SGD New Issue Review : Vallianz 2Y 7.5% and a story on listing pigs

Vallianz Holdings 2Year


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

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.”

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.

vallianz stock price

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.