OCBC TREASURY RESEARCH - Asian Credit Daily Thursday, May 20, 2021 - OCBC Bank
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OCBC TREASURY RESEARCH
Asian Credit Daily
Thursday, May 20, 2021
Market Commentary
▪ The SGD swap curve moved marginally yesterday. Shorter
Credit Research
tenors remained mostly unchanged while belly and longer
tenors traded ~1bps lower. Andrew Wong
+65 6530 4736
▪ The Bloomberg Barclays Asia USD IG Bond Index average OAS WongVKAM@ocbc.com
remained mostly unchanged at 142bps, and the Bloomberg
Barclays Asia USD HY Bond Index average OAS tightened 2bps Ezien Hoo, CFA
to 611bps. The HY-IG Index Spread tightened 2bps to 469bps. +65 6722 2215
▪ There were heavy flows yesterday including in UBS 4.85%- EzienHoo@ocbc.com
PERPs, CS 5.625%-PERPs, MINTSP 3.15%-PERPs, OLAMSP
5.375%-PERPs, STSP 3.3%-PERPs and OLAMSP 4%'26s. Wong Hong Wei, CFA
▪ 10Y UST Yields gained 3bps to 1.67% on the back of the Fed’s +65 6722 2533
minutes which showed that some officials indicated the WongHongWei@ocbc.com
possibility of discussing its asset-purchase program if the
economy continues to show evidence of improvement and Seow Zhi Qi, CFA
sustained inflation. +65 6530 7348
zhiqiseow@ocbc.com
Credit Summary:
▪ City Developments Ltd (“CDL”) | Issuer Profile: Neutral (4): CDL released its operational update for 1Q2021. Net
gearing (including revaluation surplus) rose q/q to 65% (2020: 62%) while reported interest cover (which
excludes non-cash impairment losses) fell q/q to 1.7x (2020: 3.4x). We continue to hold CDL at a Neutral (4)
Issuer Profile.
▪ Hongkong Land Ltd (“HKL”) | Issuer Profile: Positive (2): HKL announced today that Mr. Simon Dixon, Chief
Financial Officer (“CFO”) has decided to step down from his role at end of August 2021 to return to Australia. He
will be succeeded by Craig Beattie, who is currently CFO of Mandarin Oriental International Limited.
▪ First Real Estate Investment Trust (“FIRT”) | Issuer Profile: Negative (7): FIRT announced that it has completed
the restructuring of its master lease agreements and recapitalised its balance sheet. The restructured master
lease agreements covering (1) 11 hospitals which FIRT had leased to either PT Lippo Karawaci Tbk (“LK”) or LK
and certain subsidiaries of PT Siloam International Hospitals Tbk (“Siloam”, partly-owned subsidiary of LK) and (2)
Leases with PT MetropolisPropertindo Utama on three hospitals, had become effective from 1 January2021.
▪ Julius Baer Group Ltd (“JBG”) | Issuer Profile: Neutral (3): JBG released its interim management statement for
the four months ended 30 April 2021. Performance flowed through to JBG’s capital position with its CET1 capital
ratio at 16.6% as at 30 April 2021, up from 14.9% as at 31 December 2020 and remaining well above the
regulatory minimum requirement of 7.9% and its target of 11.0%. With results solid and in line with
expectations, we maintain our Neutral (3) issuer profile.
▪ Qantas Airways Ltd (“Qantas”) | Issuer Profile: Neutral (5): Qantas announced a market update. The company
expects Underlying EBITDA to be positive at AUD400mn to AUD500mn for the financial year ended 30 June 2021
(“FY2021”) but statutory losses before taxes of more than AUD2bn (including impairments, depreciation and
costs from announced redundancies).
▪ Singapore Airlines Ltd (“SIA”) | Issuer Profile: Neutral (5): SIA announced its second half and full year financial
results for the financial year ended 31 March 2021 (“FY2021”). For 2HFY2021, the company reported an
operating loss of SGD649.6mn on SGD2.2bn of revenue. We maintain SIA’s issuer profile on Neutral (5) on the
back of its liquidity buffers includingthe MCBs supported by its major shareholders.
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Asian Credit Daily
Credit Headlines
City Developments Ltd (“CDL”) | Issuer Profile: Neutral (4)
▪ CDL released operational update for 1Q2021. Figures for revenues and profit are not provided
though snippets of operating performance by major segments are disclosed.
▪ Singapore Property Development picking up though construction is a challenge:
o Good sales: In Singapore, CDL sold 319 units totalling SGD513.6mn (including joint venture,
associates) in 1Q2021, with Amber Park being one of the top contributors with around 100 units
sold. 1Q2021 figures looks decent compared to 2020 when 1318 units were sold with total value
of SGD1.85bn. Irwell Hill Residences which was launched in April has sold 324 units (~60%) to
date, despite a high price average price tag of SGD2700 psf.
o Labour shortage affecting construction timeline: CDL flagged that construction activities have
not returned to pre-COVID levels. Delays are likely though CDL has no project due for
completion in 2021; projects are scheduled for completion from mid-2022 to 2023. CDL has not
mentioned if there will be escalation in costs though we believe that the labour shortage has
translated into higher labour costs, which may be passed on to developers such as CDL.
o Replenishing land bank: CDL and JV partner MCL Land won the Government Land Sales site at
Northumberland Road with a bid of SGD445.9mn at SGD1,129 psf ppr. This is in-line with CDL’s
initiative to grow its development pipeline.
▪ Singapore Investment Properties seeing softer occupancy: Committed occupancy has softened
somewhat q/q with committed occupancy at 91.4% for office (2020: 92.2%) and 92.1% for retail
(2020: 92.2%). That said, CDL flagged that gross turnover rents for 1Q2021 is 5% higher y/y.
▪ Hotel operations under pressure: RevPar has fallen 51.7% y/y to SGD44.6, with significant falls in all
geographies, especially Europe (-87% y/y). CDL flagged that the UK was severely impacted due to
national lockdown in January forcing hotels to stay closed, though with the vaccinate roll-out in UK
CDL is hopeful of the market recovery.
▪ Others:
o Sincere Property still in the doldrums: Sincere Property continues to face liquidity challenges and
efforts are on collections, asset sales and divestment to raise funds.
o Australia property development looking good: Domestic demand is strong, with a number of
projects selling well including The Market in Melbourne (pre-sold 80% of its 198 units),
Brickworks Park in Brisbane (44% of the 132 released units) and Waterbrook Bowral (92% of 77
townhouses).
o Mall closure in Thailand: Jungcelyon, major retail mall in Phuket, Thailand, closed to reduce
operational costs.
o Some recovery in office in China and Japan: CDL observed increase in office leasing enquiries.
Hong Leong City Centre Grade A office tower is 85% occupied.
▪ Net gearing (including revaluation surplus) rose q/q to 65% (2020: 62%) while reported interest cover
(which excludes non-cash impairment losses) fell q/q to 1.7x (2020: 3.4x). While credit metrics has
weakened, cash reserves of SGD3.4bn and available undrawn committed bank facility of SGD5.5bn
looks sufficient. We continue to hold CDL at a Neutral (4) Issuer Profile. (Company, OCBC)
Page 2OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Hongkong Land Ltd (“HKL”) | Issuer Profile: Positive (2)
▪ HKL announced today that Mr. Simon Dixon, Chief Financial Officer (“CFO”) has decided to step down
from his role at end of August 2021 to return to Australia. He will be succeeded by Craig Beattie, who
is currently CFO of Mandarin Oriental International Limited (‘Mandarin Oriental’). Craig will assume
his new role with effect from 1st September 2021.
▪ Craig joined Jardine Matheson in 2006 and has held a number of senior finance roles across the
Group, including Finance Director for South Asia of HKL, Group Finance Director of Jardine Motors
Group in the UK and Group Treasurer of Jardine Matheson. He has been CFO of Mandarin Oriental
since November 2018.
▪ Separately, we note that Lendlease Group has appointed Mr. Simon Dixon as its new Group CFO,
effective October 1. (OCBC, Company)
First Real Estate Investment Trust (“FIRT”) | Issuer Profile: Negative (7)
▪ FIRT announced that it has completed the restructuring of its master lease agreements and
recapitalised its balance sheet.
▪ The restructured master lease agreements covering (1) 11 hospitals which FIRT had leased to either
PT Lippo Karawaci Tbk (“LK”) or LK and certain subsidiaries of PT Siloam International Hospitals Tbk
(“Siloam”, partly-owned subsidiary of LK) and (2) Leases with PT Metropolis Propertindo Utama
(“MPU”) on three hospitals, had become effective from 1 January 2021.
▪ These master lease agreements has been extended to 31 December 2035, with an option for a
further 15-year renewal term with mutual agreement.
▪ FIRT’s equity rights issue raised ~SGD158.2mn, of which SGD140.1mn was used to repay part of the
REIT’s bank debt, extending the REIT’s weighted average debt maturity to 1.78 years as at 1 March
2021 versus 1.22 years in end-2020. The debt repayment has resulted in a lower aggregate leverage
at FIRT to 34.6% on a proforma basis versus 49.0% as at 31 December 2020, without factoring in the
SGD60mn of perpetuals as debt. The next financing requirement is in 2022.
▪ FIRT’s portfolio has been revalued at SGD939.7mn (down 29.9% y/y) which has taken into
consideration the terms from the lease restructuring (memorandum of understanding was
announced in end-November 2020) and the reduction in asset value has been accounted for in the
2020 financials.
▪ As at 18 May 2021, OUE Limited (“OUE”, Issuer profile: Neutral (5))’s deemed interest in FIRT is now
~28.5%.
▪ FIRT will look towards reaching a resolution on the leases at Sarang Hospital due in August 2021 and
Imperial Aryaduta Hotel & Country Club due in December 2021. Additionally, the REIT continues to
explore opportunities to diversify its income stream. FIRT will look at assets including from its new
Sponsors OUE and OUE Lippo Healthcare Ltd (“OUE-LH”, partly owned subsidiary of OUE) and via
third parties, including those outside of Asia. (Company, OCBC).
Page 3OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Julius Baer Group Ltd (“JBG”) | Issuer Profile: Neutral (3)
▪ JBG released its interim management statement for the four months ended 30 April 2021
(“4M2021”), in line with prior year practice with solid underlying numbers. Profitability improved
through a combination of growth in client assets, improved cost efficiency and absence of credit
losses.
▪ Gross margins improved to around 90bps, up from 84bps in 2H2020 on higher client activity through
brokerage commissions, net income from financial instruments as well as moderately higher
recurring fee income that offset lower net interest income.
▪ Assets under Management rose to CHF470bn as at 30 April 2021, a year to date rise of 8% from net
new money inflows (+4% on an annualized basis) as well as positive market and FX movements.
▪ Expense performance was influenced by last year’s cost-reduction program and together with
improved revenues, the reported adjusted cost/income ratio was around 60% for 4M2021, up from
66% in 2H2020 with the adjusted pre-tax margin at 36bps, up 10bps against 24bps in 2H2020.
▪ Performance flowed through to JBG’s capital position with its CET1 capital ratio at 16.6% as at 30
April 2021, up from 14.9% as at 31 December 2020 and remaining well above the regulatory
minimum requirement of 7.9% and its target of 11.0%.
▪ With results solid and in line with expectations, we maintain our Neutral (3) issuer profile. (Company,
Bloomberg, OCBC)
Qantas Airways Ltd (“Qantas”) | Issuer Profile: Neutral (5)
▪ Qantas announced a market update. The company expects Underlying EBITDA to be positive at
AUD400mn to AUD500mn for the financial year ended 30 June 2021 (“FY2021”) but statutory losses
before taxes of more than AUD2bn (including impairments, depreciation and costs from announced
redundancies). This assumes no further lockdowns or significant domestic travel restrictions.
▪ Per company, net debt in February 2021 was AUD6.4bn and this is expected to be the peak with net
debt levels dropping below AUD6.05bn by the end of FY2021.
▪ As at 30 April 2021, cash plus undrawn debt facilities of AUD1.6bn amounted to AUD4.0bn of liquidity
for Qantas.
▪ On business segments:
o Group Domestic: Qantas is on track to reach 95% of pre-COVID domestic capacity for 4QFY2021.
All domestic aircraft is back into service with 38 new routes announced for the flagship airline
and Jetstar.
o Group International and Freight: Qantas has pushed back expectations of a significant level of
international flying to late December 2021 (except Trans-Tasman between Australia and New
Zealand), in line with delays to Australia’s vaccination rollout and the government’s indication
that international borders will be mostly closed until mid-2022, despite calls from businesses to
reopen sooner. Earlier in the year, Qantas’ had reopened its ticket sales for international travel
from July 2021. Freight continues to serve as a natural hedge with Freight revenue in 2HFY2021
expected to exceed 1HFY2021.
o Qantas Loyalty: Qantas expects h/h and y/y growth for this segment which continues to perform
well. (Argus Media, Bloomberg, Company, OCBC) Page 4OCBC TREASURY RESEARCH
Asian Credit Daily
Credit Headlines
Singapore Airlines Ltd (“SIA”) | Issuer Profile: Neutral (5)
▪ SIA announced its second half and full year financial results for the financial year ended 31 March
2021 (“FY2021”). For 2HFY2021, the company reported an operating loss of SGD649.6mn on
SGD2.2bn of revenue while at the net level which also takes into account of impairments, financing
charges and share of losses from associated companies, net losses for 2HFY2021 was SGD805.6mn.
▪ The results though had improved on a h/h basis where 1HFY2021 reported revenue of SGD1.6bn and
operating losses of SGD1.9bn. 1HFY2021 net losses were SGD3.5bn, dragged by impairments on
aircraft of SGD1.4bn.
▪ Based on our calculation which does not include fuel hedging ineffectiveness, SIA eked out a small
positive EBITDA of SGD21.9mn in 2HFY2021 (2HFY2020: SGD1.6bn). In 1HFY2021, SIA had a loss
before interest, tax, depreciation and amortization of SGD164.1mn. Encouragingly also, per company,
SIA has cut down its monthly cash burn to SGD100-150mn per month on an operating basis (takes
into account expected cash settlement on its fuel hedges), from ~SGD350mn per month same time
last year.
▪ In line with our expectations, SIA also announced that it will be exercising the option to raise a
further SGD6.2bn in mandatory convertible bonds (“MCBs”). In our view, this should help the
company gain further access to the bond market. Similar to the previous tranche of MCBs, SIA holds
the option to convert these into straight equity (rather than the MCB holders) and the MCBs will be
recognized as equity in its books. As at 31 March 2021, unadjusted gross gearing was 0.9x (31 March
2020: 1.2x) though we expect this to fall with the MCB issuances to ~0.6-0.7x.
▪ The company still retains access to SGD2.1bn of unutilized committed lines of credit from banks and
completed a sales and leaseback in recent months.
▪ SIA’s current Chief Financial Officer (“CFO”) Mr Stephen Barnes who has been navigating the
financing markets along with the SIA team through COVID-19 will be retiring in end-May 2021. Mr
Tan Kai Ping, a long serving member of the SIA team (including various past positions in SIA’s cargo
business) has been appointed as the new CFO. Mr Tan is currently SIA’s Executive Vice President -
Finance & Strategy.
▪ In our view, whilst passenger air travel is expected to pick up in the US and Europe (starting to
reopen international travel on back of successful mass vaccine roll-outs), SIA is reliant on the Asia-
Pacific region where the industry outlook for the passenger airline business remains highly
challenging. We observe a continued lack of intent and co-ordination among geographies in the
region towards re-opening, compounded by virus resurgence in certain areas.
▪ That being said, SIA continue to make strides in the cargo business. For 2HFY2021, SIA reported cargo
load factor of 89.2% versus 60.2% in 2HFY2020. We maintain SIA’s issuer profile on Neutral (5) on the
back of its liquidity buffers including the MCBs supported by its major shareholders. (The Edge,
Company, OCBC)
Page 5OCBC TREASURY RESEARCH
Asian Credit Daily
Key Market Movements
1W chg 1M chg
20-May 20-May 1W chg 1M chg
(bps) (bps)
iTraxx Asiax IG 87 2 7 Brent Crude Spot ($/bbl) 66.58 -0.70% 0.02%
iTraxx SovX APAC 27 0 0 Gold Spot ($/oz) 1,864.71 2.08% 4.83%
iTraxx Japan 47 -2 -1 CRB 201.86 -2.93% 4.06%
iTraxx Australia 61 -1 -2 GSCI 507.45 -3.65% 3.44%
CDX NA IG 53 1 1 VIX 22.18 -19.61% 28.28%
CDX NA HY 109 0 0 CT10 (%) 1.675% 1.71 11.56
iTraxx Eur Main 52 1 1
iTraxx Eur XO 261 2 7 AUD/USD 0.772 -0.08% -0.03%
iTraxx Eur Snr Fin 61 0 2 EUR/USD 1.217 0.77% 1.15%
iTraxx Eur Sub Fin 108 -9 -1 USD/SGD 1.335 -0.12% -0.43%
iTraxx Sovx WE 6 0 0 AUD/SGD 1.031 -0.07% -0.44%
USD Sw ap Spread 10Y -4 2 -3 ASX 200 6,938 -0.65% -1.14%
USD Sw ap Spread 30Y -31 4 -4 DJIA 33,896 0.92% -0.53%
US Libor-OIS Spread 8 0 -2 SPX 4,116 1.30% -1.14%
Euro Libor-OIS Spread -7 -1 -2 MSCI Asiax 863 3.09% -2.36%
HSI 28,594 2.07% -1.76%
China 5Y CDS 40 1 2 STI 3,104 -1.27% -2.76%
Malaysia 5Y CDS 47 -2 1 KLCI 1,581 -0.21% -1.68%
Indonesia 5Y CDS 79 -1 -2 JCI 5,761 -2.83% -4.60%
Thailand 5Y CDS 40 -3 -1 EU Stoxx 50 3,937 -0.27% -0.09%
Australia 5Y CDS 15 0 -12 Source: Bloomberg
Page 6OCBC TREASURY RESEARCH
Asian Credit Daily
New Issues
▪ Hotel Properties Limited priced a SGD125mn 7-year senior unsecured bond at 3.75%, tightening from
IPG of 3.9% area.
Date Issuer Size Tenor Pricing
19-May-21 Hotel Properties Limited SGD125mn 7-year 3.75%
Skyfame International Holdings Ltd
18-May-21 USD32mn SKYFAM 13%’23s 13%
(Guarantor: Skyfame Realty)
18-May-21 Haixi Overseas Investment Co Ltd USD100mn 3-year 2.3%
Coastal Emerald Ltd
17-May-21 (Guarantor: China Shandong Hi-Speed USD200mn 3-year 3.95%
Financial Group Limited)
17-May-21 National Australia Bank Ltd USD1.25bn 10-year T+135bps
USD2.0bn 4NC3 T+65bps
17-May-21 HSBC Holdings PLC
USD3.0bn 11NC10 T+117bps
17-May-21 Redsun Properties Group Ltd USD210mn 3NC2 7.6%
Source: OCBC, Bloomberg
Page 7OCBC TREASURY RESEARCH
Asian Credit Daily
Treasury Research & Strategy
Macro Research
Selena Ling Tommy Xie Dongming Wellian Wiranto Howie Lee
Head of Research & Strategy Head of Greater China Malaysia & Indonesia Thailand, Korea &
LingSSSelena@ocbc.com Research WellianWiranto@ocbc.com Commodities
XieD@ocbc.com HowieLee@ocbc.com
Carie Li Herbert Wong
Hong Kong & Macau Hong Kong & Macau
carierli@ocbcwh.com herberthtwong@ocbcwh.com
FX/Rates Strategy
Frances Cheung Terence Wu
Rates Strategist FX Strategist
FrancesCheung@ocbc.com TerenceWu@ocbc.com
Credit Research
Andrew Wong Ezien Hoo Wong Hong Wei Seow Zhi Qi
Credit Research Analyst Credit Research Analyst Credit Research Analyst Credit Research Analyst
WongVKAM@ocbc.com EzienHoo@ocbc.com WongHongWei@ocbc.com ZhiQiSeow@ocbc.com
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