BE Commentary: New SGD bond IPOs now on Bond Express

• SingPost Limited tapped the bond market with two new bond issuances, a 5 year bond at a final price guidance of 3.23% and a NC5.25 perpetual bond at a FPG of 4.35%.

• CapitaLand Investment Limited priced a 5 year senior unsecured bond at a FPG of 3.33%.

• Oxley announced on 27 April 2022 that the company entered into two sale proposals for the sale of their assets in Vietnam for a total of ~SGD 84m.

• Metro Group announced that the company will be forming a strategic collaboration with the Daiwa House Industry Co., Ltd.

• Earnings were lackluster as Credit Suisse suffered a loss to net income attributable to shareholders of CHF 273m.

For the month of April, Bond Express saw investors purchasing newly onboarded bonds from SingPost and CapitaLand Investments. The SGD bond market saw many issuers opting to tap the bond market in April to issue new bonds before the Fed rate hike in May.

The bonds that were onboarded on Bond Express were new issues in Singapore such as STRTR 4.100% 04May2026 Corp (SGD), CLIVSG 3.330% 12Apr2027 Corp (SGD) and FIRTSP 3.250% 07Apr2027 Corp (SGD). The links to their respective credit insights can be found in Table 2.

Table 1: Top traded bonds on SG Bond Express for April

Table 2: New additions to Bond Express for April

SingPost Limited

SingPost Limited (“SingPost”) tapped the bond market with two new bond issuances, a 5 year bond at a final price guidance (“FPG”) of 3.23% and a NC5.25 perpetual bond at a FPG of 4.35%. SingPost is Singapore’s leading postal service provider for over 160 years and today, it provides a wide range of services such as post and parcel delivery, ecommerce solutions, as well as logistics such as warehousing, freight and fulfilment. For the first half of FY21/22 (“1H FY21/22”), revenues for SingPost grew by 3.3% year-on-year (“YoY”), while total operating profit before tax grew 28.4% from SGD 39.8m to SGD 51.1m.

In terms of its credit profile, SingPost has healthy liquidity with a net cash position of SGD 165.8m as at 30 September 2021. Total debt-to-asset ratio also improved slightly from 11.84% as at 31 March 2021 to 11.62% as at 30 September 2021. The Group still maintains a strong interest servicing ability despite a slight decline of its interest coverage ratio (EBITDA/Finance Expense) from 14.4x in March 2021 to 12.1x in September 2021. As such, SingPost has strong credit metrics and it remains well-positioned to pay off its debt obligations.

The SPOST 4.350% Perpetual Corp (SGD) was onboarded on Bond Express and has a current yield to worse (“YTW”) of 3.935%.  It is first callable on 6 April 2027 at par. The perp is callable at any date during the 3 months up to (and including) its first reset date on 6 July 2027. Following which, there will be a 25 basis points ("bps") step-up and it becomes callable on every distribution payment date thereafter, if the issuer decides not to redeem the bond by the first reset date.

There will be an additional step-up margin of 75 bps on 6 July 2047 if the perp is not called by then. Distributions are deferrable but cumulative, and the perp also contains both a dividend stopper and dividend pusher clause with a 6-month look-back period. This incentivizes the issuer not to skip distributions to perpetual bondholders unless they are unable to support payments. The perp is subordinated and has an expected issue rating of BBB- by S&P. We think that the pricing is attractive relative to other investment grade perpetual bonds. However, investors should be mindful of the potential non-call risks in 2027 given the low step-up margin.

Investors who are interested to find out more on SingPost may read our full credit update here.

CapitaLand Investment Limited

CapitaLand Investment Limited (“CLI”) priced a 5 year senior unsecured bond at a FPG of 3.33%. CLI is engaged in fund management, lodging management and capital management with core markets spread across countries like Singapore, China and India. As at 31 December 2021, CLI managed approximately SGD 86b of funds under management (“FUM”) mainly through its 6 listed REITs and business trusts as well as private funds across the world. CLI is majority owned by Temasek Holdings as of February 2022, with a shareholding of 52.0%.

Proceeds from this bond offering will be used to refinance existing borrowings, finance the investments and general corporate purposes of the issuer and the guarantor. Both the issuer and new issue are expected to be unrated. The senior unsecured bond is expected to mature on 12 April 2027, and it may be redeemed early at par for taxation reasons.

For FY2021, revenue of CLI improved 16% year-on-year (“YoY”) from SGD 1.98b to SGD 2.29b, with higher contributions from both its Fee Income-Related Business (“FRB”) and Real Estate Investment Business (“REIB”). The Group also became profit-making in 2021 after incurring a loss in the previous year. Total profit for the year was SGD 1.56b, which is a substantial turnaround from a loss of SGD 0.67b in 2020.

In terms of its credit profile, CLI has a strong liquidity position with SGD 3.9b in cash and cash equivalents and SGD 4.4b in available undrawn bank facilities, which is more than sufficient to cover its short-term borrowings of ~SGD 2.5b. Net debt-to-EBITDA improved from 8.9x in 2020 to 4.7x as at 31 December 2021, while net gearing ratio also improved to 0.48x as compared to 0.62x from a year ago. Interest servicing ability remains healthy with an interest cover ratio of 6.3x for last year (2020: 4.0x) due to a better operating environment during the year. CLI’s debt maturity profile is evenly spread out with an average debt maturity of 2.8 years, and the Group will look to continue extending its debt maturity profile where possible.

Investors who are interested may refer to our new issue view on CLI here.

Oxley Holdings Limited

Oxley announced on 27 April 2022 that the company entered into two sale proposals for the sale of their assets in Vietnam. The first proposed sale is for their land at Thao Dien Ward in Ho Chi Minh City. The Group has an effective interest of 63.9% in the Thao Dien Transaction and the proposed sale price for the land was VND 350b (~SGD 21m).

A separate memorandum of understanding had been entered for the proposed sale of the Group’s entire capital of Phu Thinh Co., Ltd. Oxley has a 80% stake in Phu Thinh and the proposed sale price was VND 100b (~SGD 63m).

We find the proposed sales to be positive to Oxley’s cash flows and credit profile as Oxley seeks to cut down its SGD 1.8b of debt expiring in FY23. Further sales of land and revenue recognition from the completion of its properties will aid Oxley in repaying its debt obligations due in FY23.

For more information on Oxley, investors may read the recent credit update on Oxley here.

Metro Holdings Limited

Metro Group announced that the company will be forming a strategic collaboration with the Daiwa House Industry Co., Ltd (“Daiwa House”) by executing a Memorandum of Understanding (“MOU”). The collaboration will focus in logistic and commercial facilities, as well as housing in Japan, Singapore and the Asia Pacific region. Metro previously invested in Daiwa House Logistics Trust (“DHLT”) for approximately 7.65% of the total issued units in DHLT for a total consideration of approximately SGD 41.3m. DHLT has 14 logistics and industrial properties in Japan with an aggregate net lettable area of 423,920 square metres and appraised value of approximately JPY 80,570m (~SGD 944.4m).

We think Metro has a strong liquidity and credit profile. Metro has kept a healthy liquidity position with a current ratio of 2.50x. Total cash and cash equivalents is SGD 357m, which is more than sufficient to cover short-term borrowings of SGD 288m as at 30 September 2021. Net cash flows from operating activities were stable in 1H FY21/22 and 1H FY20/21. Interest servicing ability remains healthy with an EBITDA coverage of ~2.69x Net debt-to-equity as at 30 September 2021 is 0.16x, which is considerably lower as compared to other comparable property developers

Investors who are interested in Metro Holdings, may read our full credit update here.

Credit Suisse Group AG

Credit Suisse (“CS”) announced its first quarter 2022 earnings (“1Q22”) for the quarter ended 31 March 2022. Earnings were lackluster as CS suffered a loss to net income attributable to shareholders of CHF 273m. The recent market volatility and client risk aversion has also negatively impacted its net revenues, and we do foresee these tough market conditions to persist in the coming months.

Nonetheless, the Group still maintains a sound solvency profile based on the latest quarterly results. CET1 ratio for 1Q22 is 13.8% (vs 12.2% in 1Q21), which remains well above regulatory requirements while liquidity coverage ratio was 196% in 1Q22, demonstrating a continued conservative liquidity position. Its leverage exposure was also down by CHF 11b due to the ongoing de-risking of its investment banking division, while net stable funding ratio improved slightly to 128% from 127% in 4Q21.

About Bond Express

Bond Express is an initiative that allows you to trade a selected list of wholesale bonds with firm executable pricing and volumes, but more importantly, in lot sizes from as little as USD5,000 for USD-denominated wholesale bonds (or SGD 5,000, HKD 5,000, MYR 5,000 for their respective denominated bonds). Click here to find out more about Bond Express. 

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in SPOST 4.350% Perpetual Corp (SGD), CLIVSG 3.330% 12Apr2027 Corp (SGD), OHLSP 6.900% 08Jul2024 Corp (SGD), METRO 4.300% 02Apr2024 Corp (SGD), CS 5.625% Perpetual Corp (SGD) and the analyst who produced this report hold a NIL position in the abovementioned securities.