SGD New Issue Review : Tee Land 3Y 6.5%
NEW ISSUE: TEE LAND SGD 3YR
Issuer: TEE Land Limited
Status: Senior, unsecured
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
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
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.
And their inventory (of unsold properties, I presume) and other long term assets.
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.
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.