Frasers Centrepoint Ltd (market cap: S$4.93b as of 16 Feb 17) has announced a new 10-year senior unsecured SGD-denominated bond issue. This is on the back of strong earnings it reported last week for the recent quarter ended Dec 16 (1QFY17), with revenue and operating profits increasing 45% and 57% year-on-year to S$972 million and S$331 million, respectively. Its stronger performance was due mainly to higher contributions from sales and completions of residential units in Singapore and China. Specifically, over 1QFY17 its Singapore operations benefitted from profit contributions from North Park Residences and the sale of a bungalow at Holland Park along with stable contributions from recurring income from its REIT platforms. In China, the Group achieved sales of 48 units, along with the completion and settlement of 743 units.
Comments on pricing
At the initial price guidance of 4.5%, this would make it the highest yielding bond on Fraser's credit curve, albeit also sporting the longest tenor. We note that the yield is more attractive compared its existing subordinated perpetual bonds (FCLSP 4.880% Perpetual Corp (SGD); FCLSP 5.000% Perpetual Corp (SGD)), which are quoted at 3.98% and 4.2% on a yield-to-call basis respectively, with both issues callable in under 3 years. On a spread basis, the 4.5% price guidance represents a spread of around 185bps over prevailing SGD Swap rates, which is more attractive compared to its existing senior unsecured debt, quoted at between 120-140bps over SOR. However, given the household name and strong ownership structure of Frasers Centrepoint (the Group is 87.4% owned by TCC Assets and Thai Beverage, which are both controlled by Thai billionaire Charoen Sirivadhanabhakdi), we expect strong interest in this new issue, which could tighten the final yield to 4% - 4.25%.
Chart 1: Frasers Centrepoint Ltd's bonds