With several government and corporate bonds maturing in 2025 (including one of our favourites, ESRCAY 5.100% 26Feb2025 Corp (SGD)), we list below six ideas within the SGD bond space that provide above 4% yield to maturity/call and separated them into three categories ‘short’, ‘medium’, and ‘medium to long’ term.
- OLAMSP 4.000% 24Feb2026 Corp (SGD)
- HOBEE 4.350% 11Jul2029 Corp (SGD)
- OUESP 4.000% 08Oct2029 Corp (SGD)
- TMGSP 5.500% 31May2028 Corp (SGD, TMGSP 4.650% 29Oct2029 Corp (SGD)
- BPCEGP 4.600% 21Jan2035 Corp (SGD), BPCEGP 5.000% 08Mar2034 Corp (SGD)
- ACAFP 5.250% 07Sep2033 Corp (SGD), ACAFP 4.250% 14Jan2035 Corp (SGD)
Short-term option
1. OLAMSP 4.000% 24Feb2026 Corp (SGD)
Olam Group Limited (“Olam”) reported a 9% YoY increase in revenue to SGB 26.9b in 1H24, fuelled by higher sales volume growth. EBIT recorded strong growth of 8% YoY to SGD 888.0m while Profit after tax and minority interests (“PATMI”) remained resilient at S$48.1M (1H23: SGD 47.9m), as EBIT growth offset higher taxes and interest costs. We remain optimistic on Olam’s earnings outlook and expect operating conditions to improve from 2H24 onwards. We think the Olam Food Ingredients (“ofi”) segment should continue demonstrating robust growth, in line with management’s medium-term forecast for high single-digit EBIT growth.
Olam’s debt levels have increased to SGD 22.4B in 1H24 due to higher working capital requirements, but movements across credit metrics remain mixed. Net debt-to-EBITDA ratio (adjusted for perps) rose to 7.6x in 1H24 (1H23: 5.7x) while reported net debt-to-equity ratio (“net gearing”) was 260% in 1H24 (1H23: 173%). However, EBITDA-interest coverage ratio (adjusted for perps distribution) improved to 1.5x in 1H24 (1H23: 1.9x) due to solid EBITDA growth. While Olam’s leverage tends to be higher amongst SGD corporates, its liquidity profile remains more than adequate to cover debt obligations. The Group has a total available liquidity of SGD 24.1b, which should cover total debt to SGD 22.4B. We like Olam International’s 2026 SGD bond and find it attractively priced with a yield of around 4.1%. The 2026 bond stands out as there are very limited attractive short-term options across the SGD bond space. We expect little issue in paying off the 2026 bond given Olam’s strong liquidity profile.
Olam has announced that it will sell a 44.6% stake in Olam Agri for USD 1.78b to the Saudi Agricultural and Livestock Investment Company (“SALIC”). Upon completion of the sale, the Group is estimated to realise a gain of SGD 2.4b while SALIC is expected to own a controlling 80.01% stake. The remaining 19.99% stake in Olam Agri is expected to be sold across the next three years. Given Olam’s available liquidity and proceeds from this divestment, we believe the Group still has the ability to cover debt obligations of the 2026 SGD bond, despite a likely drop in profitability.
Medium-term option
2. HOBEE 4.350% 11Jul2029 Corp (SGD)
Ho Bee Land’s (“HBL”) revenues grew 48% YoY to SGD 230m primarily due to higher property development revenues. HBL eventually managed to turn a profit of SGD 35m in 1H24, compared to a loss of SGD -136m in 1H23 as cap rates began to stabilise and fair value losses declined to just SGD -11m in 1H24 (1H23: SGD -208m in 1H23). We think profit headwinds should continue to dissipate in 2H24 as UK cap rates ‘stabilise’ and financing costs fall after the BOE has begun to cut interest rates.
HBL’s net gearing ratio remained stable at 80% over the past twelve months, with management guiding for stability in the near term. The total-debt-to-assets ratio also held steady at around 44%. HBL’s estimated EBITDA-interest coverage ratio fell to 1.6x in 1H24 (1H23: 2.0x) but has room to improve with finance costs stabilising. We also like that HBL’s operating cashflows are positive and fairly stable despite fluctuations from cap-rate movements. Overall, we consider HBL to be more leveraged than other larger developers but the Group’s credit profile has stabilised and there are no signs of credit deterioration at the moment. We like HBL’s 2029 SGD bonds which continue to offer above 4% yield and coupon, one of the higher-yielding ones in the SGD real estate developer space.
Medium-term option
3. OUESP 4.000% 08Oct2029 Corp (SGD)
OUE Limited (“OUE”) has had a rough year, but mainly due to its exposure to China. The Group reported a 3% YoY increase in revenue in 1H24, but adjusted EBIT fell by 81% YoY to SGD 28.1M (1H23: SGD 146.6M). OUE reported a net loss of SGD -69.3M (1H23: SGD 68.2M) which was weighed down by non-cash losses from its 25%-owned associate, Gemdale Properties, due to the property market downturn in China. This has led to a recent guidance for an expected loss attributable to shareholders for FY24 (FY23: SGD 81.1m). That said, we remain optimistic on its underlying businesses such as 1) investment properties, anchored by high-quality Singapore assets and solid dividend income from OUE REIT, and 2) the growing healthcare segment, through its subsidiary, First REIT.
Despite the financial performance, OUE’s net gearing and total debt-to-assets ratio remained stable at 48% and 32% respectively over the past twelve months, generally lower than average for SGD developers. However, the estimated EBITDA-interest coverage ratio fell to 1.4x in 1H24 (1H23: 2.7x) largely due to a drop in earnings. That said, we are not expecting near-term liquidity risks given strong access to the SGD bond market and cash of SGD 186.3m (against short-term debt of SGD 144.8m). We like OUE’s 2029 SGD bonds and the 4% yield stands out, similar to HBL’s 2029 bond. However, we think the credit profile for OUE is slightly better than HBL despite its recent soft financial performance.
Medium-term option
4. TMGSP 5.500% 31May2028 Corp (SGD), TMGSP 4.650% 29Oct2029 Corp (SGD)
Thomson Medical Group (“Thomson Medical”) reported an 18% YoY jump in revenue to SGD 199.1m in 1H25 (1H24: SGD 168.1m). However, the Group recorded a 2% YoY increase in EBITDA and a net loss of SGD 12.6m in the same period. The loss was largely attributed to weaker revenue contribution from the Malaysia business and a spike in finance costs post-acquisition of the Far East Medical Vietnam Limited– something which we had expected. Looking forward, we expect revenue to improve and for full-year earnings to turn positive given valuation gains from its 9.2 hectares of freehold land in Johor Bahru.
Thomson Medical’s credit metrics have weakened in FY24, but it was widely anticipated with the Vietnam Hospital acquisition. Generally, credit metrics have not seen significant deterioration or improvement over the past twelve months. For 1H25, the total debt-to-asset ratio remains unchanged at around 60%, the net debt-to-EBITDA ratio dipped slightly to 9.3x (1H24: 9.7x) while the EBITDA-interest coverage ratio has declined to 1.7x (1H4: 2.3x). The Group continues to report stable operating cashflow (before changes in working capital), as with its past results. Overall, we do not see any concerns for upcoming maturing debt given the Group’s ability to roll over secured bank loans. We like Thomson Medical’s 2028 and 2029 SGD bonds which are offering around 4.4% - 4.6% yield.
Medium to long-term option
5. BPCEGP 5.000% 08Mar2034 Corp (SGD), BPCEGP 4.600% 21Jan2035 Corp (SGD)
Groupe BPCE (“BPCE”) continues to see strong profitability in FY24. Net banking income rose 5% YoY to EUR 23.3b (FY23: EUR 22.2b) while underlying net income rose by a substantial 103% YoY in FY24, driven by broad-based growth across all business lines. The results reaffirmed that the political instability had little effect on the French banking sector, despite two-thirds of the income being contributed by the domestic French market. Overall, BPCE’s strength lies in its diversified financial services offerings in France, which have helped to mitigate the impact of slower traditional banking growth. Approximately 50% of the bank’s net banking income is derived from non-traditional sources (insurance, asset management, and trading activities) which should help fuel BPCE’s growth in the near term.
In terms of capital, BPCE’s pro-forma CET1 ratio stood at 15.6% as of December 2024, after accounting for upcoming acquisitions. This represents a significant 500 bps buffer above the regulatory required levels. S&P Global Ratings upgraded BPCE’s long-term issuer rating from ‘A’ to ‘A+’ earlier in July 2024, citing the bank’s enhanced capacity to absorb losses through increased senior non-preferred issuances. We like BPCE’s 2034 and 2035 investment-grade rated SGD Tier 2 bonds (with a call date at 2029 and 2030 respectively) and yield-to-call of 4.3% - 4.4%. Due to France’s recent political drama, credit spreads for BPCE’s bonds have widened but we think credit fundamentals remain solid. Therefore, bond yields seem attractive to us and we see this as an opportunity amidst tight spreads within the SGD financial bonds.
Medium to long-term option
6. ACAFP 5.250% 07Sep2033 Corp (SGD), ACAFP 4.250% 14Jan2035 Corp (SGD)
Like BPCE, FY24 was another strong year for Crédit Agricole. At the Group level, revenue is up 4% YoY to EUR 38.1b (FY23: EUR 36.5b), whereas net income rose 5% to EUR 9.5b (FY23: EUR 9.1b) in FY24. Crédit Agricole generated stable growth over time, with a near 6% compounded annual growth rate in revenue from FY15 to FY24. Given its highly diversified business lines (both operationally and geographically), the Group remains less exposed to economic turbulence in France.
Crédit Agricole reports one of the highest CET1 ratios across the European banks. The Group reported a CET1 ratio of 17.2% while Crédit Agricole S.A.’s (an arm of the Group and bond issuer) reported a ratio of 11.7% as of December 2024. The latter has a buffer of around 300 bps to regulatory required levels. The Group’s consistent earnings growth has largely offset any increases in risk-weighted assets resulting in stable capital ratios. Like BPCE, credit spreads for Crédit Agricole SA’s bonds have also widened but credit fundamentals remain solid. Therefore, we see opportunities in Crédit Agricole SA’s 2033 and 2035 investment-grade rated SGD Tier 2 bonds (with a call date in 2028 and 2030 respectively) which offer a yield-to-call of around 4.1%.
Chart 1: Bond recommendations
|
Issue |
Ask Price |
Yield to Call/ Maturity |
Years to Call/ Maturity |
|
|
Short Term |
99.90 |
-/ 4.10% |
-/1.00 |
|
|
Medium Term |
101.20 |
- / 4.05% |
-/ 4.38 |
|
|
99.82 |
- / 4.04% |
-/ 4.62 |
||
|
103.30 |
- / 4.40% |
-/ 3.62 |
||
|
100.20 |
- / 4.60% |
-/ 4.68 |
||
|
Medium to Long term |
100.71 |
4.44%/ 4.36% |
4.91/9.91 |
|
|
102.60 |
4.29%/ 4.45% |
4.04/9.04 |
||
|
103.92 |
4.05%/ 4.40% |
3.54/8.54 |
||
|
100.65 |
4.10%/ 4.09% |
4.89/9.89 |
||
|
Sources: Bloomberg Finance L.P., Bondsupermart, iFAST Compilations. Data as of 24 February 2024. |
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