OCBC TREASURY RESEARCH - Asian Credit Daily Thursday, May 19, 2022 - OCBC Bank
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OCBC TREASURY RESEARCH Asian Credit Daily Thursday, May 19, 2022 Market Commentary ▪ The SGD SORA curve traded higher yesterday, with shorter tenors trading 4-6bps higher, belly tenors trading 2-3bps higher, and longer tenors trading 1-3bps higher. ▪ There were heavy flows in SGD corporates yesterday, with flows in CS 5.625%-PERPs, UBS 4.85%-PERPs, SOCGEN 6.125%-PERPs, FPLSP 4.98%-PERPs, MAPLSP 3.7%-PERPs, OLGPSP 5.375%-PERPs. ▪ UST 10Y yields traded 11bps lower to 2.88% yesterday, reversing much of the gain in the prior trading day. Risk- off sentiments drove demand for the safe-haven asset, amidst a sell-off in the equities market. The US equity markets incurred significant losses overnight, with the Dow Jones Industrial Average and S&P 500 incurring the largest declines since June 2020, down by 3.57% and 4.04% respectively, while the Nasdaq was down by 4.73% overnight. Separately, the housing market showed signs of slowing, with housing starts for April lower than expected at 1,724,000, below Bloomberg median estimates of 1,756,000, and building permits for April at 1,819,000, above Bloomberg median estimates of 1,814,000 but down from the prior month’s 1,873,000. Credit Summary: ▪ First Real Estate Investment Trust (“FIRT”) | Issuer Profile: Negative (6): FIRT has announced that it has entered into a conditional sale and purchase agreement with PT Siloam International Hospitals Tbk (“Siloam”) and PT Megapratama Karya Bersama (99%-owned by Siloam) for the proposed sale of a 100%-stake in PT Tata Prima Indah. Unitholder approval is required for the proposed sale. ▪ Singapore Airlines Ltd (“SIA”) | Issuer Profile: Neutral (5): SIA’s gross revenue increased by 119.5% y/y to SGD4.8bn for the second half of the financial year ending 31 March 2022 (“2HFY2022”), with all business segments seeing an improvement in revenue. Signalling the strong pent-up demand for travel since the large-scale reopening of international borders, SIA received SGD1.5bn in cash from sales in advance of carriage in 2HFY2022. However, fuel cost is something to watch, with the company having lowered its hedging position from pre-pandemic levels to a more neutral position. We continue to review SIA’s results. ▪ Société Générale SA (“SocGen”) | Issuer Profile: Neutral (4): SocGen has announced the closing of the sale of Rosbank and its Russian insurance subsidiaries. SocGen expects an additional 7bps impact (in addition to an earlier 6bps residual impact) to its CET1 capital position which was 12.9% as at 31 March 2022, around 370bps above its minimum regulatory requirement. The impact will be included in 2Q2022 results with a net loss of ~EUR3.2bn expected.
OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
First Real Estate Investment Trust (“FIRT”) | Issuer Profile: Negative (6):
▪ FIRT has announced that it has entered into a conditional sale and purchase agreement with PT
Siloam International Hospitals Tbk (“Siloam”) and PT Megapratama Karya Bersama (99%-owned by
Siloam) for the proposed sale of a 100%-stake in PT Tata Prima Indah which in turns owns a 100%-
interest in Siloam Hospitals Surabaya for IDR430bn (~SGD40.9mn), subject to post-completion
adjustments. Unitholder approval is required for the proposed sale. As at 31 December 2021, this
property was independently valued at IDR430bn (~SGD40.9mn).
▪ Per FIRT, the net proceeds may be used to repay debt, finance any capital expenditure and asset
enhancement works and/or general corporate and working requirements, and to distribute as capital
gains. (Company)
Singapore Airlines Ltd (“SIA”) | Issuer Profile: Neutral (5):
▪ SIA’s gross revenue increased by 119.5% y/y to SGD4.8bn for the second half of the financial year
ending 31 March 2022 (“2HFY2022”), with all business segments seeing an improvement in revenue.
On a h/h basis, gross revenue grew 69.4%.
▪ Passenger flown revenue was reported to be SGD2.0bn, implying that cargo flown revenue was
~SGD2.4bn in 2HFY2022 as SIA Engineering (~78%-owned subsidiary of SIA) reported revenues of
~SGD303mn in 2HFY2022. By percentage contribution, passenger flown revenue was ~27% of total
revenue in 1HFY2022, but had increased to ~43% in 2HFY2022. Pre-pandemic, passenger revenue
comprised ~80% of the total.
▪ SIA eked out an operating profit of SGD9.7mn in 2HFY2022, significantly turning around from the
reported operating loss of SGD619.4mn in 1HFY2022 (2HFY2021: operating loss of SGD649.6mn).
▪ EBITDA (based on our calculation which excludes fuel hedging ineffectiveness) was SGD1.0bn in
2HFY2022, with resultant EBITDA/Interest highly encouraging at 5.1x.
▪ Signalling the strong pent-up demand for travel since the large-scale reopening of international
borders, SIA received SGD1.5bn in cash from sales in advance of carriage (largely from ticket sales),
boosting its net cash flow from operations in 2HFY2022. SIA has guided that forward sales (measured
as a percentage of total number of seats available) for June, July and August 2022 is approaching pre-
COVID-19 levels for the corresponding periods, though cargo demand is expected to be volatile in the
near term.
▪ In April 2022, group passenger load factor was 72.7% (84.5% in January 2020 before COVID went
global) while April 2022’s passenger capacity (measured in available seat-kilometres) was 57% of
January 2020 levels.
▪ Per company, average jet fuel prices before hedging for FY2022 was USD90.31 per barrel although
spot prices were ~USD150 per barrel in early May 2022. Fuel cost is something to watch, with the
company having lowered its hedging position from pre-pandemic levels to a more neutral position.
SIA has hedged 40% of its fuel requirements from 1QFY2023 to 1QFY2024 at an average hedged price
for brent at USD60 per barrel.
▪ As at 31 March 2021, unadjusted gross gearing which factors in the mandatorily convertible bond
(conversion option held by SIA) as equity was stable h/h at 0.7x. We continue to review SIA’s results.
(Company, OCBC)
Page 2OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Société Générale SA (“SocGen”) | Issuer Profile: Neutral (4):
▪ SocGen has announced the closing of the sale of Rosbank and its Russian insurance subsidiaries. As
previously mentioned, SocGen had entered into an agreement to sell its entire stake in its 99.97%
owned subsidiary Rosbank PJSC and Russian insurance subsidiaries to Interros Capital, the previous
shareholder of Rosbank. With the completion, SocGen has fully exited the Russian market.
▪ SocGen expects an additional 7bps impact (in addition to an earlier 6bps residual impact) to its CET1
capital position which was 12.9% as at 31 March 2022, around 370bps above its minimum regulatory
requirement. Management is targeting the CET1 ratio to remain 200-250bps above the regulatory
minimum which was recently revised up for SocGen to 9.23% for 2022 following completion of the
European Central Bank’s (“ECB”) 2021 Supervisory Review and Evaluation Process (“SREP”).
▪ The impact will be included in 2Q2022 results with a net loss of ~EUR3.2bn expected. (Company,
OCBC)
Page 3OCBC TREASURY RESEARCH
Asian Credit Daily
Key Market Movements
1W chg 1M chg
19-May 19-May 1W chg 1M chg
(bps) (bps)
iTraxx Asiax IG 130 -4 18 Brent Crude Spot ($/bbl) 109.14 1.57% 1.76%
iTraxx SovX APAC 36 -2 7 Gold Spot ($/oz) 1,815.33 -0.36% -6.91%
iTraxx Japan 74 -4 15 CRB 309.37 1.47% 0.80%
iTraxx Australia 104 -6 15 GSCI 754.73 1.22% 0.65%
CDX NA IG 90 3 16 VIX 30.96 -4.91% 44.88%
CDX NA HY 99 -1 -5 CT10 (%) 2.890% 4.16 -4.66
iTraxx Eur Main 96 1 16
iTraxx Eur XO 463 3 83 AUD/USD 0.697 1.62% -5.52%
iTraxx Eur Snr Fin 106 1 16 EUR/USD 1.049 1.07% -2.75%
iTraxx Eur Sub Fin 203 2 32 USD/SGD 1.390 0.45% -1.60%
iTraxx Sovx WE 6 0 2 AUD/SGD 0.968 -1.10% 4.16%
USD Swap Spread 10Y 7 -2 0 ASX 200 7,063 1.76% -6.64%
USD Swap Spread 30Y -26 -2 -6 DJIA 31,490 -1.08% -9.80%
US Libor-OIS Spread 8 -4 -8 SPX 3,924 -0.29% -12.07%
Euro Libor-OIS Spread 11 3 9 MSCI Asiax 662 5.15% -4.41%
HSI 20,644 4.13% -1.82%
China 5Y CDS 84 -4 13 STI 3,225 -0.02% -2.47%
Malaysia 5Y CDS 99 -4 16 KLCI 1,555 -0.07% -1.66%
Indonesia 5Y CDS 127 -8 22 JCI 6,793 -0.39% -5.64%
Thailand 5Y CDS 49 -4 4 EU Stoxx 50 3,691 1.18% -3.66%
Australia 5Y CDS 25 1 9 Source: Bloomberg
Page 4OCBC TREASURY RESEARCH
Asian Credit Daily
New Issues
▪ NTUC FairPrice Co-operative Ltd priced a SGD300mn 7-year unsecured bond at 3.46%, tightening
from an IPT of 3.75% area.
▪ Wing Tai Holdings Ltd priced a SGD100mn 5-year senior unsecured bond at 4.1%, tightening from an
IPT of 4.45% area.
▪ SDG Finance Ltd (Guarantor: Shandong Gold Group Co Ltd) priced a USD100mn perpNC3 bond at
4.95%, tightening from an IPT of 5.5% area.
▪ Sihai International Investment Ltd (Guarantor: Wuxi Hengting Industrial Co Ltd) priced a USD130mn
3-year bond at 3.8%, tightening from an IPT of 4% area.
▪ Avic International Leasing Co. has arranged investor calls commencing 18 May for its proposed USD
senior unsecured bonds offering.
Date Issuer Size Tenor Pricing
17-May-22 NTUC FairPrice Co-operative Ltd SGD300mn 7-year 3.46%
18-May-22 Wing Tai Holdings Ltd SGD100mn 5-year 4.10%
SDG Finance Ltd
18-May-22 USD100mn PerpNC3 4.95%
(Guarantor: Shandong Gold Group Co Ltd)
Sihai International Investment Ltd
18-May-22 USD130mn 3-year 3.80%
(Guarantor: Wuxi Hengting Industrial Co Ltd)
Source: OCBC, Bloomberg
Temporary Suspension
▪ Do note that our official coverage on City Developments Limited and Wing Tai Holdings Ltd 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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