SGD NEW ISSUE REVIEW : PERENNIAL REAL ESTATE HOLDINGS LIMITED SGD 3YR (UPDATED)

Issuer : Perennial Treasury Pte. Ltd.
Guarantor:  Perennial Real Estate Holdings Limited
Issuer Rating :  Unrated
Status : Senior Unsecured
Issue Size :  Benchmark
Format :Bearer, Regulation S only and S274/275 of SFA, SG; Issuance off Issuer’s S$2bn Multicurrency Debt  Issuance Programme
Tenor : 3-year
Initial Price Guidance :   4.25% area
Coupon Payment : Fixed Rate, semi-annual, actual/365 (fixed)
Settlement Date:  [ ] March 2015
Maturity Date:  [] March 2018
Denomination :  SGD250k
Governing Law: Singapore Law
Listing:   SGX-ST
Clearing : CDP
UOP :   As per Programme
Joint Global Coordinators: DBS Bank Ltd. and United Overseas Bank Limited Joint Lead Managers
and Joint Bookrunners :    DBS Bank Ltd., Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited
B&D:  DBS Bank Ltd.
Timing:   As early as today

PERENNIAL REAL ESTATE HOLDINGS LIMITED SGD 3YR

–    New Perennial Real Estate Holding Limited SGD 3yr announced

–    Strong IOI received post roadshow and deal is anchored

–    Initial price guidance: 4.25% area

 

–    Timing: As early as today

Comparable Bond :
Guocoland 3.6 Aug 2017 at 100.40, 3.45%

Credit Highlights:
–    Perennial Real Estate Holdings Limited (PREHL) is an integrated real estate owner, developer and manager listed on the Mainboard of the Singapore Exchange. Headquartered in Singapore, the Group focuses strategically on large scale mixed-use developments primarily in the People’s Republic of China (“PRC”) and Singapore. The Group owns interests in and/or manages a diversified portfolio measuring about 36.5 million square feet and over 2.0 million square feet in gross floor area in the PRC and Singapore respectively.
–    PREHL key sponsors comprise Mr Pua Seck Guan (CEO of PREHL), Mr Kuok Khoon Hong (Chairman and CEO of Wilmar), Wilmar International Limited and Mr Ron Sim (Founder, Chairman and CEO of OSIM)
–    In Singapore, PREHL is invested in and manages prime and iconic properties located predominantly in the Downtown Civic District and Orchard Road precinct, such as CHIJMES, Capitol Singapore, TripleOne Somerset and the House of Tan Yeok Nee. The Group also holds stakes in and manages 112 Katong mall, Chinatown Point mall and AXA Tower.
–    PREHL is a dominant commercial developer with sizeable integrated developments in the PRC, of which two are the largest high speed railway commercial hubs in the country, being Chengdu East High Speed Railway Integrated Development and Xi’an North High Speed Railway Integrated Development. PREHL is also invested in the Zhuhai Hengqin Integrated Development.
–    As of 6 Mar 2015, PREHL’s market capitalization stood at SGD1.35 billion. PREHL has total equity of SGD2.35 billion and net debt-to-total equity ratio of 0.59x as of 31 December 2014.

This is the first issue out of Perennial Real Estate Holdings after their takeover of Perennial China Retail Trust in Dec last year and the company got promoted to the mainboard on the SGX.

The old notes issued under PCRT have been guaranteed by them after the takeover with approval of note holders.

Prices of the old bonds.

PCRT 5.25% 07/2016 101.20/102.10 4.38%/3.70%
PCRT 6.375% 09/2015 101.38 3.72%

They have been on a buying spree acquiring 31.2% equity stake in Axa Tower for S$ 117.9 mio in Jan and St James Holdings in Oct last year.

Their new multicurrency debt programme is for S$ 2 bio versus their current market cap of S$ 1.35 bio.

The company description is “now a commercial property developer with large-scale mixed used integrated developments in China, two of which are the largest high-speed railway commercial hubs in the country. Its properties in Singapore include Capitol Singapore, Chijmes and TripleOne Somerset”, along with their St James and Axa acquisitions.

Initially I failed to see how the parent can be issuing at 4.25% when the last 2 PCRT 3Y issues paid 5.25% and 6.375% respectively ?

But I have been informed that the 3 year tenor is favoured these days and 4% is the nice handle that retail customers are comfortable with despite the China exposure. Note that Guoco 2Y came at 3.6%, Ciputra 3Y came at 5.625% and Cambridge Reit 3Y at 3.5%.

3 year interest rates are at their 4 year highs today at 1.77%, nearing the 5 year highs set in Apr 2010 at 1.83%.

The shortage of supply in new issues especially short duration papers make the 4.25% somewhat palatable.

Meanwhile do note that CENCHI 6.5% 2018 USD (BB-/Ba3) is going at 7.9%.

Good luck.