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Food Innovators Holding Limited

Food Innovators Holdings Limited ("FIH" or the "Company") is offering 14m shares at $0.22 each, for which 13m shares will be through placement and the remaining 1m shares via a Public Offer. The IPO will close on 14 Nov at 12 noon and starts trading on 16 Oct 9am.  FIH has two business models - the first is to be a master lease and sublease the space to other tenants and the second is to operate and manage restaurants.  The Company currently has 12 restaurants in Japan, 10 in Singapore and 4 in Malaysia. The market cap based on the IPO price is around $24.9m. Financial Highlights FIH's revenue grew from $37.8m in FY2022 to $43.8m in FY2024. It is quite funny to see that being a master land lease holder has a higher margin than operating the restaurants, once again illustrating the point that it is better to be a landlord to shake leg and collect rent. According to the prospectus, the PER is around 19x. The Company intends to pay 20% of its net profit after tax a
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Temasek T2026-S$ Bond - 5 Year 1.8% Per Annum

 


Temasek is issuing new 5-year retail bonds at 1.8% per annum payable semi-annually.  You can find more details on the bonds here but the summary table is below.


The IPO will close on 22 Nov at noon and trading will start on 25 Nov 2021.




The last bond issuance was made in Oct 2018 at 2.7% per annum and you can read my last write up here and about 44% of those polled (144) said they subscribe to the issuance. Since then, interest rate has fallen quite dramatically, in line with global QE induced by Covid 19. Market was pricing in rate hikes in 2022 but that seemed to have been dispelled by global economic chiefs.

Interest rate has been declining since 2019



With interest rates here likely to remain subdued as a background, let's see if it is worth investing in this bond. I will arrange the write up by topics which I think readers will want to know.

Temasek's credit worthiness

Temasek is rated Aaa and AAA by Moodys and S&P respectively and according to them, the risk of default risk is zero. The portfolio value reached a high of S$381b on 31 March 2021 and if you look at the underlying portfolio construct - the largest single company exposure is 6% and it's DBS Group Holdings. While the portfolio is highly diversified, it also means that the DBS position alone is sufficient to "cover" all the debt that was issued by Temasek.


The Company is also lowly geared where the debt is only 5% of its total net portfolio value. 


It also passes all the credit rating ratios with flying colours.


Temasek always leave money on the table, especially for retail investors

In case you don't know, Temasek always leaves money on the table. I am pretty sure they could have tightened the 1.8% pricing if they really want to but no, they want to benefit the retail investors. This creates goodwill and strong demand from its investors for the long run.

According to bankers close to the deal, the institutional placement tranche received strong support and was more than 6x subscribed. 

T2023 bonds are trading at around 1.3%

According to bond supermart, the T2023 bond (5 year) is trading at a yield to maturity of 1.336%. Usually investors will impute an extension risk premium (assuming they want to roll over a bond expiring in 2023 to 2026). At 1.8% for T2026 over 1.33% for T2023, there should be some "upside" for T2026 when it trades.

https://www.bondsupermart.com/bsm/bond-factsheet/AV0642042

What are the Cash Alternatives

I basically view the Temasek bonds as "cash alternatives". In other words, if I have spare cash sitting around doing nothing for a few years, I would consider investing in T-2026 instead. Let's look at what are the other "safer alternatives".

The first alternative is the AAA-rated Singapore Savings bonds. You can see from the table below that the average yield - if you hold it for 5 years - is 0.82%.This is 98 bps lower than T2026.

Source: https://eservices.mas.gov.sg/statistics/fdanet/StepUpInterest.aspx

If you look at a AA rated Fixed Deposit from DBS Bank, the fixed deposit rate is 0.75%

https://www.dbs.com.sg/personal/rates-online/singapore-dollar-fixed-deposits.page


How likely will I get what I apply for?

First of all the size for retail issuance is higher than the $100m on cover. If the greenshoe is exercised (subject to demand), then the offering size will be $250m, which will be lower than the $300m for T-2023.  The Issuer also made it clear that they want to allocate to as many retail investors as possible, meaning that more than 70% of the issuance will be for investors who applied $30,000 or less (if we use the last issuance as a guide).

Considering the lower interest rate of 1.8% this time, the demand will likely be less than the 8x subscribed. Using the last T2023 balloting table as a guide and the intent of the Issuer, there is really no point to subscribe "big big". 

Applying for up to $100,000 will suffice unless you want the incremental few thousand shares. It also means that you cannot 'flip it' given the small allotment and frictional charges.

T2023 - S$ balloting table


Personally I will not be investing in this bond given the low interest rate but I will ask wifey to apply since her cash sits idle in the bank doing nothing.

Mr IPO Chilli Ratings

The ratings are not really applicable here. I will give it a one chilli rating - apply only if you have no better use of the cash or if you can't beat the 1.8% return

Will you be subscribing for T2026 ?

You can take part in the poll here.


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