SGD New Issue Review : Tiong Seng Holdings 3.5Y
TIONG SENG HOLDINGS SGD 3.5Y
New Tiong Seng SGD 3.5yrs announced, deal is anchored
Initial price guidance: Low 5%
Issuer: Tiong Seng Holdings Limited
Status: Senior, unsecured
Format: Reg S, Bearer, S274 & 275 of Singapore SFA, issued off the SGD250m Multicurrency MTN Programme
Tenor: 3.5 years
Issue Size: TBD
Issue Date: [ ] July 2014
Maturity Date: [ ] January 2018
Payment: Semi-annual, Actual/365 (fixed)
Redemption at the Option of Noteholders upon Cessation or Suspension of Trading of the Issuer’s Shares: At par, if (i) the shares of the Issuer cease to be traded on the SGX-ST, or (ii) trading in the shares of the Issuer on the SGX-ST is suspended for a continuous period of more than seven days
Redemption for Taxation Reasons: Yes, in accordance with the Programme
Redemption at the Option of Noteholders Pursuant to Change of Shareholding Event: At par, if Tiong Seng Shareholdings Pte. Ltd. ceases to own at least 30% of the share capital of the Issuer
Details: SGD250k denoms / Singapore Law / CDP / SGX-ST
Joint Bookrunners: DBS (B&D), HSBC & UOB
Timing: As early as today’s business
Comparable Bond :
KOHSP 4.8 2018 at 101.30, 4.40%
Another familiar name in the local contractor/construction scene that should attract millionaire contractors (plenty of them around after the construction boom in past decade) to buy for their investment portfolios.
Market Cap SGD 177 mio and their share price has seen better days but there is nothing much to worry about because bonds are usually issued when the company is doing well. Indeed, ” As at 31 May 2014, the group had a robust order book size of S$1.27bn, one of the largest among Singapore contractors, which extends to 2017“. (Source : SGX)
Within the past month, we have TS winning an LTA contract and announcing a joint venture with 2 Japanese firms.
There is little to worry about in their Chinese property development business which only contributes about 10% to their revenue. Their revenues are still very much based in Singapore and dependent on Singapore, as their market position consolidates and the weaker players exit after the nation’s move to reduce reliance on foreign labour.
Of the 1 analyst who covers Tiong Seng, the call is for a “Hold” on this family owned name ( almost 70% owned by insiders).
Yes, they are a little more over-leveraged than Koh Brothers. But they pay twice the dividend rate at 3.11% vs Koh Brothers 1.5% although their dividend rate is falling which means stakeholders ought to buy some bonds instead. And I could be right, because the deal is ANCHORED by somebody already (bond coupons and capital gains are all Tax Free. Dividends are Post Tax !)
Like I said in the recent Koh Brothers 4.8% 3.5Y bond issue, there is no need to analyse too much about the company because investors will be company fans and TS has a 50 year track record (vs Koh Brothers’ 40 years). 5% would be a bargain considering that Koh Brothers 4.8% 01/2018 is now trading at 101.25/101.70 (4.41/4.27%).
I just wonder if they will follow Koh Brothers’ lead in a stock buy back exercise next ?
Looks like I’ve found the hog..
I will leverage .. allow 55% onli.
Hi tradehaven thank you so much for the thoughtful writeup again. May I ask how is the response so far for this issue? Thanks
Books approaching 300 mio and closed.
Strong participatioin from both institutions and pte banks.
Expecting sub 5% coupon and issue size between 50-100 mio.
TIONG SENG HOLDINGS SGD 3.5Y
– Books are around S$650mm
– Final price guidance at 4.80% (+/-5bp)
– Expect issue size to be around S$75mm
When it comes to good issues the banks will always grab it first,
we small investors don’t stand a chance. This is customer service
Don’t fret. More coming… Tan Chong and gang all raring to get a piece of the action and money.
I read you highlighted Oxley gearing as 59% and leverage as 11X and you mentioned it is considered high. May I ask, what is the gearing and leverage for Gallant Venture and Tiong Seng? I am sorry I am terribly bad at these. Thank you so much.
Gallant Gearing 33% Fin Leverage 2.1 times
Tiong Seng Gearing 26.5% Fin Leverage 3.7 times
Hi tradehaven, thank you so much for your kind information. In general, my perception is the riskier the bond the higher the coupon they give for similar maturity dates. I happen to get both Tiong Seng 4.75 and Gallant Venture 5.9. I am thinking of selling one of them away. Gallant seem to be able to give me higher YTM but does it mean it is riskier too? But the gearing and leverage I supposed are considered not too different and market capital of Gallant seems to be bigger than Tiong Seng. Is it just that Gallant is more generous and so I consider myself lucky to get 5.9 for three years instead of 4.75 for three years or I am actually exposing myself to relatively higher risk if I keep Gallant and sell Tiong Seng 4.75? Heard this is the first 75 million of the 250 million bonds TS going to issue, I supposed the rest will be issued sometime second half of 2014? May I express my deep and sincere appreciation for your very insightful write ups and information again.
Many many thanks again.
You will only know the answer during a crisis when default strikes.
Both are not the best deals in the market but it really depends.
No one really expected Olam to crash less than a month after it was issued back in Oct 2012 and then no one really expected Temasek to step in after over a year.
Gallant and Tiong Seng should be both very encouraged by their successful bond issues which could mean future issues would be cheaper. Then again, investors could be in for an Aspial and Oxley, reopenings (after the bond has rallied) at 100.
The retail market no one can read very well because it is not a logical one, mainly because retail investors are not credit savvy which does not mean they are wrong, of course.
Much thanks for sharing your thoughts and insights again, really very much appreciated it. The rest of the bonds I hold are all investment grade, apart from a Olam paper but I supposed since Temasek is kind of backing it, it doesnt seem to have any imminent risk. I dont know I am lucky or unlucky to get the Tiong Seng and Gallant, and I feel really uneasy to keep two junk bonds that may default any time. Keeping one seems still manageable. Really not sure what to sell away now. 🙁 I supposed I will keep Gallant if both are just as risky and prone to default since I can get 1% more per year from Gallant. May I just seek one last advice from you on this, are there any ‘signs’ or ‘events’ that I should look out for that may mean the risk of Gallant is getting higher or more prone to default? Political unrest in indonesia? Faster and sharper increase in interest rate by Fed or Indo government than expected or ?? I am so sorry to be bothering you with this. May I express my most sincere appreciation for you effort to keep this site running with countless inspiring and remarkable write ups again. Thank you so much.
I don’t think banks would be irresponsible enough to bring out bonds that will default 1 month after their issuance. That would make them look bad. Thus I would not be worried that they “may default any time”. And there is even less reason for them to default if they just got the cash from the bonds they issued.
Have a good weekend.
Hi tradehaven, much thanks for sharing your thoughts and insights again. Hope everything will be fine and there wont be any defaults soon. Have a fantastic Sunday ahead and a fruitful July ahead too 🙂
Tiong Seng 4.75% 01/2018