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.

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

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.