SGD New Issue Review : Guocoland 4.5Y 4.3%
GUOCOLAND SGD 4.5YR
– New SGD 4.5YR transaction announced at initial guidance of 4.3% area
– This transaction is on the back of 2 positive developments for the company:
1) a 84.7% growth in revenues, 2.7x% growth in EBITDA and 7.6x growth in Net Profit YoY based on its FY2014 results.
2) Judgment from the Hainan High Court in their favour over its existing Dongzhimen development project
– OCBC as Sole Bookrunner will also be offering trading switches for existing holders of the GUOLSP 2% 10/01/2014, GUOLSP 4% 11/25/2014 and GUOLSP 4.25% 02/23/2015 with their concurrent participation in this new transaction.
– Expected Issue Size: S$100M
GUOLSP 5 02/23/17 102.95, 3.71%
GUOLSP 4.35 09/12/17 101.55, 3.79%
GUOLSP 4.1 05/13/20 99.60, 4.17%
Maturities coming up for Guocoland. $ 250 mio for 2014 and $ 527 mio for 2015.
4.5 year interest rates is about 1.725% today which means this bond is delivering a premium of 2.575%.
The good news is that the company has managed to reduce their debt in the past year, bringing long term borrowings down by a billion dollars. Revenue has grown by almost double and interest expense has fallen by more than half.
And the other good news is that this bond is cheaper than the 7 year they issued last year at 4.1%.
I have not had anything good to say about Guocoland for the past 18 months.
Overall looking healthier this year.
I have little to say except I am neutral on the name these days and there is still the risk of privatisation that has been plaguing them for ages. Guocoland Malaysia is rumoured to be taken private and I made some comments back in 2012 on the Guoco Group privatisation which did not transpire finally. https://tradehaven.net/market/analysis-guocoland-and-petra-foods-bonds-not-in-the-news/
It is a family empire and there is little risk for shareholders because they are on the same side as the owner. Bond holders should also not have much to fear.
As for the switches that the arranging bank is offering to bondholders, it depends on the price and it looks like it should be a fair deal as long as it is not at 100 except for the 2% coupon issue.
I have to rush out for a funeral now. Good luck !
Trading switches for existing holders:
GUOLSP 2% 14 – 100.00/ 2%
GUOLSP 4% 14 – 100.40/ 1.54%
GUOLSP 4.25% 15 – 100.85/ 2.15%
GUOLSP 4.125% 15 – 100.90/ 2.68%
It gets dumb when 4.3% is indicated and people are queuing at 3.95%.
GUOCOLAND SGD 4.5YR
– Final Guidance at 3.95% (the number)
– Orderbooks of SGD 1 billion
– Expected issue size of SGD 100 million with an option for a small increase in the issue size due to the overwhelming demand.
Guocoland 3.95% 04/2019 opening 99.80/99.90
still in the money if we include the PB rebate.
Shareholders can never be on the same side as owner,
Owner got the shares FREE due to the shareholders paying for them.
Bondholders lent their money for him to risk.
It is really good news if he managed to pay down the $5.7B long term debt (due to sales or bonds issued?)
Read various reports about real estate slow down in China leading developers to JB. How true is that?
Yes. I have been told Chinese developers have 20,000 apartments for sale in Iskandar.
Paying back long term debt is better than share buyback which is really in his interest and is happening all around the world and Singapore too.
Just noticed OUE had a sudden spike in earnings before returning to normal profit of $4M per year.
Did they sell something big?
Don’t worry, they will be selling/REIT-ing more assets to get profits soon.
From Stanchart :
“2Q14 net profit below expectations: OUE’s 2Q14 net profit of SGD 4.4mn was 66%
lower y/y and below our estimate of SGD 14.7mn. Its revenue was 9% below our
forecast due to slower income recognition at Twin Peaks. While hotel income from
OUEHT was 6% lower than expected, this was partially offset by lower interest
expenses. Management has proposed a S¢ 1 dividend for 1H14, implying annualised
Asset-heavy, earnings-light: OUE’s earnings declined after
it sold its stabilised hotel and commercial assets to two new REITs in the last
12 months. We expect OUE to sell mature assets, such as Crowne Plaza Changi
Airport and its stake in One Raffles Place, in the next 12 months. We estimate
that these assets make up 21% of OUE’s RNAV and 23% of its 2015 operating