The Housing and Development Board (“HDB”) is tapping the bond markets again, this time round with an inaugural green bond at a final price guidance (“FPG”) of 1.845%. The SGD bond is senior unsecured with a tenor of 5 years, thus expecting to mature in March 2027.
HDB is a statutory board under the Ministry of National Development. The public housing authority was established in 1960, and has provided Singaporeans with affordable and quality housing over the years. Some of the principal activities of HDB include developing public housing and facilities, fostering stronger communities by catering to different socio-economic groups, as well as allocating properties to meet the housing needs of the Singapore population. As of 2021, about 80% of Singapore residents live in HDB flats, with more than 90% of these households owning their flats.
The statutory board currently has a credit rating of ‘Aaa’ (stable) / ‘AAA’ (stable) by Moody’s and Fitch respectively. The new issue is also expected to be rated ‘Aaa’ and ‘AAA’ by Moody’s and Fitch respectively. Proceeds from this bond offering will be used to finance or refinance HDB’s Eligible Green Projects under the project category of Green Buildings, which is in line with its Green Finance Framework. This includes the development of new residential and non-residential projects that are planned to achieve the BCA Green Mark certification of Gold Plus or above. HDB will allocate these proceeds to Eligible Green Projects on a portfolio basis no later than 2 years from the date of issuance, subject to unforeseen circumstances and market conditions.
For FY20/21, HDB’s total net assets have improved slightly from SGD 15.36b to SGD 15.37b. Despite having an overall deficit of SGD 2.32b, we should recognise that HDB is a statutory board under the Singapore government. Its deficit is covered by government grant and the Ministry of Finance has funded HDB’s deficits in the past. For FY20/21, the Singapore government has provided a grant of SGD 2.35b to HDB, leaving the public housing authority with a net surplus before tax of SGD 26m for the year.
The government also provides housing development loan facilities to fund its operations, as well as mortgage and upgrading financing loans to help provide assistance to home buyers under the public housing scheme. As such, HDB is a quasi-sovereign entity that is closely linked to the Singapore government. It is Singapore’s sole agency in charge of public housing, thus providing the government with a strong incentive to support the entity if required.
In terms of relative valuation, we think that this new issue is fairly attractive, considering that its current 1.760% 2027 bond with similar remaining years to maturity is yielding at 1.825%. The latest 5-year bond issuance was priced back in November 2021 with a coupon of 1.645%, and it is currently yielding at 1.787%. Considering its close ties to the Singapore government, we believe that the bond is attractive and suitable for investors who are looking for stable income.
Declaration: For or specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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