SP Group prudent profile may be what investor are looking for in volatile times

Shawn Sng  |   31 Oct 2022  |    161 views

Company background

SP Group is an energy utility company in the Asia Pacific. It owns and operates electricity and gas transmission and distribution businesses in both Singapore and Australia, and implements sustainable energy solutions in Singapore, China, Vietnam and Thailand.

The SP Group’s core business segments comprise a Transmission and distribution business, Market Support Services and Others (such as providing Sustainable Energy Solutions).

SP Group’s transmission and distribution business is driven by the Electricity T&D Business and also the Gas T&D Business in Singapore.

SP PowerAssets (SPPA), a wholly-owned subsidiary of SP, is the sole Transmission Licensee in Singapore.

SPPA owns and maintains the electricity transmission and distribution network that delivers power to electricity consumers in Singapore.

In Australia, SP Group also holds an interest in SGSPAA, an Australian company which is engaged in the transmission and distribution of electricity and gas in Australia. As of June 30, 2022, SP Group owns a 40% interest in SGSPAA.

In the gas sector, PowerGas, a wholly-owned subsidiary of SP, is the sole Gas Transporter Licensee and gas system operator in Singapore. It owns, operates and maintains the gas transmission and distribution network that delivers both natural gas and town gas to gas end-users in Singapore.

 

Additionally, SP group is also a wholly owned subsidiary of Temasek, which is in turn wholly owned by the Government of Singapore through the Ministry of Finance. Temasek is an investment company headquartered in Singapore with a diversified investment portfolio.

 

Corporate Structure

Source: SP Group

 

SP group’s financial for FY2022 (ending 31st March 2022)

In its FY2022 results, SP Group reported net revenue of $2.45billion. This is 2.95% higher YoY as compared to $2.38 billion back in FY2021 and this was due to the increased revenue in all segments such as higher sales of electricity because of power purchased at higher costs, which is a pass-through cost, as well as higher use of system revenue and gas transportation revenue.

Although the SP Group’s EBITDA was reported at $3.39billion in FY2022 – which is roughly an 80% increase as compared to $1.88billion in FY2021 – this was due to a one-off gain from the disposal of interest in an associate of $1.53 billion. The gain arose from the disposal of the group’s interest in AusNet Services on 16th February 2022. Hence, excluding the one-off gain on disposal, the adjusted EBITDA for FY2022 would be $1.85billion.

 

In terms of its credit metrics, SP Group has a credit rating of Aa1 (Moody’s) and AA+ (S&P). The group’s total debt to capital ratio for FY2022 is at 24% and this is 4% lower than its FY2021 at 28%. Interest coverage ratio (excluding the one-off gain from the AusNet divestment) is also at a very comfortable level at 22 times in FY2022. Cash and cash equivalents have also increased from S$1.18 billion in FY2021 to S$4.20 billion in FY2022. This increase was also primarily due to a cash consideration received by SP Group from the AusNet divestment. Lastly, SP Group also have S$500 million worth of undrawn bank facilities if they ever require it.

 

Debt Maturity Profile & Debt Breakdown

SP Group’s debt maturity profile is also spread evenly across the years while also locking 94% of their debts into fixed income instruments to mitigate any interest rate fluctuation risk. All in all, SP Group is the sole electricity and gas T&D operator in Singapore, and has a strong financial profile and prudent financial management. So, investors may consider adding the group’s bonds into their portfolio mix. SP Group did a non-deal roadshow on 19th October 2022. Investors in Singapore would love to see their new SGD deal and demand should be strong if priced correctly. Do remember to do your own due diligence as well.

 

SP Group Outstanding Bonds as of 31st October 2022

Related Articles

Key points for September FOMC Meeting

The U.S. Federal Open Market Committee (FOMC) concluded its two-day meeting on the 20th of September 2023.

Shawn Sng  |   21 Sep 2023

AIA 5.1% NC5.5 Perpetual Tier 2 SGD

AIA Group Limited recently announced the issuance of its NC5.5 Tier 2 perpetual SGD bonds with a final price guidance of 5.1%.

Shawn Sng  |   05 Sep 2023

CapitaLand Ascott Reit 4.2% 5 year Senior Unsecured SGD

CapitaLand Ascott Trust, or CLAS, recently announced the issuance of its 5-year senior unsecured bonds with a final price guidance of 4.2%.

Shawn Sng  |   30 Aug 2023

Disclaimers


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you

?>