In November 2018, the Monetary Authority of Singapore (MAS) announced that Singapore’s core inflation rate rose to 1.9% year-on-year (YOY) for October 2018, on the back of higher electricity and gas prices. With a tightening labour market, the MAS projects that core inflation will continue to rise to between 1.5% to 2.5% in 2019.
For conservative investors seeking to beat inflation, the fixed income market on SGX presents many opportunities. In this episode of 4 Stocks This Week, we will look at four retail bonds listed on the SGX.
Astrea IV4.35%B280614# (SGX: RMRB)
Astrea IV Pte. Ltd., a subsidiary of Azalea which is wholly-owned by Temasek, issued $682 million of PE bonds in June 2018. This includes $242 million of Class-A1 bonds, 50% of which were made available to retail investors. The scheduled call date is 14 June 2023, and the maturity date is on 14 June 2028. The bond was oversubscribed by 8.4 times, receiving $890 million in valid applications.
This week (on 14 December 2018), Astrea IV released its first semi-annual distribution report for the period between 1 April 2018 to 14 December 2018, where it recorded a fair value gain of US$83 million. In addition, US$169 million of distributions were received from Private Equity Funds, while US$35 million were invested through capital calls, resulting in US$134 million in net distributions. The net distributions were applied to the Priority of Payments, which went towards payments such as taxes, interest, reserves, and other expenses.
Overall, after accounting for the above cash flow activities, the Astrea IV Portfolio ended the first distribution period with a portfolio NAV of US$1,047 million. For every $1,000 of principal value in class-A1 bonds, an investor would receive $21.81 in interest payments.
As of 30 November 2018, by fund strategy, buyout funds account for 86.5% of portfolio net asset value (NAV), while Growth Equity and Private Equity account for 11.3% and 2.2% respectively. The Top 3 Private Equity Fund Managers by NAV were Blackstone Capital Partners at 10.9%, Silver Lake Partners at 10.4% and PAG Asia at 8.3%.
By geographic segment, Astrea IV’s private equity portfolio is most exposed to the US market, which makes up 63.9% of its portfolio, followed by Asia at 18.3% and Europe at 17.8% respectively.
Astrea IV bonds close at $1.055 this week on 14 December 2018, up from opening price of $1.021 on first day of listing (18 June 2018).
AspialTrea 5.3%b200401 (SGX: BRQZ)
Aspial Corporation Limited is an investing holding company with business interests mainly in real estate, jewellery, financial services and hospitality. In 2016, Aspial issued the 5.3% bonds due in April 2020, offering $50 million to the public and $25 million to institutional investors. The public offer was oversubscribed by 5 times, prompting Aspial to increase its public offering to $175 million.
In Q3 2018, Aspial announced that its revenue soared by 217% YOY from $109.4 million to $347 million, while post-tax profits also ballooned from $1.3 million to $24 million. This surge in revenue was primarily driven by Aspial’s Real Estate Business, due to progress in recognition of sales from the CityGate project in Singapore and the settlement and handover of residential units for its projects in Melbourne, Australia.
In October 2018, Aspial offered bondholders of 2018 and 2019 notes the opportunity to swap for higher-yielding 6.25% notes due in October 2021 to improve its debt position.
The opening price of Aspial 2020 5.3% bonds during listing was $1.002 and it closed at $0.975 this week on 14 December 2018.
Perennial n4.55%200429 (SGX: BSKZ)
Perennial Real Estate Holdings Limited is a real estate and healthcare company headquartered in Singapore. Perennial’s business activities are focused primarily in Singapore and China. In April 2016, Perennial issued $200 million of bonds with a 4.55% coupon. The bond was oversubscribed by 1.6 times, causing Perennial to increase its bond offering to $280 million.
In March 2018, Perennial had acquired Pontiac unit’s 50% stake in Capitol Singapore for $528 million, giving Perennial full ownership of Capitol Singapore.
In Q3 2018, Perennial announced that its revenue rose by 8.7% YOY to $22.2 million. This was driven by new revenue contribution from Capitol Singapore and Perennial’s medical hub in Chengdu.
Perennial’s Q3 2018 earnings before interest and taxes (EBIT) were $247.5 million, much higher than Q3 2017’s $37.5 million, supported by a one-off gain of $241.9 million in fair valuation gains on two plots in Beijing. This sent Perennial’s total profit after tax and minority interest (PATMI) soaring by 185.7% YOY to $48.3 million for Q3 2018.
In August 2018, Perennial issued $180 million of 5.95% notes due in 2020, as part of Perennial’s $2 billion multi-currency debt issuance programme which started in 2015.
Perennial 2020 4.55% bonds closed at $1.015 this week, a slight increase from $1.001 since the first trading day in 3 May 2016.
Temasek 2.7% 231025XB# (SGX: TEKB)
As one of Singapore’s sovereign wealth fund, Temasek invests in many SGX-listed companies.
In October 2018, Temasek issued bonds for retail investors for the first time, and fully guaranteed all interest and principal repayments. The T2023-S$ Temasek Bond, like all Temasek Bonds, has been rated Aaa by Moody’s Investors Service (Moody’s) and AAA by S&P Global Ratings (S&P).
Despite Temasek offering a coupon of 2.7%, one of the lowest amongst SGX-listed retail bonds, there was good response from retail investors, resulting in the Temasek notes being subscribed over 8 times. This result in an upsize of public bond offer by $100 million to $500 million.
While Temasek has a strong net cash position, Temasek CFO Leong Wai Leng said that issuing the Temasek Bonds would further improve Temasek’s funding flexibility, while helping Temasek-owned companies to fund their business operations. In addition, Temasek decided to offer the bonds to retail investors to help broaden its stakeholder base.
Temasek T2023-S$ retail bonds was listed on 26 Oct 2018 with an opening price of $1.025. The latest closing price as of 14 December was $1.019.
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