SGD New Issue Review : SABANA REIT SUKUK 4.5Y SGD4.375%



Sabana REIT 4.00%  2018     99.75 / 4.08%
AACI REIT 3.80%  2019    100.07 / 3.78%
VIVA ITRUST  4.15%  2018    100.65 / 3.99%

This is a BBB- rated company which is apparently not popular with investors given that its prior issue is still under water in price.

Not enough bait to the private bank sellers. This issue goes on pure merit and there is no PB rebate to entice buyers which says ALOT if you compare the coupon with say, yesterday’s UNRATED GUOCOLAND.

The previous issue went mostly to bank investment books and fund managers, with PB buyers a minority.

Market Cap SGD 709 mio. Gross Dividend yield 7.33% !! for a REIT structure and Shari’ah compliant slant, which makes it easier to raise money in certain parts of the world with certain investors.

Nothing special or strategic about the properties in their portfolio, looking more like a motley assortment thrown in to make the numbers up for the IPO.

But that is of secondary importance to the bond investment.

This bond is good value for its rating of BBB- which is the same as 4 year Viva Trust issued just a fortnight ago which is a slightly smaller market cap business trust (not REIT). Viva  4.15% 09/2018 is going at 3.99%.

Credit spread wise, this paper is delivering a credit premium of 2.53% over the 5 year interest rate. Compared to their 4 year issue priced at a premium of 2.68%, we are not seeing massive tightening.

And 4.375% is definitely more decent than UNRATED GUOCOLAND (which came with selling commission).

I suspect, however, that Sabana will not do as well as Far East Horizon, also BBB- rated, because of the selling commissions, in terms of name recognition and that Far East is indicating a higher coupon too.

If only this came out yesterday. But we all know why.