SGD NEW ISSUE REVIEW : GALLANT VENTURE 3Y LOW 7%

Issuer:  Gallant Venture Ltd.
Status:  Senior, unsecured, off USD500m EMTN Programme
Rating:  Unrated
Format:   Reg S, S274 & 275 of Singapore SFA
Tenor: 3 Years
Issue Size: TBD
Initial Price Guidance:  Low 7% area
Payment:   Semi-annual, Actual/365 (fixed)

Delisting Put: If, on any date, (A) the shares of the Issuer cease to be traded on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) or (B) trading in the shares of the Issuer is suspended for more than seven consecutive business days on which normal trading of securities is carried out, the Issuer shall, at the option of the holder of any Note, redeem such Note at its principal amount together with interest accrued to the date fixed for redemption which shall be the date (or, if such date is not a business day, on the immediately preceding business day) falling 45 days after the relevant Effective Date. The Issuer shall, within seven business days of the relevant Effective Date, give notice to the Trustee, the Paying Agents and the Noteholders of the occurrence of either event specified in (A) or (B) above (provided that any failure by the Issuer to give such notice shall not prejudice any exercise of such option).

Use of Proceeds:  Refinancing of existing syndicated terms loans
Denomination:  SGD250,000
Governing Law: English Law
Clearing:  CDP
Listing: SGX-ST

They have debts of SGD 238 mio due this year. SGD 103 mio in loans and SGD 135 mio in bonds for their Indomobil arm. Thus it makes sense to borrow via parent which is cheaper.

The big loans are not due till 2017, all USD 583 mio of it.

Debts due :

2015 SGD 583 mio
2015 SGD 440 mio
2017 SGD 1.085 bio
2018 SGD 275 mio

“Cannot say much about their financials because of their acquisition of the auto distribution that threw the first 9 months of 2014 into a loss, according to their latest announcement. ” https://tradehaven.net/market/sgd-new-issue-review-gallant-ventures-2y-7-125/

The MTN programme size is USD 500 mio, SGD 400 mio used which leaves us about SGD 200 mio more to go, unless they manage to upsize the programme in the near future.

Market cap SGD 1.18 bio.

Past bond issues and their spreads.

10 April 2014
Gallant Venture 5.95% SGD 175 mio 2 year at +5.37%
Current price 100.05/100.75  5.98/5.28% (+4.29% premium)

5 May 2014
Gallant Venture 5.9% SGD 150 mio 3 year at +4.9%
Current price 98.95/99.80 6.43/6% (+4.64% premium)

26 Jan 2015
Gallant Venture 7% SGD 75 mio 2.5 year at +5.97%
Current price 100.70/101.55 6.67/6.27% (+4.9% premium)

Not exactly the most liquid of names, but it does look like their bonds have returned nice profits for the trader with their January 2015 issue making >1% in credit terms, defying the higher interest rates.

3 year rates are 1.74% today which means we will be getting at least 5.26%, if the bonds are priced at 7%.

Yearly results released end Feb shows that finance costs have shot up 75% in 2014, related to their acquisition, so it is hard to generalise a trend. Revenues should look better this year given their earnings are not in SGD dollar.

Some profit warnings from the company.
“Commentary On Current Year Prospects

While the Group is hopeful with the launch of Datsun Low Cost Car, it remains cautious of the Indonesian Rupiah exchange rate and high interest rate.

The Industrial Park and Utilities business are recovering from last global crisis while businesses remain challenging and electricity consumption remains low. With increasing labour cost, foreign currency volatilities and potential surcharge on natural gas purchases, the Industrial Parks’ and Utilities’ margin will be impacted. The Group continues to deliver resorts land sales and is hopeful of higher contributions from Phase 1 of the Lagoi Bay Development.” http://www.gallantventure.com/

The other Indonesian bonds in SGD space would be Trikomsel and Ciputra.

Trikomsel 7.875% 06/2017 95.50/96.50 10.21/9.68%
Trikmosel 5.25% 05/2016 95.375/96.25 9.73/8.86%
Ciputra 5.625% 02/2018 101.67/102.08  4.99/4.84%

Gallant, being sandwiched the two, listed in Singapore and counting Sembcorp and the Salim Group as stakeholders, seems like a fair deal given their current market prices and retail comfort with the name.