- Deadline for the tender offer is 17 November, 10am and settlement is expected to be done on or about 18 November.
- Tender size is limited to SGD 75m, but the issuer reserves the rights to increase the size slightly.
- We do not recommend accepting the tender offer as the coupon on the note remains relatively high even amidst this interest rate environment.
On 4 November 2022, Tuan Sing Holdings Ltd (“Tuan Sing”) invited holders of its TSHSP 6.900% 18Oct2024 Corp (SGD) to a tender offer to purchase the perps at a price of 101 per cent of its principal amount. In this article, we shall examine the tender offer and provide some opinions on the offer itself.
About the tender offer
Tuan Sing offers to purchase its TSHSP 6.900% 18Oct2024 Corp (SGD) at a 101 per cent of the issuance or $252,500 for every $250,000 in principal amount of the notes, which they have indicated the rationale of this offer as “re-evaluating the viability and/or timing of some of the potential developments and investments it had contemplated.” This has allowed Tuan Sing to be in a “surplus cash position”.
The maximum acceptance amount offered will be SGD 75m, although Tuan Sing may adjust this amount. The expiration deadline is set on 17 November 2022 at 10 am, with the settlement expected to complete on or about 18 November 2022.
Financial highlights
In the six-month ended 30 June 2022 (“1H22”), Tuan Sing reports a drop in revenue to SGD 113.9m from SGD 143.9m in 1H21 – primarily attributed to the lack of coal delivery in its Industrial Services segment. Across its’ operating segments, revenue from Hospitality improved as a result of the lifting of restrictions, although the improvement was offset by the decrease in revenue from Real Estate Development and Real Estate Investments. The overall profit for the period stands at SGD 8.8m, much lower as compared to the previous years’ SGD 99.9m in 1H21, of which SGD 89.0m came from the disposal of a subsidiary.
Tuan Sing’s cash and cash equivalent fell to SGD 371m in 1H22, from SGD 405m in 2021. The company indicated that the drop is mainly due to repayment of bank loans and interest payments. Their net gearing changed relatively marginally from 0.75x to 0.76x. It remains cautiously optimistic about the outlook for the real estate market.
Quick Comments
A key consideration for Tuan Sing is its inconsistency in being profitable, especially considering that the majority of the profit enjoyed last year was primarily due to the sale of the subsidiary rather than from its operations. With that being said, Tuan Sing has managed to kept itself consistently on a surplus cash position, and coupled with a low net gearing, its liquidity risk in the short term is relatively low where it appears unlikely to run into any issues.
Given that the issue is callable on 18 October 2023 at 102 per cent, and with a considerably high coupon of 6.90%, we believe that investors would benefit more from holding on the bond to maturity in approximately two years’ time. In the unlikely event that the bond is called in 2023, the indicative yield to call is estimated to be 8.95% at ask price of 100. On the other hand, the coupon remains attractive even in this rising interest rate environment, among the selection available in the SGD market. Therefore, we believe that bondholders would stand to gain more by continuing to hold until maturity.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in TSHSP 6.900% 18Oct2024 Corp (SGD) and the analyst who produced this report holds a NIL position in the abovementioned securities.
Our podcast series, Yield Hunters, is available on Spotify, iTunes Podcasts and Google Podcasts. We share our thoughts on new bond issues and hold discussions on the fixed income space. Listen to our latest episode below and follow us!