A2 (Moody’s) / A+ (Fitch)
OFFERING: Basel III-compliant Tier 2 Subordinated Notes
FORMAT: Reg S, Registered. Drawdown from Issuer’s EMTN Programme
SIZE:  US$ Benchmark
TENOR: 10.5NC5.5
RANKING: Direct, unsecured and subordinated Tier 2 capital of the Issuer pursuant to MAS Notice 637
ISSUER CALL: One-time issuer call option at par in year 5.5, subject to MAS approval
EARLY REDEMPTION: Upon occurrence of Change of Qualification or Taxation Events, subject to MAS approval
INTEREST:  Fixed for the first 5.5 years, thereafter reset at  then prevailing 5-year USD mid swap rate plus the Initial Spread
PRICE GUIDANCE: CT5+250bps area (4.1% area)
LOSS ABSORPTION EVENT: Earlier of the MAS notifying the Issuer in writing  (i) that a write-off is necessary or (ii) of its decision to make a public injection of support,(in each case) without which the Issuer would become non-viable
WRITE-DOWN (PARTIAL ALLOWED)*: (i) The Issuer shall permanently reduce the principal amount and cancel any accrued but unpaid interest by an amount as ascertained by the Issuer to be sufficient to ensure the Issuer ceases to be non-viable
WRITE-DOWN (PARTIAL ALLOWED)*: (i) The Issuer shall permanently reduce the principal amount and cancel any accrued but unpaid interest by an amount as ascertained by the Issuer to be sufficient to ensure the Issuer ceases to be non-viable
(ii) Write down will occur only after Additional Tier 1 Securities with loss absorption features are fully written off and pro rata with parity Tier 2 instruments that include loss absorption features * Subject to MAS approval
DETAILS: US$200k/1k denoms, SGX-ST listing
GOVERNING LAW: English law (subordination provisions governed by  Singapore law)
SELLING RESTRICTIONS: Reg S and Section 274/275 of SFA
USE OF PROCEEDS: For general corporate purposes

If you are going to let the crowd of disclaimers and clauses put you off, I hope you are not holding on to the UOB 4.75% perpetual callable 11/2019 then. I chose the UOB 4.75% perp as a comparable because their call dates are almost similar, in 5.5 years time.

“Write down will occur only after Additional Tier 1 Securities with loss absorption features are fully written off” so chances are that the UOB 4.75% will be written off first, if MAS plays by the rules.

UOB is on a roll – 8 issues excluding this one in the past year, in CNY, USD and SGD.

This USD issue would do nicely to replace the USD 5.375% 09/2019 issue that would likely be called in Sep this year.

In terms of pricing, this is too close to the lesser rated and higher risk UOB 4.75% perp to miss at 4.1% (unless it is priced much lower), given that we are seeing about SGD 4.18% on that yield for the perpetual which converts to about 4.35% in USD.

Good luck !

And the one that I missed yesterday….

SABANA REIT SGD 4YR ISSUE

New Sabana Sukuk SGD 4yrs announced
Initial Price Guidance: Low 4s
Timing: This week’s business, as early as today

Comp:  AAREIT 4.9 2016 104.25, 3.05%
MINTSP 3.75 2019 104.50, 2.78%

The bond was finally priced at 4% for SGD 85 mio.

38% of the notes were placed with fund managers and 35% with banks. 23% went to private banks, the person said, asking not to be identified because the details are private
Issuer: Sabana Sukuk Pte.
Status: Senior unsecured Fixed Periodic Distribution Rate Trust Certificates
Rating of Sabana REIT: BBB-/Stable (S&P)
Issue Rating: Unrated
Format: Reg S, S274 & 275 of SFA, issuance off S$500 Million Multicurrency Islamic Trust Certificates Issuance Program
Tenor: 4 Years
Issue Size: S$85 million
Issue Price: 100.00
Rate: 4% (267.8bp above 4yrs sgd sor)

The share price has taken quite a beating in the past 6 months to imply gross dividends of over 8% now. But I note, hmmmm its largest shareholder is Freight Links, holding 6.86%, and Freight Links 4.6% 05/2017 is giving 4.85%. No wonder they are not asking them for a loan like in the case of City Harvest Church.

All said in jest.

Good luck.