The Credit Cheatsheet – Still looking for high yield? Here’s NWD with >10%

• In October’s meeting, the European Central Bank (“ECB”) cut its benchmark rates by 25 basis points (“bps”). The bank reflected that the disinflationary process is well on track, while economic indicators have seen recent negative surprises affecting the overall inflation outlook. Meanwhile, the ECB emphasised not committing to any predetermined rate path and will continue to follow a data-dependent approach.  
  
  
• In November’s meeting, the Bank of England (“BoE”) lowered the benchmark Bank Rate by 25 bps to 4.75%, with 8 of the 9 committee members voting to proceed with a cut. The bank sees progress in disinflation, with headline inflation falling to 1.7% YoY in September. Despite the figure falling below BoE’s targeted 2%, the bank expects the measures from the recently announced United Kingdom’s Autumn Budget 2024 to raise inflation by 0.5% at its peak.
  
  
• The Federal Reserve announced a 25bps cut to the Federal Funds target range to 4.50% - 4.75% after November’s meeting, in line with market expectations. Fed Chair Powell continued to emphasise the Fed’s data-dependent stance and will carefully review the ongoing data prior to making further decisions. Meanwhile, as compared to September’s meeting statement, November’s statement saw the removal of “greater confidence that inflation sustainably toward 2 percent”.
  
  
• The Monetary Authority of Singapore (“MAS”) left the monetary policy unchanged, maintaining the current rate of appreciation of the S$NEER policy band. Singapore’s core inflation rate stands at 2.8% year-on-year (“YoY”) in September, seeing a slight rebound as it increases from 2.5% in July and 2.7% in August. MAS expects the momentum to be contained in the fourth quarter and should see further slowing to close to 2% over the next few months.
   
• For the period from 7 October to 8 November, the 2-year Singapore Overnight Rate Average-Overnight Index Swap (“SORA-OIS”) decreased by 9 basis points to 2.5950%, the 5-year SORA-OIS decreased by 2 bps to 2.6150% and the 10-year SORA-OIS decreased by 1 bps to 2.6982%. 
  
  
• Over the same period, yields for the 6-month SGD T-bills rose slightly to 3.00% while the 1-year SGD T-bills dipped by 32 basis points to 2.72%. The 5-year Singapore Government Securities decreased by 5 basis points to 2.72%, while the 10-year Singapore Government Securities decreased by 8 basis points to 2.82%. In the recent 6-month T-bills auctions, bid-to-cover ratio has been falling to the current 1.82 times as of the auction on 7 November, which enabled a slightly rebound in the cut-off yield to 3.04%.

Favourite Bond Investment Ideas

• NWDEVL 4.750% 23Jan2027 Corp (USD) and NWDEVL 5.875% 16Jun2027 Corp (USD) –  High risk, higher rewards with yields above 10%

New World Development (“NWD”) bonds saw a rebound in bond prices after the announcement of remedial measures post-FY24 results, alongside the support measures initiated by the Chinese government for the real estate sector. Despite a poor performance in FY24, we expect the downturn to be limited to the near term and for operational performance to improve progressively. Concurrently, there are plans by the management to divest non-core assets (targeting HKD 13b in FY25), enabling the repayment of debt via asset disposal. As such, we believe the Group’s overall default risk remains highly manageable, making the >10% yield to maturity on both NWD papers an attractive option for investors willing to take the high risk.

• ASLAU 7.500% 26Apr2029 Corp (USD) – New USD option on Bond Express

Perenti Limited’s (“Perenti”) 2029 bond is one of our latest additions to the Bond Express platform, with the company being the largest listed mining service company in Australia at a market cap of AUD 1.1b. The Perenti USD paper is rated BB and BB+ by S&P and Fitch respectively, while we expect to see a credit rating upgrade owing to rising profitability and the use of its cash flows to reduce overall debt levels. At a yield to maturity of 6.1%, the Perenti 2029 paper will be attractive for investors looking into the high yield space.

• STRTR 3.750% 29Oct2025 Corp (SGD) and STRTR 4.100% 04May2026 Corp (SGD) – Preferred choices among short-duration

The Straits Trading Company’s (“STC”) 2025 and 2026 bonds are some of our favourite short-duration bonds at the moment. We are optimistic about STC’s earnings outlook, which sees room for earnings to gradually rebound amidst a recovering macro backdrop. On the other hand, while there has been some moderation in STC’s credit profile, we expect the gradually improving profitability to help improve credit metrics over time.

• TMGSP 5.500% 31May2028 Corp (SGD) –  Awaiting value to be unlocked from its balance sheet

Thomson Medical Group’s (“Thomson Medical”) bonds are popular options on our platform, and we see the reasons why. Although Thomson Medical’s profitability has fallen, we believe the earnings will likely remain stable over the upcoming years. More importantly, we see significant value in the freehold land in Johor Bahru, reserved for the development of the Vantage Bay Healthcare City. Given the surrounding developments around the area, we expect the valuations on this freehold land to improve – which will provide a great boost for bondholders.

Hot New Issues

Table 1: New issuances over the past weeks

Corporate Updates You Should Know

• 9 October – CapitaLand Ascott Trust Management Limited (“CLAS”) announced the divestment of Citadines Karasuma-Gojo Kyoto in Japan for approximately SGD 53.1m. The property was divested at 40.1% above its book value and CLAS has recognised a net gain of SGD 8.0m from the sale.
  
  
  The divestment came a week after the proposed acquisition of lyf Funan Singapore at an agreed value of SGD 263m, utilising proceeds from the divestment of Citadines Mount Sophia Singapore. The management of CLAS reflected that the refreshment of the portfolio is part of its active portfolio reconstitution strategy, which seeks to divest matured assets and reinvest the proceeds towards higher-yielding investments.
  
  
• 11 October – CapitaLand Ascendas REIT Management Limited (“CLAR”) announced that it has entered into a sale and purchase agreement for the sale of 21 Jalan Buroh in Singapore for a sale consideration of SGD 112.8m. CLAR indicated that the sale consideration represents a premium to both the original purchase price (at SGD 58.4m) and independent market valuations (at SGD 67.5m). The management highlighted that the divestment is part of its proactive asset management strategy to improve the quality of the portfolio and optimise returns. 
  
  
• ·14 October – Income Insurance Limited (“Income Insurance”) indicated that the proposed transaction between Allianz Europe B.V. (“Allianz”) and Income Insurance has been rejected by the Singapore government.
  
  
  The ministerial statement by the Minister for Culture, Community and Youth highlighted that the Ministry is concerned over the terms and structure of this transaction, although it remains open to any new arrangement should the concerns become fully addressed. Concurrently, the government intends to make an amendment to the Insurance Act, which enables the Ministry of Culture of Community and Youth to be involved should the insurer be either a cooperative or linked to one.
  
  
  Income Insurance stated in its reply that it would review and take into consideration the upcoming amendment to the Insurance Act, while at the same time, working closely with relevant stakeholders for the next course of action. Meanwhile, Allianz replied that it would similarly work closely with the relevant stakeholders to consider revisions to the proposed transaction structure.
  
  
• 17 October – ESR-LOGOS Funds Management (S) Limited (“ESR-LOGOS REIT”) announced that it has entered into an SGD 225m unsecured sustainability-linked term loan facility agreement and a JPY 15.5b unsecured term loan facility. Proceeds from both loan facilities are expected to be used towards general corporate funding purposes, with the JPY financing to partially fund the acquisition of ESR Yatomi Kisosaki Distribution Centre located in Nagoya, Japan.
  
  
• 17 October – Frasers Logistics & Commercial Asset Management Pte. Ltd. (“FLCT”) announced that it entered into a sale and purchase agreement to acquire the remaining leasehold interest in the property on 2 Tuas South Link 1, Singapore. The purchase price is SGD 140.3m, which represents a discount of approximately 2.5% to the independent appraised valuation. FLCT indicated that the financing of the acquisition will be through external debt financing and is expected to raise the distributable income and distribution per unit of FLCT.
  
  
• 29 October – Olam Group Limited (“Olam”) announced that its wholly-owned subsidiary, ofi Group Limited (“ofi”) has priced USD 65m issuances of 5-year floating rate notes via a private placement. The issuer of the notes is Olam International Limited, a wholly-owned subsidiary of ofi. The proceeds will be used towards the refinancing of ofi’s existing loans and general corporate purposes.
  
  
• 5 November – CapitaLand Investment (“CLI”) announced that it has secured SGD 261m capital commitment from a new Japanese capital partner, Mitsui O.S.K. Lines, Ltd. (“MOL”) for its Southeast Asia and India private funds. This raises CapitaLand SEA Logistics Fund’s (“CSLF”) equity size to SGD 400m, while CapitaLand India Growth Fund 2 (“CIGF2”) will be raised to SGD 525m.
  
  
  The fund-raising efforts are part of CLI’s asset-light growth strategy, maintaining a sponsor stake in the funds while keeping alignment with the interests of its capital partners. CSLF is part of CLI’s three thematic fund strategies launched over the past two years, specifically targeting opportunities within the Southeast Asia region. Meanwhile, CIGF2 is CLI’s second business park development fund in India, aside from two logistics private funds launched in India as well.