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Saturday, 26 March 2016

Aspial Retail Bonds 5.3% 4 Years

Aspial Treasury Pte. Ltd. ("Aspial" or the "Company") is offering up to S$75m worth of bonds through public and placement offering. 

The placement trance of $25m was fully subscribed on its first day. Investors who are keen to invest can try to buy through the ATM as the Company has set aside $50m for the retail tranche. In the event of oversubscription, the Company can upsize the offer to $200m.

This retail offering comes after its inaugural retail bonds issuance in Aug 2015. My post was here.

Application for the public tranche will close on 30 March 2016. For ease of future reference, the key terms are as follows:
  • Interest rate: 5.3% per annum
  • Tenure: 4 years
  • Maturity : 1st April 2020
  • Amount for retail investors:$50m
  • Minimum subscription for retail: $2,000
  • Minimum subscription for placement: $100,000
  • Interest payable on: 1 Apr and 1 Oct each year
  • First interest payment date: 1 Oct 2016
  • Closing: 30 March 2016 - 12pm
  • CPF: Cannot apply or invest after listing
  • SRS: Cannot apply but may invest after listing
  • Listing date: 4 April 2016

The Guarantor for the bonds is Aspial Corporation Limited ("Aspial" or "Guarantor").

Aspial announced a pretty lousy set of financial results in Feb 2016 where profit fell from $53m to $9m.  

Based on the balance sheet below, the key asset will be the development properties to the tune of $875m

And the key liabilities will be the loans and borrowings.

Assuming the values are true and fair, the Company will have ~$376m after selling all the assets and paying off all the debt. This is probably why it can continue to issue new debt even though it is already highly geared.

Solvency Ratios (source: Capital IQ)

Aspial did not release the full set of accounts with notes yet. Based on the press release, it is not exactly encouraging when you see the EBIT/Interest Exp ratios declining from 5.5x to 0.7x over the last 3 years. I certainly don't like the way the ratios are trending.

How are Aspial Bonds trading in the market place?

There is a bond maturing in 2016. My guess is that they are raising the current bond to redeem the one maturing in 2016. One reader asked on my Facebook Page if we are better off buying the previous retail bonds maturing in 28 Aug 2020 in the market. The answer is yes if you are able to buy them below par on SGX as the yield to maturity will be higher than 5.3%.

While the bonds are trading below par, they are certainly not trading at distressed levels, implying market confidence in redeeming the bonds where they mature.

Proposed Spin Off

Aspial is preparing the spin off of its real estate business in Australia and Malaysia on Catalist. The spin off is subject to market conditions but if it happens, the gearing ratio will come down, which is great for bond holders.

Real Estate Business

As of 18 Feb 2016, Aspial has locked in revenue of $580m for property projects in Singapore and this will be progressively recognised based on the stage of construction. It also has locked in A$1.05b worth of revenue from Australia 108 and Avant but these revenue will be recognised only upon completion of projects. Potential revenue based on current market price for Aspial remaining projects is estimated to be > $1.8 billion.

My views

Barring unforeseen circumstances, i believe the Company should be able to repay the bonds as and when they fall due. 

If you can afford $250,000, you are probably better off  buying the bonds OTC that are maturing in 2018 and 2019. It is also interesting to note that this bond with a 4 year tenure will mature before the prior retail bond issued in August last year. My view is that if you are not currently holding on to Aspial bonds, you may want to allocate some for passive income. If you are an existing Aspial bond investors, you may want to wait for other bond issuance for diversification.

Frankly, there are really not many options to choose from in Singapore. The government should encourage more "T-chip" companies to issue bonds to retail investors! Otherwise, we are starved of options and can only choose between Aspial, Oxley and Perennial (all real estate companies). 

Bonds is not meant for flipping. It is in conjunction with my earlier post on creating a stream of passive income through a bond ladder. You can read those posts here


Anonymous said...

How many chili rating?

Mr. IPO said...

No ratings given for bonds. Haven't thought of how to rate them.

Tze Yik said...

How can I get an email subscription from your blog?

Mr. IPO said...

Hi, you can sign up on the top right corner or click on my facebook page :)

Yu Yuan (Yun Ngen) said...

EBIT/InterestExp of 0.7x, means the EBIT cannot cover interest right? So Aspial has to draw down from retained earnings from the past to pay for the current interest due on its borrowings?

Mr. IPO said...

It's about cash flow, not earnings. Sometimes they can use the cash proceeds received from buyers booking the properties but cannot recognized the proceeds as earnings.

Edna said...

Just got interest out for this bond. Crossing finger till the maturity .

Mr. IPO said...

Yes. Fingers crossed. Wifey got her first pay cheque as well.

Anonymous said...

How come I still didn't get the cheque?

Mr. IPO said...

My "cheque" is direct into the bank account from CDP. if yours is physical cheque may need to wait longer...

Anonymous said...

Oh I see. Thank you very much.

Anonymous said...

Can you sell aspial bonds before maturity?

Mr. IPO said...

Yes you can but liquidity may be low and price spreads may be wide

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