The Straits Trading Company Limited (“STRTR”) announced that they will be issuing a 4 year, unsubordinated and unsecured SGD Notes at a final price guidance (“FPG”) of 4.1%.
The new issue is issued under their SGD 500m Multicurrency Debt Issuance Programme and will be unrated. The use of proceeds of the new issue will be used for general corporate purposes, including the refinancing of existing borrowings and the financing of working capital and capital expenditure requirements of the group.
The Straits Trading Company Limited was founded on 8 November 1887 as a tin smelting company. By the 1900s, Straits Trading had become renowned for tin smelting, and the Pulau Brani smelter had gained international fame for producing the purest tin in the world. After the 1960s, STRTR diversified into other segments such as investment, property development and hospitality. The company is also listed on the SGX mainboard under ticker, S20.
STRTR has a 52.0% stake in Malaysia Smelting Corporation Berhad, the largest independent custom tin smelter in the world, and is also listed on the KLSE under ticker, 5916. STRTR also holds stakes in ARA Asset Management Pte Ltd (22.1%) and Suntec Real Estate Investment Trust (aggregate interest: 11.2%). Upon completion of the merger between ARA Asset Management Pte Ltd and ESR Cayman Limited, STRTR realised approximately SGD 685.6m in valuation uplift for its equity stake in ARA. Post-merger, STRTR holds approximately 4.8% stake in the enlarged ESR.
For full year financial results ending 31 December 2021 (“FY21”), total revenue increased to SGD 396.5m while earnings before interest, tax, depreciation and amortisation (“EBITDA”) also increased to SGD 401.0m. Profit after tax and non-controlling interest (“PATNCI”) was SGD 234.3m as compared to SGD 69.8m in FY20. The increase was due to higher profits in FY21 due to fair value gains from the portfolios of Australian and Korean logistics properties. For the resources segment, Malaysia Smelting Corporation Berhad reported PATNCI of SGD 20.7m in FY21 (FY20: SGD 3.3m). The rise in global commodity prices benefited the resource segment as the average tin price for FY21 increased by 82.5% to RM 130,575 per metric tonne.
For FY21, cash and short-term deposits was SGD 141.6m, this excludes the SGD 134.8m in cash STRTR would gain from the merger between ARA and ESR completed on 20 Jan 2022. Total borrowings for the group totaled to SGD 1.05b in FY21, of which SGD 540.7m are short-term borrowings. The management have said that the company is in progress of refinancing borrowings maturing this year. Due to the strong operating results, STRTR have strong interest paying ability as interest coverage ratio was 12.5x. Net gearing for the group was adequate at 47%.
Comparing to other issuances by the issuer such as the STRTR 3.750% 29Oct2025 Corp (SGD), it has an indicative ask yield to maturity of 3.26% with approximately 3.5 years to maturity. At a FPG of 4.1%, we think the STRTR 4.100% 04May2026 Corp (SGD) is attractive compared to its outstanding 3.75% notes as it provides a step up of 35 basis points for a difference of ~0.5 years in tenure. We recommend this new issue to stable income seekers.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in STRTR 3.750% 29Oct2025 Corp (SGD) and the analyst who produced this report holds a NIL position in the abovementioned securities.
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