SGD New Issue Review : Tiong Seng Holdings 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
Rating:  Unrated
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.

tiong seng revenues

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 ?