Tuan Sing Holdings Limited (Credit View) – Heavy expansion calls for caution July 30, 2019 62

Tuan Sing Holdings Limited is a diversified regional investment holding company with interests mainly in property development, property investment and hotel ownership. Its projects are located in Singapore and around the region.

 

Primary business units:

  • Property: Development of and investment in prime residential, commercial and industrial properties.
  • Hotels Investment: Owns two five-star Hyatt hotels in Australia, namely, Grand Hyatt in Melbourne and Hyatt Regency in Perth.
  • Industrial Services: Owns an 80.2% stake in listed SP Corporation Limited (commodities trading) and a 97.9% stake in Hypak Sdn Bhd (manufacturing and marketing polypropylene packaging bags in Malaysia).
  • Other Investments: Owns a 44.5% share of Gul Technologies Singapore Pte Ltd (printed circuit board manufacturer) and a 49% interest in Pan-West (Private) Ltd. (retailer of golf-related products).

 

Overview:

(-) Growing debt levels and falling liquidity

(-) Numerous developmental projects call for higher capex

(+) Incoming investment property income to help with recurring income

(+) Possible sale of investments

 

CREDIT VIEW

(-) Growing debt levels and falling liquidity – The Group has seen its credit metrics weaken since FY2016 to 2Q2019. Debt to assets ratio increased from 48.1% to 57% and quick ratio fell from 1.97x to 0.24x, showing weakness when compared to property developer peers.

Although debt levels are still within the financial covenants, EBITDA interest coverage ratio hover slightly above 1x for FY18, signalling tightening cash flows.

 

(-) Numerous developmental projects call for higher capex – In addition to three residential development projects, the Group is set to commence AEI on Fortescue Centre in Perth and is planning to launch the Batam Marina City project, comprising hotels with MICE facilities, retail, tourist facilities as well as residential properties.

Capital commitments as of 31 Dec 2018 amount to S$34.78mn. This could further pressure the Group’s credit metrics moving forward.

 

(+) Incoming investment property income to help with recurring income – The Group will begin receiving recurring rental income from 2H 2019 from its investment properties; 18 Robinson Road (Grade A office, 95% occupancy) and 896 Dunearn Road (commercial building mix retail). The company expects good rental rates and healthy take up for 18 Robinson Road arising from lower supply of Grade A office buildings in the CBD area.

 

(+) Possible sale of investments – In line with its strategic direction, the Group is not averse to divesting its investments in Gul Technologies Singapore Pte Ltd and Pan-West (Private) Ltd. when the opportunities arise. This offers potential to pare down the Group’s debt levels.

 

Significant deemed interest by management with 53% indirectly owned by the CEO William Nursalim alas William Liem through the wholly owned company Nuri Holdings Pte Ltd.

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Timothy Ang
Research Analyst
Phillip Securities Research

Timothy covers credit analysis of local and foreign bonds. Previously an equity dealer, he handled equity trade execution and portfolio management. He has presented seminars for organisations such as SIAS, SPH and IRAS, commentated live market updates for 93.8FM, and authored investment articles for the Business Times newspaper. He graduated with a Bachelor of Commerce in Accounting & Finance from the University of Western Australia.

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