GuocoLand Limited announces 5Y SGD senior bond at 4.40% FPG

GuocoLand Limited announced that the company is intending to issue a 5-year senior unsecured SGD bond at a final price guidance (“FPG”) of 4.40%. The issuer is unrated and the bond is expected to be unrated. The use of proceeds of the bond will be to finance general working capital and corporate requirements of the group.

GuocoLand Limited ("GuocoLand") is headquartered in Singapore and the principal business activities of GuocoLand and its subsidiaries (“the Group”) are property development, property investment, property management and hotel operations. The company is listed on the SGX mainboard under the ticker, F17. GuocoLand is a subsidiary of Guoco Group Limited, which is a member of the Hong Leong Group – a large conglomerate with many listed firms in Singapore, Malaysia, Hong Kong and London.

GuocoLand's earnings remains relatively strong given its ongoing recovery post-COVID, and we see its smooth recovery on both in its recent half year and full year annual report of 2023 and 2022 respectively.

For the half year ending 31 Dec 2022 (“1H23”), total revenue for GuocoLand summed up to SGD 661.5m, an increase of 46% from 1H22. Its profit also showed a strong improvement over 1H22 with an increase of 19% to SGD 81.4m. This was driven mainly by higher progressive recognition of sales from the Group’s residential projects in Singapore, especially Meyer Mansion and Midtown Modern. Revenue from the Group’s property development business grew by 45% to SGD 550.4m as compared to 1H22.

For the full year ending 30 June 2022 (“FY22”), total revenue for GuocoLand summed up to SGD 965.5m, an increase of 13.1% from FY21. Its profit before tax also showed a strong improvement over FY21 with an increase of 119% to SGD 525.5m. This was mainly due to the performance of two of the Groups’ division – the property development and property investment businesses. In particular, Guoco Midtown saw a significant increase in fair value gain on investment property, which recorded a fair value gain of SGD 328.1m during FY22 as compared to SGD 71.5m in FY21, which led to the Group’s gross profit from its property investment business to grow by 11% to SGD 94.4m for FY22.

GuocoLand continues to see a decent cash flow generating ability with a free cash flow of SGD 975m in 1H23. Total borrowings amounted to SGD 5.21b, of which SGD 2.86b are short-term borrowings. Total loans and borrowings have reduced by 8% since FY22 mainly due to repayments made during the period. However, the total amount remains relatively high, given additional borrowings taken up for the acquisition of the site of Lentor Modern – which saw a successful public launch on 17 September 2022, with 84% sold in the first weekend.

Its liquidity might be limited given a cash position of SGD 993.5m - less than half of its short-term borrowings. However, we believe that GuocoLand is unlikely to see difficulty in meeting this obligation given the incoming proceeds from the Group’s development property sales and potential completion of numerous projects in 2023 and 2024, while its refinancing capabilities should help with the funding. Overall, we find the credit profile of GuocoLand to be decent.

Table 1
GUOLSP Fixed Rate Issuances

The new issue GUOLSP 4.400% 27Jul2028 Corp (SGD) has a FPG of 4.40%, and we think it is fair when compared to its earlier issuances. The indicative yield to maturity ("YTM") of its other fixed rate, senior unsecured notes GUOLSP 3.400% 10Aug2025 Corp (SGD) and GUOLSP 3.290% 26Oct2026 Corp (SGD), is 4.39% and 4.37%, while both issuances hold a considerably shorter term to maturity. For investors considering GuocoLand’s offerings, the existing issuances might be a better option given the shorter duration.

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), and the analyst who produced this report hold a NIL position in the abovementioned securities.

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