SGD New Issue : CHINA COAL SOLUTION (SINGAPORE) PTE. LTD.

CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. SGD 2Y

– New SGD 2yrs announced for China Coal Solution Pte. Ltd post successful roadshow in Singapore. Deal is strongly anchored.

– Guarantor: CCS Supply Chain Management Co., Ltd. (listed on the Shanghai Stock Exchange under the ticker code ‘600180’ with a market capitalisation of RMB10.5billion as of 31 August 2014. )

– Initial price guidance: 7.75% area

Comps:

Midas 6.0 2016 at 101.15, 5.42%
Golden Agri 4.2 2017 at 100, 4.20%

Credit Highlights:

– CCS Supply Chain Management Co., Ltd. (“CCS”) is a leading coal supply chain management company in China. It provides  one-stop multi-variety and full process coal supply chain management services and coal supply chain finance services . It is the first coal supply chain management company to be listed on the Shanghai Stock Exchange under the ticker code ‘600180’ with a market capitalisation of RMB10.5billion as of 31 August 2014.

-Long established relationships with leading coal consuming companies: CCS’ clients are mainly state-owned enterprises (“SOEs”). For FY2013, about 90% of the group’s revenue were derived from SOEs, predominantly power companies. CCS has more than 10 years of relationship with the six largest state-owned power companies in China, who contributed more than 50% of the group’s FY2013 revenue.

– Well-established and stable coal procurement network: CCS has a diversified supplier base, with 49% of coal procured from overseas, and none of the suppliers accounting for more than 10% of its FY13 coal supplies.

– Prudent approach to coal procurement and price volatility management: Coal procurement is only conducted upon establishing more contracts with the end-clients, keeping speculative procurement to a minimum. The average contract tenor with clients is one year and is volume-based. The average selling price is negotiated on a monthly or quarterly basis on spot price, which allows CCS to better manage coal price fluctuation.

– Demand for supply chain management remains strong in China: Coal is the predominant source of energy for China, which is the world’s largest consumer of energy and a net import of coal, a trend which is expected to continue. The uneven geographical distribution of coal supply and demand in China necessitates the need for coal distribution and logistics.

– Strong financial performance and prudent capital management: The group’s net profit for FY2013 and 1H2014 was RMB471 million and RMB133 million respectively. As 30 June 2014, the group’s total borrowings/total assets ratio was at 0.30x.
Established company listed in 1998.

Stock Price.

Healthy revenues but operating income looks a tad weak.

Graph : Coal futures curve looking healthy

A hard to evaluate credit.

My initial thoughts – shadow banking comes to Singapore. Not sure if they are involved in any trust products back home. Then again, with 16 years of operations behind them, I am sure there is little chance of their CEO and COO running away together like the Chinese shoe company listed in Frankfurt did. http://www.businessinsider.sg/shoe-company-ceo-coo-go-missing-2014-9/#.VBpBNxaKVX8

The reason for this bond issue is probably because SGX is establishing itself as a serious commodity derivatives clearer, being the largest clearer for iron ore swaps.

7.75% is reasonable coupon although I have not found many comparables out there.

Then again, I trust that the arranging banks would have done their due diligence and homework on the company and gave them the all clear.