Property Developer Tuan Sing’s Credit Profile

Shawn Sng  |   20 Oct 2023  |    122 views

Company Overview

Tuan Sing Holdings Limited primarily focuses on real estate investment, real estate development, and hospitality as its areas of interest, and its area of operation spans across Singapore, China, Indonesia and Australia. The Group also holds 44.5% stake in Gul Technologies Singapore Pte Ltd (“GulTech”) – a printed circuit board manufacturer with manufacturing plants in China and also Tuan Sing is listed on SGX (ticker: T24) with a market cap of $340.471 million as of 19th October 2023. The Group is non-rated however.

 

1H2023 Financials

The group had reported a 30% YoY improvement in its Total revenue from $113.9m in 1H2022 to $144.7m in 1H2023. This was largely contributed from higher revenue from its Real Estate Development (+58% YoY: higher progressive revenue recognition of units sold in Peak Residence), Hospitality (+13% YoY: recovery of the Group’s hotel operations in Melbourne following the easing of COVID-19 related restrictions last year) and Real Estate Investment segments (+10% YoY: stronger performance from 18 Robinson and Link@896, with improved occupancies and average gross rental rates).

 

However, the group’s adjusted Earning Before Interest and Tax (EBIT) has shown a decline of 9% YoY from $32.8m in 1H2022 to $32m in 1H2023. This was led by higher construction costs in its Real Estate Development segment ($-0.1m in 1H2022 to $-0.5m in 1H2023) and also a weaker performance from the hotel operations in Perth for its Hospitality segment ($8.3m in 1H2022 to $6.8m in 1H2023).

 

In terms the liquidity position, as of 1H2023 the Group has a net gearing of 0.8 times which is an improvement from its 2H2022 of 0.84 times (as compared to Oxley’s net gearing of 1.66 times as of 30 June 2023, Tuan Sing appears have a better gearing profile). Tuan Sing’s cash and cash equivalents had dipped by 6% from 2H2022 of $252m to $236.2m in 1H2023 and this was mainly due to the net repayment of bank loans of $59.1m and interest payments of $33m. However, looking at the Group’s debt maturing profile, there will be approx. $530m of debts that will be due in 2024 thus translating that $236.2m of cash and cash equivalent will not be sufficient to meet these debt obligations in the following year. Nonetheless, the Group has mentioned that they have sufficient credit lines in place alongside the new upcoming bond issuance, the Group should not face any refinancing difficulty in meeting their debt obligations. If we were to take a close look into their equity reserves, it is currently standing at $1.04bn which is sufficient to bolster the Group if it were to run into liquidity challenges.

 

Overall, Tuan Sing remains within the higher-yielding bond category in line with its peer Oxley Holdings. Despite an improvement in the Group’s performance, investors should still exercise caution and be comfortable with their own risk appetite during consideration. In terms of the attractiveness of the tender offer, it was mentioned in their latest announcement that priority will be given to existing bondholders who wish to participate in both the tender offer and the new issuance. Therefore, the current 6.9% bondholders should take note even if they were to place a tender offer during this period (17 Oct 23 – 31 Oct 23, it is not guaranteed that their offer will be accepted as the Group may not redeem the full outstanding amount. Currently, the bond is trading at 100.25 which gives a yield of 5.318, for previous note owners who previously bought it at par 100 then this tender offer would be attractive (but subject to priority). For information on the new bond issuance, more information will be released on 23rd October 2023.

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