- Credit profile for GuocoLand remains stable despite a slight moderation in debt ratios, helped by the resilient performance from its Singapore business.
- GuocoLand’s bond yields have fallen and are fair when compared to peers. We no longer find it as attractive.
- We recommend bonds from Ho Bee Land, Wing Tai, and OUE Limited for investors seeking higher yields.
- For investors who have followed our recommendation and bought when yields were above 4%, we recommend holding GuocoLand’s bonds till maturity.
1. Property development and investment business fuels continued revenue growth
GuocoLand reported revenue of SGD 1.82B (FY23: SGD 1.54B) in FY24 (full year ended 30 June ‘24), an 18% YoY increase driven by robust growth from both the property development and investment business. The Group’s twin-engine - development and investment property business - continues to remain resilient amidst high interest rates and a moderating Asia growth momentum, generating strong revenue growth.
The property development business recorded a 16% YoY revenue growth to SGD 1.5B, fuelled by strong sales and higher progressive recognition from new high-end residential developments like Midtown Modern, Lentor Mansion, and Lentor Modern. The property investment business – a source of recurring revenue for the Group – recorded a 35% YoY revenue growth to SGD 228.8M in the same period. This was helped by an improvement in recurring rental income as the leases for Guoco Midtown commenced progressively in 2024.
GuocoLand strives towards growing its investment properties while maintaining the value of its development properties. The Group has more than doubled the asset value of its investment properties to SGD6.56B since the TOP (Temporary Occupation Permit) of Guoco Tower in 2017 (GuocoLand’s first major investment property). Investment properties have also continued to see steady valuation gains since 2017, with an SGD 40M fair value gain recorded in FY24, now accounting for 66% of the Group’s total assets.
2. Singapore business remains a key revenue driver
GuocoLand’s Singapore business continued to grow and remain a key revenue driver. As of 30 June 2024, the segment accounted for nearly 75% of the Group’s total assets. In FY24, The segment saw a 21% YoY increase in revenue to SGD 1.47B, accounting for 81% of the Group’s revenue.
The Group’s Singapore investment properties continue to see positive rental reversion for Grade A offices and near-full occupancy rates – Guoco Tower (99%), Guoco Midtown (98%), 20 Collyer Quay (96%). In particular, mixed-used developments like Guoco Tower and Guoco Midtown have shown strong lease demand and stand out with their diversified tenant profile and centralised location, in our view. Guoco Midtown II is also expected to complete in 1H 2025 which should contribute to the Group’s rental income.
On the other hand, GuocoLand’s Singapore development properties have demonstrated strong sales across all its projects. The Midtown projects have largely done well, helped by the mixed-development appeal, good location, and luxury-branding. The Group has also rapidly expanded its footprint in Singapore’s Lentor area with several new projects that have all done well. With the acquisition of the Lentor central site in September 2023, more launches in the Lentor area can be expected. The group has also expanded into other areas with the acquisition of another land parcel like Upper Thomson Road (Parcel B) and Margaret Drive site, suggesting a healthy pipeline of Singapore projects to come.
Table 1: Major upcoming residential developments in Singapore
Project | Units sold
| Expected Completion |
Meyer Mansion | 100% | Q1 2024 (Completed) |
Midtown Bay* | 61% | Q2 2024 (Completed) |
Midtown Modern* | 98% | End-2024 |
Lentor Modern | 99% | 1H2026 |
Lentor Hills Residences* | 90% | End-2026 |
Lentor Mansion* | 77% | 1H2028 |
Source: Company reports Data as of 30 Jun 24 *Jointly developed with partners. | ||
3. Higher financing costs pose as headwind but revenue should remain resilient
Collectively, higher revenue and reductions in administrative and other expenses contributed to a 13% YoY increase in the Group’s operating profit to SGD 320.0 million (FY23: 282.0M). However, profit attributable to equity holders fell 38% YoY to SGD129.0 M (FY23: SGD 207.1M) in FY24.
This was mainly due to a 60% YoY increase in financing costs (FY24: SGD 239.4M) due to the higher interest backdrop and the recognition of interest expense from Guoco Midtown (capitalised upon the property’s completion). That said, with the downshift in global interest rates and upcoming maturity from GuocoLand’s 2025 senior unsecured note, we expect less pressure on financing costs. The Group also recorded lower fair value gains of SGD 40M for its investment properties in FY24 (FY23: SGD 156M) which contributed to the decline in profits.
Our view of GuocoLand’s outlook remains unchanged as we expect revenue to remain resilient, supporting earnings. The group has a relatively large land bank in Singapore and we think the sell-through rate for Singapore residential projects will remain robust, supporting its property development business. We also expect the trend of strong occupancy rates and positive rental growth to continue, particularly across the high-quality Singapore assets, supporting the Group’s investment property business.
4. Borrowings rose slightly but unlikely to face difficulties in meeting debt obligations
Total borrowings for GuocoLand rose by 3% YoY at SGD 5.3B in FY24 from SGD 5.1B in FY23. A majority of the increase came from short-term borrowings which amount to SGD 2.2B. Despite higher levels of borrowings, the majority are backed by assets in Singapore which we deem to be more resilient.
GuocoLand has grown its cash position to SGD 984.2M (as of June -24) from SGD 890.4M a year ago, helped by smaller outflows arising from financing needs. The Group’s short-term borrowings continue to exceed its cash position, but this has narrowed from 1H24. However, we believe the Group is unlikely to face difficulties in meeting short-term obligations due to strong sales momentum from the Singapore residential projects. Recurring revenue from investment properties (SGD 228.8M) should also help offset the bulk of financing costs (FY24: SGD 239.4M) moving forward.
5. Debt ratios have moderated slightly
GuocoLand’s debt ratios have largely worsened due to greater borrowing but just slightly in magnitude. Adjusting for perpetual securities, net debt to EBITDA was estimated to be 14.7x in FY24, improving slightly from last year (FY23: 16.0x). Net debt-to-total asset rose was estimated to be 41.3% in FY24. Nearly unchanged from last year (FY23: 42.0%). Adjusted net gearing was estimated to be 90.5% in FY24, slightly higher than last year (FY23: 89.7%).
Interest coverage also weakened as financing costs rose while earnings softened with EBITDA-Interest coverage (accounting for perpetual distribution) falling to 1.2x in FY24 (FY23: 1.7x). The Group has announced its intention to redeem the GUOLSP 4.600% Perpetual Corp (SGD) on the redemption date of 23 Jan 2025. This redemption should improve adjusted debt ratios, barring further debt refinancing.
Table 2: Debt ratios for GuocoLand
Ratios | FY23 | FY24 |
Net Gearing | 75.8% | 76.6% |
Adj. Net Gearing (Incl. perp) | 89.7% | 90.5% |
EBITDA to Interest (Incl. perp distribution) | 1.7x | 1.2x |
Adj. Net Debt to Total Assets (Incl. perp) | 42.0% | 41.3% |
Adj. Net Debt to EBITDA (Incl. perp) | 16.0x | 14.7x |
Source: Bloomberg L.P., Company Report, iFAST Estimates. | ||
Bond yields have fallen but credit profile remains stable. What should you do?
Table 3: GuocoLand fixed rate bonds
Bond | Ask Price | Yield to Maturity | Years to Maturity |
100.00 | 3.39 | 0.55 | |
99.60 | 3.52 | 1.76 | |
101.10 | 3.55 | 2.37 | |
99.65 | 3.43 | 2.82 | |
102.70 | 3.57 | 3.52 | |
Source: Bondsupermart, Bloomberg L.P., iFAST Compilations. Data as of 20 Jan 2025. | |||
Table 4: Options that offer higher yields
Bond | Issuer | Ask Price | Yield to Maturity | Years to Maturity |
Ho Bee Land Limited | 100.80 | 4.15 | 4.47 | |
Wing Tai Holdings Limited | 103.70 | 3.74 | 3.77 | |
Wing Tai Holdings Limited | 102.70 | 3.68 | 4.20 | |
OUE Treasury | 99.57 | 3.76 | 1.67 | |
OUE Treasury | 99.83 | 4.04 | 4.72 | |
Source: Bondsupermart, Bloomberg L.P., iFAST Compilations. | ||||
GuocoLand’s SGD fixed rate bonds are now trading around mid-3% yields (Table 3), falling in recent months as benchmark rates decline. The Group’s fixed rate bonds were more attractive when we previously recommended, trading above 4% yield. At current levels, yields are fair when compared to other SGD real estate developer bonds (Chart 1) and we think GuocoLand’s bonds are no longer as attractive.
• Instead, we recommend bonds from Ho Bee Land, Wing Tai, and OUE Limited for investors seeking higher yields (Table 2). These bonds are trading at wider spreads than GuocoLand but are stable issuers in our view. Wing Tai and OUE bonds are trading at high-3% to 4% for 2026-2029 maturities while Ho Bee Land’s 2029 bond trades above 4%.
• We recommend holding GuocoLand’s bonds till maturity for investors who have followed our prior recommendations and bought when yields were above 4% - which is an increasingly tough find in the current backdrop. Despite moderation across several credit metrics, we do not expect the Group to face any issues servicing its debt.
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Chart 1: Yields of GuocoLand’s bonds are fair as compared to peers
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in GUOLSP 3.290% 26Oct2026 Corp (SGD), HOBEE 4.350% 11Jul2029 Corp (SGD) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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