SGD New Issue Review : Vallianz 2Y 7.5% and a story on listing pigs
Vallianz Holdings 2Year
NEW ISSUE: VALLIANZ HOLDINGS LIMITED SGD 2YR ISSUE
Issuer: Vallianz Holdings Limited
Status: Direct, unconditional, unsubordinated and unsecured Notes
Rating: Unrated
Format: Reg S, S274 & 275 of Singapore SFA
Tenure: 2 Years
Issue Size: TBD
Redemption upon Cessation or Suspension of Trading of the Issuer’s Shares: Yes, in accordance with the Programme
Redemption for Taxation Reasons: Yes, in accordance with the Programme
Payment: Semi-annual, actual/365 (fixed)
Details: SGD250K/Multicurrency Debt Issuance Programme/Singapore Law/CDP
Listing: SGX-ST
New Vallianz SGD 2yrs announced. Deal is already strongly anchored.
7.5% area
PB Selling Concession:XXX
Comps:
Swiber 7 2016 @ 103.25,5.45%
Ezra 4.75 2016 @ 100.50, 4.48%
Vallianz, the word, does not meaning anything. Go Google it as opposed to valiant etc.. or even Tesla, which means magnetic flux.
25% owned by Swiber since 2010. It is a vessel and equipment owning and leasing company providing marine support services, primarily marine asset ownership, leasing and fleet management.
Market cap : SGD 310 mio. Swiber market cap : SGD 408 mio.
I do not know much about the workings of both companies and I am sure there are many loyal equity supporters out there so I will tell you a story of pigs and how I see it.
Shuanghui International is a privately owned meat processing company that came out of the blue and bought Smithfield Foods Inc, the largest pork producer and processor in the world for USD 7 bio (including 3 bio in debt) in Sep last year. They paid a premium of 31% over the market price at the time of the deal.
So they borrowed the money for the transaction.
Asset = Liability
Now they are listing for another US 5 bio in Hong Kong which means the company is valued at 5 bio now, including the liability.
Asset Revalued Higher = Liability + Equity
I guess the only way to make money is not to work for it.
Just sell it, like most of the stakeholders will although I am not sure about Temasek’s stance.
“…..pave the way for Shuanghui’s investors to exit via a global listing, after a plan to tap China’s capital markets fell through three years ago.
Shanghai-based CDH Investments first invested in the Chinese company seven years ago and remains its biggest shareholder—a rarity considering Chinese private-equity firms sometimes exit their investments in as little as two years. Other shareholders in the pork producer include Goldman Sachs Group Inc.GS -0.74%’s private-equity arm, which first invested in 2006, and Singapore state investment firm Temasek Holdings Pte. Ltd., which invested around 2009.” http://online.wsj.com/news/articles/SB30001424052702303936904579180771391697660
Back to Vallianz.
I am not saying that listing is the best way to make profits these days because revenue is still important, I think.
But that is what Swiber did and now Vallianz is following the parent on a borrowing spree, setting up a 500 mio MTN programme versus market cap of SGD 310 mio.
The alarming bit is that Vallianz is even more highly geared than Swiber (4.4 times) with its financial leverage of 4.6 times total assets over common equity. But things are looking rosy for them as their stock price tripled in the past 6 months as it won US 150 mio worth of chartering contracts in the Middle East.
Middle east ? hmmm, I hope it works out for them.
7.5% for 2 years ?
Do you know that it would be 8% if they did not have to pay the bankers to sell this ?
No wonder nobody is reading about my trade idea for HDB bonds that will potentially give 21% return on capital !
Good luck.
Haha, chase for yields continues! Your HDB idea is nice but 3% return on 90% leverage over 7 years plus rising interest rates; I don’t know…….
VALLIANZ HOLDINGS LIMITED SGD 2YR – UPDATE
Orderbook in excess of S$1bln
Final Price Guidance at 7.20% (+/-5bp), will price within range
Issue size: S$100mm (will not grow)
You got to consider what rising rates will do to highly geared 2nd board listed companies too.
Catalist (former Sesdaq) companies have NO explicit quantitative criteria vs a mainboard listing which requires a sponsor to determine and supervise the listing applicant.
Hi TH,
Don’t disagree with you on that. Your HDB idea is alot more assuring in this rising interest rate environment compared to this paper. I just think there’s maybe better risk reward ratios out there.
Yo RedBaron,
For your guide, I did not buy the HDB too. But I think it is not a bad idea especially against all the junk out there that they are trying to pass off as investments.
Hi Tradehaven sir,
Much obliged for the good advice and caution given,which is not forthcoming from the bank Rms who are more interested in meeting targets; a case of you die your pasal.Please keep up the good work.
Thanks and good luck to you too !
Financial Engineering at its best, the likes of Ezra, Ezion and the infamous Li & Fung are good at it too.
Injecting business segments into another listed entity in exchange for a significant but non-controlling stake (associate company) so that there is no need to consolidate the debt, then gear the associate to the hilt!
The easiest way to make money is not to earn it.
Vallianz Bond Price Today
100.65/101.00 but some people saw 101.00 bid earlier.
Chairman of the company owns 11.5% of this perp issuance
Hiya,
I would be less surprised if Swiber issued at 5.55% to buy Vallianz at 7.2%.
And since I am feeling cheeky, it does make sense for the Chairman and all the owners of the company to buy up this issue because it is a left pocket, right pocket affair. More tax free interest income, less dividends ?
I think I just struck on a goldmine here ! for all these listed companies.
Take cash advance, buy bonds, save on tax.
My comments are not to be taken seriously, of course.
Hahaha. In which case it’s safe for us to buy as well since we are in the same boat as them, and they will look after their own pockets