OCBC TREASURY RESEARCH - Asian Credit Daily Monday, July 25, 2022
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OCBC TREASURY RESEARCH Asian Credit Daily Monday, July 25, 2022 Market Commentary ▪ The SGD SORA curve traded mostly lower last Friday, with shorter tenors trading 6-9bps lower, belly tenors trading 11- 13bps lower, and longer tenors traded 13-14bps lower. ▪ There were heavy flows in SGD corporates last Friday, with flows in UOBSP 4.25%-PERPs, BACR 8.3%-PERPs, HSBC 5.25%'32s, ABNANV 5.5%'32s, SOCGEN 8.25%-PERPs, MAPLSP 3.95%-PERPs and UBS 5.875%-PERPs. ▪ UST 10Y yields traded 12bps lower to 2.75% last Friday as risk off sentiments intensified following the European Central Bank’s first rate hike in 11 years and weak economic data increased concerns for an economic slowdown. Separately, S&P Global Flash US Manufacturing Purchasing Managers' Index (“PMI”) came in at 52.3 for July, above Bloomberg median estimates of 52.2 while S&P Global US Services PMI came in at 47.0, below Bloomberg median estimates of 53.0. For the week ahead, investors will be looking ahead to the the Federal Open Market Committee (“FOMC”) meeting and the Federal Reserve’s (“Fed”) interest rate hike decision for July as well as several important economic data releases including second-quarter Gross Domestic Product and weekly initial jobless claims on Thursday, release of Personal Consumption Expenditure price index for June and consumer sentiment data for July on Friday. Credit Summary: ▪ Industry Outlook – Singapore Residential Property: AMO Residence, a joint venture between UOL Group, Singapore Land Group and Kheng Leong Company, sold 98% of its 372 units on the first day of its launch over the weekend following 1,500 cheques collected during the preview stage, implying four times subscription ahead of launch. ▪ GuocoLand Ltd (“GUOL”) | Issuer Profile: Neutral (5): We summarized Business Times’s interview with GUOL’s chief executive Cheng Hsing Yao who shared information about the company. ▪ Mapletree Logistics Trust (“MLT”) | Issuer Profile: Neutral (3): MLT reported its first quarter results for the financial year ending 31 March 2023 (“1QFY2023”), with gross revenue and net property income increasing q/q by 2.6% and 3.9% respectively. ▪ Mercatus Co-operative Limited (“MRCOOP”) | Issuer Profile: Unrated: Per Bloomberg, it was reported last week that CapitaLand Integrated Commercial Trust (“CICT”) and Hong Kong-listed Link Real Estate Investment Trust (“Link REIT”) are among bidders for MRCOOP’s sale of shopping malls under its portfolio, with the assets also having drawn interest from a major property developer based in Singapore.
OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Industry Outlook – Singapore Residential Property:
▪ AMO Residence sold 98% of its 372 units on the first day of its launch over the weekend following
1,500 cheques collected during the preview stage, implying four times subscription ahead of launch.
▪ While prices started from SGD1,890 psf, with one of the penthouses sold at over SGD6mn (at about
SGD2,400 psf), Business Times reported that the market talk suggested the average was around
SGD2,100 psf which may imply a new benchmark for prices in Outside Central Region.
▪ The unsold units were two penthouses and five five-bedroom apartments.
▪ The project is a joint venture between UOL Group, Singapore Land Group and Kheng Leong Company.
▪ According to UOL, ‘buyers are mostly owner-occupiers, while some families have purchased multiple
units so as to live in the same vicinity’. Meanwhile, 55 units were sold to bulk unit buyers and families
who want to purchase units together.
▪ We think that the strong sales at the project demonstrates strong demand by homeowners amidst
dwindling supply in the market, which should keep property prices firm despite rising interest rates.
(Business Times, UOL, EdgeProp)
GuocoLand Ltd (“GUOL”) | Issuer Profile: Neutral (5):
▪ Business Times interviewed GUOL’s chief executive Cheng Hsing Yao who shared information about
the company. We summarise the interview in the following.
▪ GUOL’s objective is to create a multi-platform real estate company by building on end-to-end
capabilities ranging from land acquisition and conceptualization to the development and
management of assets.
▪ Specifically, GUOL intends to shift towards investment properties, particularly in integrated mixed-
use developments, which in turn helps to grow the asset management business.
▪ GUOL is also looking at joint ventures with external partners for development projects to reduce the
need to rely on its balance sheet.
▪ Separately, for Guoco Midtown, GUOL is undertaking a similar approach as Guoco Tower where it
joined up with other landlords to take part in the Business Improvement District (“BID”) programme.
According to URA, BID is a pilot programme to enhance the vibrancy and attractiveness of the
precinct through targeted marketing, hospitality and events. Pilot BID precincts receive matching
seed funding from the government for every dollar of collected membership fees to kick start
stakeholder-led place management initiatives.
▪ GUOL is looking to focus on its 3 core markets, which are Singapore, China and Malaysia.
▪ In relation to Singapore home sales, GUOL observed demand returning after Chinese New Year,
mostly from local buyers. Its projects are well-sold, with Wallich Residence and Meyer Mansion 88%
and 86% sold respectively while that of Midtown Modern and Midtown Bay are 79% and 40%
respectively.
▪ In relation to Singapore offices, Guoco Tower’s occupancy has been maintained at 99% to 100%
through the pandemic while office leasing at Guoco Midtown has been gathering momentum.
Meanwhile, office tenants have higher expectations of ESG performance of both office buildings and
the landlord. (Business Times, Company, URA, OCBC)
Page 2OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Mapletree Logistics Trust (“MLT”) | Issuer Profile: Neutral (3):
▪ For the first quarter results for the financial year ending 31 March 2023 (“1QFY2023”), MLT reported
gross revenue of SGD187.7mn (up 14.6% y/y) and net property income of SGD163.2mn (up 13.2%
y/y). On a q/q basis, this increased 2.6% and 3.9% respectively. The increase in top line was mainly
due to higher revenue from existing properties, full quarter contribution from acquisitions in China,
Vietnam and Malaysia completed in 4QFY2022 and contribution from acquisitions of a property in
China (Mapletree Yuyao, announced in January 2020) and South Korea (Baeksa Logistics Centre) in
April 2022.
▪ EBITDA (based on our calculation which does not include other income and other expenses) for
1QFY2023 was SGD132.8mn, with resultant EBITDA/Interest of 4.3x. Assuming MLT pays out
SGD21.5mn of perpetual distribution p.a (~SGD5.4mn per quarter) and taking this as interest
expense, we find adjusted EBITDA/Interest coverage at 3.7x, still manageable.
▪ Reported aggregate leverage is manageable at 37.2% (31 March 2022: 36.8%). That said, MLT is
expected to continue to gear up to 40-41% as it continues to pursue acquisitions and
redevelopments. We expect proceeds from divestments to be reinvested into growth areas where
MLT is keeping its expansion focus on the Asia-Pacific.
▪ Overall portfolio occupancy was 96.8% as at 30 June 2022, stable versus 31 March 2022’s 96.9%, with
little q/q change (+1%/-1% range) across its geographical markets. Weighted lease expiry profile by
net lettable area was 3.4 years as at 30 June 2022, with 24.2% of leases due for expiry for the
remaining of the financial year FY2023. The lease expiry profile is also relatively concentrated with
52% of these expiring leases in China.
▪ As at 30 June 2022, MLT faces SGD916.3mn of short term debt due (representing 18% of total debt)
whilst available committed credit facilities was SGD848mn. That said, we see MLT’s financial
flexibility as high, with 100% of its portfolio remaining unencumbered and available to raise secured
debt if need be. We maintain MLT’s issuer profile at Neutral (3) and expect this to be stable in the
next 12 months. (Company, OCBC)
Mercatus Co-operative Limited (“MRCOOP”) | Issuer Profile: Unrated:
▪ MRCOOP was reviewing strategic options for the sale of shopping malls under its portfolio in June
2022.
▪ Per Bloomberg, it was reported last week that CapitaLand Integrated Commercial Trust (“CICT”) and
Hong Kong-listed Link Real Estate Investment Trust (“Link REIT”) are among bidders for the SDG4bn
deal. Apart from these two bidders, the assets have also drawn interest from a major property
developer based in Singapore.
▪ Shopping malls under MRCOOP’s portfolio are AMK Hub, Jurong Point and Swing by @ Thomson
Plaza and it also co-owns NEX at Serangoon. Besides these, MRCOOP also owns strata-titled assets
within retail malls across various locations in Singapore and a 31-storey office building – One Marina
Boulevard. (Bloomberg, OCBC)
Page 3OCBC TREASURY RESEARCH
Asian Credit Daily
Key Market Movements
1W chg 1M chg
25-Jul 25-Jul 1W chg 1M chg
(bps) (bps)
iTraxx Asiax IG 157 -13 27 Brent Crude Spot ($/bbl) 103.85 -2.28% -8.19%
iTraxx SovX APAC 40 -4 5 Gold Spot ($/oz) 1,721.13 0.70% -5.58%
iTraxx Japan 92 -10 0 CRB 281.16 1.27% -5.83%
iTraxx Australia 125 -12 7 GSCI 663.45 0.76% -9.74%
CDX NA IG 86 -5 -9 VIX 23.03 -4.95% -15.42%
CDX NA HY 100 1 1 CT10 (%) 2.787% -19.87 -34.33
iTraxx Eur Main 105 -15 -4
iTraxx Eur XO 533 -59 -4 AUD/USD 0.689 1.07% -0.59%
iTraxx Eur Snr Fin 117 -15 -3 EUR/USD 1.018 0.40% -3.78%
iTraxx Eur Sub Fin 219 -31 -8 USD/SGD 1.390 0.45% -0.30%
iTraxx Sovx WE 7 0 2 AUD/SGD 0.957 -0.55% 0.27%
USD Swap Spread 10Y 7 1 0 ASX 200 6,796 1.63% 3.30%
USD Swap Spread 30Y -24 3 0 DJIA 31,899 1.95% 1.27%
US Libor-OIS Spread 19 -1 5 SPX 3,962 2.55% 1.28%
Euro Libor-OIS Spread 69 15 42 MSCI Asiax 644 0.52% -2.32%
HSI 20,609 1.53% -5.11%
China 5Y CDS 82 -5 4 STI 3,181 2.65% 2.24%
Malaysia 5Y CDS 94 -13 2 KLCI 1,466 3.34% 2.03%
Indonesia 5Y CDS 138 -20 12 JCI 6,887 3.53% -2.21%
Thailand 5Y CDS 72 2 13 EU Stoxx 50 3,596 3.43% 1.79%
Australia 5Y CDS 27 -1 6 Source: Bloomberg
Page 4OCBC TREASURY RESEARCH
Asian Credit Daily
New Issues
▪ Qingdao Jimo District Urban Development Investment Co Ltd priced a USD170mn 3-year senior
unsecured bond at 4.9%, tightening from an IPT of 5.2% area.
▪ Excellence Commercial Management Ltd priced a USD100mn 3-year senior unsecured bond at 4.3%.
Date Issuer Size Tenor Pricing
Qingdao Jimo District Urban Development Investment
22-Jul-22 USD170mn 3-year 4.9%
Co Ltd
22-Jul-22 Excellence Commercial Management Ltd USD100mn 3-year 4.3%
Source: OCBC, Bloomberg
Temporary Suspension
▪ Do note that our official coverage on City Developments Limited, Frasers Hospitality Trust and
Frasers Property Limited are temporarily suspended due to OCBC’s other business.
Page 5OCBC TREASURY RESEARCH Asian Credit Daily This publication is solely for information purposes only and may not be published, circulated, reproduced, or distributed in whole or in part to any other person without our prior written consent. This publication should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities/instruments mentioned herein. Any forecast on the economy, stock market, bond market and economic trends of the markets provided is not necessarily indicative of the future or likely performance of the securities/instruments. Whilst the information contained herein has been compiled from sources believed to be reliable and we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee and we make no representation as to its accuracy or completeness, and you should not act on it without first independently verifying its contents. The securities/instruments mentioned in this publication may not be suitable for investment by all investors. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. This publication may cover a wide range of topics and is not intended to be a comprehensive study or to provide any recommendation or advice on personal investing or financial planning. Accordingly, they should not be relied on or treated as a substitute for specific advice concerning individual situations. Please seek advice from a financial adviser regarding the suitability of any investment product taking into account your specific investment objectives, financial situation, or particular needs before you make a commitment to purchase the investment product. OCBC and/or its related and affiliated corporations may at any time make markets in the securities/instruments mentioned in this publication and together with their respective directors and officers, may have or take positions in the securities/instruments mentioned in this publication and may be engaged in purchasing or selling the same for themselves or their clients, and may also perform or seek to perform broking and other investment or securities-related services for the corporations whose securities are mentioned in this publication as well as other parties generally. There may be conflicts of interest between Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), Bank of Singapore Limited, OCBC Investment Research Private Limited, OCBC Securities Private Limited or other members of the OCBC Group and any of the persons or entities mentioned in this report of which OCBC Bank and its analyst(s) are not aware due to OCBC Bank’s Chinese Wall arrangement. This report is intended for your sole use and information. By accepting this report, you agree that you shall not share, communicate, distribute, deliver a copy of or otherwise disclose in any way all or any part of this report or any information contained herein (such report, part thereof and information, “Relevant Materials”) to any person or entity (including, without limitation, any overseas office, affiliate, parent entity, subsidiary entity or related entity) (any such person or entity, a “Relevant Entity”) in breach of any law, rule, regulation, guidance or similar. In particular, you agree not to share, communicate, distribute, deliver or otherwise disclose any Relevant Materials to any Relevant Entity that is subject to the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID”) and the EU’s Markets in Financial Instruments Regulation (600/2014) (“MiFIR”) (together referred to as “MiFID II”), or any part thereof, as implemented in any jurisdiction. No member of the OCBC Group shall be liable or responsible for the compliance by you or any Relevant Entity with any law, rule, regulation, guidance or similar (including, without limitation, MiFID II, as implemented in any jurisdiction). Co.Reg.no.:193200032W Page 6
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