SGD Bond ReTap : Raffles Education 5.9% 05/2018

RAFFLES EDUCATION – SGD 5.9% MAY-18 TAP

TAP OF THE RLSSP 5.9% May-18 ANNOUNCED DRIVEN BY REVERSE INQUIRIES
PRICE GUIDANCE: 100.00 AREA
EXPECT TODAY’S BUSINESS

Comparables :
Raffles Education 5.9%  May-2018     100.25 / 100.75    5.80% / 5.62%
Overseas Education 5.2%  Apr-2019     104.35 / 104.65    3.99% / 3.91%
G8 Education  4.75% May-2017     100.50 / 101.00  4.5% / 4.24%

They recently upsized their MTN programme to SGD 500 mio from SGD 300 mio and embarked on a stock buyback campaign since Jan this year.

This is what their market cap to total debt looks like.

raffles education mkt cap

And their operating income has been insufficient to cover their interest payments.

raffles edu op income

I have to say this is not the same as Overseas Education and the rest of the field. Raffles Education is more a real estate firm than education provider as we note that their revenues unchanged for the past 3 years with non operating profits in property divestments making up the bulk of their earnings.

5.9% for 3 years is a credit premium of 4.37% compared to the 5.08% premium they paid for 5 years when they issued this paper back in 2013. Lukewarm, at  best.

I am not sure how the market would receive this given their dividend yield is about 3.1% and that there are many bonds out there giving fat yields if we bother to look.

Good luck.