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Koh Brothers Group Limited (“KOHSP”) announced that the company will be issuing a 3.5-year unsecured and unsubordinated bond at a coupon rate of 6.50%. The bond will mature on 17 April 2026.
The announcement of the new issue came after KOHSP’s exchange offer of its KOHSP 5.100% 27Oct2022 Corp (SGD) bond, where the company invited its bondholders to exchange their maturing notes for the new KOHSP 6.500% 17Apr2026 Corp (SGD). At the end of its exchange offer, a total of SGD 12.25m in principal amount of the maturing notes will be exchanged for the new notes.
Koh Brothers Group Limited is a construction, property development and specialist engineering solutions company in Singapore. The company was listed on the SGX in August 1994. The Group has more than 40 subsidiaries across Singapore, China, Indonesia and Malaysia. As of 12 Oct 2022, Koh Brothers has a market capitalisation of SGD 61.5m.
For the first half financial results ending 30 June 2022 (“1H22”), KOHSP reported revenues of SGD 158.9m while gross profit increased by 43% year-over-year (“yoy”) to SGD 11.7m. The gains in revenue were attributable to higher revenue recognition from both its Construction and Building materials and Real Estate divisions. KOHSP also saw gains of SGD 7.9m from the disposal of property, plant and equipment. Profit after income tax saw significant improvement of 135% yoy growth to SGD 6.0m.
In 1H22, KOHSP had cash and bank balances of SGD 103.9 while total borrowings stood at SGD 324.3m. Among its borrowings, short term borrowings amounted to SGD 186.9 of which SGD 70m are bonds maturing on 27 Oct 2022. After its exchange offer, the outstanding amount of its KOHSP 5.100% 27Oct2022 Corp (SGD) was SGD 57.75m which the company intends to redeem on its maturity date. Net gearing for the company was 0.8x which we find comparable to other high-yield issuers in Singapore.
We think the new issue from KOHSP is attractive at a high coupon rate of 6.50%. The new KOHSP 6.50% 2026s are comparable to other high yield SGD issuers like CHIPEN 6.500% 06Dec2024 Corp (SGD) (indicative YTM: 5.60%) and HTONSP 6.800% 13Nov2023 Corp (SGD) (indicative YTM: 5.84%). The KOHSP 6.50% 2026s have a short tenor of 3.5 years and this allows the bonds to be less affected by interest rate risks. We think the bonds will be suitable for high yield seekers who would want to invest in a shorter tenor bond.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a NIL position and the analyst who produced this report hold a NIL position in the abovementioned securities.
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