New SGD 4.5YR transaction announced at initial guidance of 3.95% area for Guocoland
– This transaction is on the back of 2 positive developments for the company:
1) a 84.7% growth in revenues, 2.7x% growth in EBITDA and 7.6x growth in Net Profit YoY based on its FY2014 results.
2) Judgment from the Hainan High Court in their favour over its existing Dongzhimen development project
OCBC as Sole Bookrunner will also be offering trading switches for existing holders of the GUOLSP 2% 10/01/2014, GUOLSP 4% 11/25/2014 and GUOLSP 4.25% 02/23/2015 with their concurrent participation in this new transaction.
– Expected Issue Size: S$100M
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GUOLSP 5 02/23/17 102.95, 3.71%
GUOLSP 4.35 09/12/17 101.55, 3.79%
GUOLSP 4.1 05/13/20 99.60, 4.17%
Maturities coming up for Guocoland. $ 250 mil for 2014 and $ 527 mil for 2015.
4.5 year interest rates is about 1.725% today which means this bond is delivering a premium of 2.575%.
The good news is that the company has managed to reduce their debt in the past year, bringing long term borrowings down by a billion dollars. Revenue has grown by almost double and interest expense has fallen by more than half.
And the other good news is that this bond is cheaper than the 7 year they issued last year at 4.1%.
Overall looking healthier this year.
I have little to say except I am neutral on the name these days and there is still the risk of privatisation that has been plaguing them for ages. Guocoland Malaysia is rumoured to be taken private and I made some comments back in 2012 on the Guoco Group privatisation which did not transpire finally.
It is a family empire and there is little risk for shareholders because they are on the same side as the owner. Bond holders should also not have much to fear.
As for the switches that the arranging bank is offering to bondholders, it depends on the price and it looks like it should be a fair deal as long as it is not at 100 except for the 2% coupon issue.
This article was published on www.tradehaven.net, and is republished with permission.