SGD New Issue Review : Tee Land 3Y 6.5%


Issuer:  TEE Land Limited
Status: Senior, unsecured
Ratings:  Unrated
Format:  Reg S, Bearer, S274 & 275 of Singapore SFA; Issuance off S$250 Million Multicurrency Medium Term Note Programme
Tenor:  3 Years
Issue Size: TBD
Issue Price:100.00
Coupon: 6.50% area
Issue Date:  27 October 2014
Maturity Date:  27 October 2017
Payment:  Semi-annual, Actual/365 (fixed)
Details: SGD250K / Singapore Law / CDP
Listing:  SGX-ST
Timing:   As early as today’s business

TEE Land Limited is a residential and commercial property developer in Singapore. The Company’s property development projects are pre-dominantly freehold in tenure and are targeted at middle-to-high income consumers who value exclusivity in good locations.

Hardly traded stock on the exchange – No Volume !

70.69% owned by Tee International, an engineering company (mkt cap SGD 125.6 mio).

Market cap of SGD 129.6 mio establishing a SGD 250 mio borrowing programme. Good job !

Now let’s take a look at the operating income.

tee land operating income

And their inventory (of unsold properties, I presume) and other long term assets.

tee land inventories

Then finally, let’s take a look at the bonds that are giving about 6% out there, excluding leverage considerations and defaulted or illiquid bonds.

high yield sgdNote : Prices unverified. List not comprehensive.

Congratulations. Tee Land would be the highest yielding local real estate bond around (China Central coming second).

Strong 3Q results with 365% net profit growth, against the market odds, sounds great on paper until you realise it is SGD 2.7 mio vs SGD 578k.  And the bigger realisation would be that a SGD 50 million issue at 6.5% would wipe that 3 months of profit off immediately (interest expense SGD 3.25 mio per annum). Note that this is supposed to be a good year for them.

That is probably why you are getting 6.5% ! to compensate the risks.

If the bank will offer leverage, I think they must be seeing something in this company that I do not. Then again, wouldn’t they be better off giving them a loan ?  Which means that by selling you the bond, the bank is better off ?

Yet the PB rebate speaks, and they do have a mighty big cohort of retail investors who would be interested in this issue although, like the stock, I expect liquidity to dry up quite instantly after issuance.

Be prepared to hold to maturity.