Month: March 2012
SingTel – BT
SingTel’s US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances
SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.
But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.
Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.
All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.
‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.
Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.
‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.
Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.
Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.
Genting has a Baa3/BBB- credit rating while Olam has no credit rating.
‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.
Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’
Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.
‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.
SingPost – BT
Bankers caution against race for high-yield perps
Read fine print and study their risks, they urge investors
There is a new share fever in town, the sale of high yield perpetual shares. Even at $250,000 a pop, they’re selling like hot cakes, and some eager investors may forget there are some risks.
Attracted to the higher yields, investors may overlook the fine print such as the right to redeem the securities as early as after five years and coupon deferral, said some bankers.
‘Globally there’s a massive hunt for yields, (but) people are quite confused about the concept of perps because they’re not so widely traded,’ said Arjuna Mahendran, the head of investment strategy for Asia at HSBC Private Bank.
‘If in the meantime you need money, you’re at the mercy of the bank which quotes the spread,’ he added.
The sale of Genting Singapore perps which ends today is said to have attracted over $2 billion in orders for a benchmark issue typically believed to be a minimum of $500 million. The perps is guided to pay 5.375 per cent coupon.
Some private bankers have hiked up the cost for Genting to 0.75 per cent from the usual 0.20 per cent due to the strong demand, complained one investor.
Last Friday SingPost perps paying 4.25 per cent received overwhelming subscription, with orders hitting almost $2.5 billion or seven times more than the $350 million issuance.
‘That was an absolute blowout,’ said Clifford Lee, DBS head of fixed income.
‘Out of 10 clients, only one got it,’ said one relationship manager who had some pretty upset customers.
SingPost’s attraction was because it ticked all the right boxes such as ties to the government. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Limited.
‘Deals that have done well in the market tend to have one or more of the following attributes,’ said Todd Schubert, head of credit research, Bank of Singapore. ‘Strong brand name such as SingPost and Genting, a new issuer that provides portfolio diversification, perceived ties or importance to the Singapore government and bondholder friendly structures,’ he said.
Right now there are probably many investors who do not read the fine print. Perhaps they should, especially if they think perps are bonds which they are not.
There are a number of commonalities such as a non-call 5-year structure with a coupon step-up in year 10, said Mr Schubert.
However, there are a number of subtle differences with respect to coupon change, coupon deferrals, call options etc that make each structure unique, he said.
‘At Bank of Singapore, our criteria for analysing perpetual securities is even more stringent than that of other bonds, as they rank only ahead of equity in the capital structure,’ he said.
But Anurag Mahesh, head of global investment and key client solutions, Asia Pacific, at Deutsche Bank Private Wealth Management, said investors do understand that the higher yield comes at a risk.
And for many non-Singapore investors, the perps are popular because they offer exposure to the Singapore dollar, he added.
SingPost – BT
Bankers caution against race for high-yield perps
Read fine print and study their risks, they urge investors
There is a new share fever in town, the sale of high yield perpetual shares. Even at $250,000 a pop, they’re selling like hot cakes, and some eager investors may forget there are some risks.
Attracted to the higher yields, investors may overlook the fine print such as the right to redeem the securities as early as after five years and coupon deferral, said some bankers.
‘Globally there’s a massive hunt for yields, (but) people are quite confused about the concept of perps because they’re not so widely traded,’ said Arjuna Mahendran, the head of investment strategy for Asia at HSBC Private Bank.
‘If in the meantime you need money, you’re at the mercy of the bank which quotes the spread,’ he added.
The sale of Genting Singapore perps which ends today is said to have attracted over $2 billion in orders for a benchmark issue typically believed to be a minimum of $500 million. The perps is guided to pay 5.375 per cent coupon.
Some private bankers have hiked up the cost for Genting to 0.75 per cent from the usual 0.20 per cent due to the strong demand, complained one investor.
Last Friday SingPost perps paying 4.25 per cent received overwhelming subscription, with orders hitting almost $2.5 billion or seven times more than the $350 million issuance.
‘That was an absolute blowout,’ said Clifford Lee, DBS head of fixed income.
‘Out of 10 clients, only one got it,’ said one relationship manager who had some pretty upset customers.
SingPost’s attraction was because it ticked all the right boxes such as ties to the government. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Limited.
‘Deals that have done well in the market tend to have one or more of the following attributes,’ said Todd Schubert, head of credit research, Bank of Singapore. ‘Strong brand name such as SingPost and Genting, a new issuer that provides portfolio diversification, perceived ties or importance to the Singapore government and bondholder friendly structures,’ he said.
Right now there are probably many investors who do not read the fine print. Perhaps they should, especially if they think perps are bonds which they are not.
There are a number of commonalities such as a non-call 5-year structure with a coupon step-up in year 10, said Mr Schubert.
However, there are a number of subtle differences with respect to coupon change, coupon deferrals, call options etc that make each structure unique, he said.
‘At Bank of Singapore, our criteria for analysing perpetual securities is even more stringent than that of other bonds, as they rank only ahead of equity in the capital structure,’ he said.
But Anurag Mahesh, head of global investment and key client solutions, Asia Pacific, at Deutsche Bank Private Wealth Management, said investors do understand that the higher yield comes at a risk.
And for many non-Singapore investors, the perps are popular because they offer exposure to the Singapore dollar, he added.