Straits Trading 4.7% 5 Years Senior Unsecured

Shawn Sng  |   17 Jan 2024  |    304 views

Straits Trading has recently announced the issuance of its 4.7% 5-year Senior Unsecured subordinated notes at 4.7%. These bonds carry a maturity date of 5 years on 24 January 2029. These bonds come with a semi-annual coupon payment scheduled on every 24th January and 24th July each year, with the first coupon payment being done on 24th July 2024. This new issuance is non-rated.

 

Company Overview

Straits Trading is a diversified conglomerate headquartered in Singapore. They operate across various sectors, primarily focusing on Property, Resources, and Hospitality. As of 16 January 2024, Straits Trading has a market capital of $794.4mn.

 

Sectorial Activities

  • Resources: It owns a 52% stake in Malaysia Smelting Corporation Berhad (MSC), one of the largest leading integrated tin producers in the world. This provides them with significant exposure to the commodities market.

 

  • Property: It holds substantial property investments in Singapore and Malaysia, both directly through owned properties and indirectly through stakes in companies like ESR Group Limited (3.8%) and Far East Hospitality Holdings (30%).

 

  • Hospitality: Through Far East Hospitality Holdings, it manages and owns a portfolio of hotels and serviced apartments across Asia Pacific and Germany.

 

  • Other Investments: It also has smaller investments in various other sectors, including real estate investment trusts, financial services, and healthcare.

 

 

Straits Trading’s 1H2023

In 1H2023, it reported a -12.7% YoY decrease in its total revenue (from $270.15mn in 1H2022 to $ 235.8mn in 1H2023). The gains in its property revenue (+36.5%) were offset by a decline in tin mining and smelting revenue (-17.7%) due to lower average tin prices despite higher sales volume. Additionally, net profit for Straits Trading has plunged -97.8% YoY (from $673m in 1H2022 to $14.9m in 1H2023) but  this was mainly due to the absence of gain on disposal of ARA Asset Management in H1 last year. Looking at its cash and short-term deposits, Straits Trading has also experienced an uplift of +40.8% HoH (from $251.7m in 2H2022 to $ 354.5m in 1H2023) due to the Exchangeable Bonds issued on 30th January 2023 which was partially used for repayment of borrowings and payment of dividend. As regards its gearing and interest coverage ratio, Straits Trading has a gearing of 95.8% with an interest coverage ratio of 10.06 times (previously 86.1% and 4.22 times* in 1H2022 respectively)

*4.22 was derived after taking away the one-off divestment gains from ARA

 

This new issuance offers yields in the attractive range of 4% and above, making it a compelling option for fixed-income investors. Additionally, Straits’ strong cash position ensures it can comfortably meet its upcoming short-term debt obligations of $143.2 million.

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