SGD New Issues : GUOCOLAND SGD 2.5Y 4% & 5Y 4.5% Dual Tranche

New 2.5Y and 5Y dual tranche transaction for Guocoland announced with an initial guidance of 4% area and 4.5% area respectively.

– This is on the back a strong set of Q2 financial results released yesterday where its gross revenues grew by 40% and its PBT and Net Income more than double versus the same quarter last year.

PB rebate: 20cents on 2.5yrs and 35cents on 5yrs

OCBC would be offering trading switches for existing investors of the following bonds that are participating in the new transaction:
GUOLSP 4 ¼ 02/23/15 Corp
GUOLSP 4 ⅛ 05/13/15 Corp
GUOLSP 4 ⅞ 03/11/16 Corp

– Deal size is benchmark and will be tranched according to demand.

– Timing: Today’s Business

COMPS
GUOLSP 5 02/23/17       103.00, 3.47%
GUOLSP 4.35 09/12/17    101.50, 3.74%
GUOLSP 3.95 04/01/19    99.90, 3.98%
GUOLSP 4.1 05/13/20     99.50, 4.21%

Net profits higher as announced yesterday which means today is a good day for new bonds.

Debts Due :

2015 SGD 1.194 bio  (SGD 527  mio bonds)
2016 SGD 458 mio (SGD 458 mio bonds)
2017 SGD 2.069 bio (SGD 265 mio bonds)
2018 SGD 521 mio
2019 SGD 125 mio (SGD 125 mio bonds)
2020 SGD 125 mio (SGD 125 mio bonds)
Perp SGD 200 mio callable 05/2016 (SGD 200 mio bonds)

Market Cap : SGD 2.15 bio

Size of Bond MTN Programme : SGD 3 bio (upped from SGD 1.5 bio in May 2013). Current utilisation : SGD 1.7 bio.

Their last issue not doing too well, trading at 99 after its launch in Sep 2014, paying a coupon of 3.95% for 4.5 years. https://tradehaven.net/market/sgd-new-issue-review-guocoland-4-5y-4-3/

Now they are paying up to 4.5%, a credit premium of 2.88% over the 5 year interest rates and 4%, a credit premium of 2.81% over the 2.5 year interest rates.

My comments last year even though I do not have anything good to say about them.

“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.”

Now as for the value that they offer ? 4.5% would put them in the same league as the smaller REITs like Viva and Sabana and Cambridge etc and the more stable names like G8 Education.

I remain neutral on them.