Tuan Sing launches new 3NC2 SGD bond at a FPG of 6.90%

Tuan Sing recently announced a tender offer exercise for their outstanding 7.75% 2022 notes. Payment for the tender exercise is conditional upon this new bond offering, which at a final price guidance of 6.90%, is looking rather attractive.

About the bonds

The bonds are issued under Tuan Sing’s SGD 900m Multicurrency Medium Term Note Programme with a maturity of 3 years but callable at a price of 102 at any time after 18 Oct 2023. The bond comes with cessation put and change of control put features.

About Tuan Sing Holdings

Tuan Sing Holdings Limited (“Tuan Sing”) is a regional real estate company focused on real estate development, real estate investment, and hospitality. Tuan Sing’s key assets include 18 Robinson, Link@896 and The Oxley and they are developers of Mont Botanik Residence and joint-developers for Peak Residence. Their hospitality revenue comes from Grand Hyatt Melbourne and Hyatt Regency Perth, and they also own commercial centres and carparks adjacent to the two hotels.

It has another business segment – industrial services and other investments, where they have an 80.2% stake in SGX-listed SP Corporation Limited and Hypak Sdn. Bhd. The former is a diversified industrial group principally engaged in commodities trading such as coal, rubber and metals, and the latter is a leading industrial packaging producer and supplier of polypropylene woven bags and laminated bags. The Group is also invested in Gul Technologies Singapore Pte. Ltd. (“Gultech”), an established printed circuit board manufacturer with plants based in China.

1H21 operating results

All business segments rebounded strongly in the first half of 2021 (“1H21”) with the group’s total revenue increasing by 57% YoY to SGD 143.9m. Net profit after tax increased by 1436% YoY to SGD 99.9m 1H21. However, SGD 88.9m came from the disposal of its wholly-owned subsidiary, 39 Robinson Road Pte. Ltd. Excluding the gains, adjusted net profit after tax came in at SGD 11.1m, up 236% YoY.

Revenue for the real estate investment segment increased by 7% to SGD 28.3m in 1H21 due to higher occupancies at 18 Robinson and Link@896, and higher average gross rental for the latter. For the real estate development segment, revenue increased by 78% to SGD 55.9m due to higher progressive recognition of units sold at Mont Botanik Residence. Hospitality’s revenue increased as Grand Hyatt Melbourne resumed operations and from Hyatt Regency Perth’s quarantine business. Revenue from industrial services also increased as delivery of coal gradually recovered from the outbreak of COVID-19.

Figure 1: Revenue by business segment

Figure 2: Adjusted EBIT by business segment

Business outlook

The Group recently soft launched Peak Residence for sale. With 88,360 sqft of gross floor area and an average selling price of SGD 2598.50 per sqft, and an equity interest of 70%, we estimate the development property could bring in about SGD 163m in revenue over the next few years. Rental income from the Group’s investment properties has been minimally impacted and is a major contributor to the Group’s recurring income. Hospitality income may start to recover as the Australian state of Victoria continues to increase its vaccination rate and tries holding events.

Credit profile

The Group has SGD 836.47m of debt expiring in the next year of which SGD 65m comprise of the TSHSP 7.750% 19May2022 Corp (SGD), which they have announced a tender offer for. The new bonds will be used to refinance them and for other working capital purposes. The rest of their short-term debt are secured borrowings.

In total, the Group has SGD 1.35b of debt with SGD 1.28b being secured borrowings. The Group has SGD 329.9m in cash and about 22% of their assets are unencumbered. While their current debt is high, they are in talks to refinance them and should still be able to use their properties as collateral.

Net debt/equity has also improved from 1.01x at end-FY20 to 0.79x for 1H21. Adjusted EBIT/interest expense stands at ~1.42x for 1H21, higher than ~0.96x for 1H20. Adjusted interest coverage ratio is also relatively stable due to the Group’s recurring income.

Relative valuation

We compare Tuan Sing to other Singapore property developers or construction companies, i.e. Heeton Holdings, Koh Brothers Group, Oxley Holdings. Tuan Sing has by far, the best credit profile in the group.

Table 1: Credit ratios as of 1H21