Hotel Properties plans to issue 5-year SGD bonds at 4.30% IPG

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Hotel Properties Limited announced that the company is intending to issue a new 5 year SGD senior unsecured notes at an initial price guidance (“IPG”) of 4.30%.

Proceeds from the new issue will be used for the refinancing of existing borrowings, including the redemption of HPLSP 4.650% Perpetual Corp (SGD), as well as financing working capital requirements.

Hotel Properties Limited (“HPL”) was incorporated in Singapore on 28 January 1980 and was listed on the SGX in 1982. HPL is an owner and operator of hotels under brands such as Four Seasons, Hilton International and InterContinental Hotels Group. It has 38 hotels under its portfolio and have a presence in 15 countries. Other than hotel management, HPL is also a property developer of premium residential and commercial properties. Some of its past projects include, Tomlinson Heights, Cuscaden Residences as well as joint ventures with CapitaLand such as The Interlace.

For full year financial results ending 31 December 2021 (“FY21”), HPL reported a 33% increase in revenue from SGD 258.8m in FY20 to SGD 344.2m in FY21. Total loss after tax was SGD 5.72m which is a significant improvement from its total loss after tax of SGD 188.1m in FY20 due the hospitality industry being negatively affected by the pandemic. The increase in revenue was due to better performance by HPL’s resorts in Maldives. In addition, the gradual resumption in overseas travel also benefited its hotels in Singapore. However, hotels in other parts of South East Asia were still affected by pandemic-related restrictions.  

For FY21, HPL had cash and bank balances amounting to SGD 85.6m. Total borrowings for HPL was SGD 1.218b, of which SGD 156.9m were short-term borrowings. With a cash-to-short term debt ratio of 0.55x, HPL’s cash is unable to cover its short term borrowings.

In terms of gearing, HPL has an adequate gearing profile, with a net-debt-to-equity of 0.54x. Although HPL’s liquidity is weak, we think the company has headroom to refinance its borrowings with debt as seen from this new issuance where the proceeds will be used to repay its outstanding SGD 150m of HPLSP 4.650% Perpetual Corp (SGD).

Comparing to other HPL bonds of similar maturity, the HPLSP 3.750% 31May2028 Corp (SGD) is trading at an indicative yield to maturity of 4.2%. With an IPG of 4.3%, we think that the new issue is fairly priced and the new issue is suitable for moderately aggressive investors. However, investors should note that the final price guidance for the new bond would likely be lower than the initial price guidance.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position and the analyst who produced this report holds a NIL position in the abovementioned securities.