CapitaMalls Asia

[Nick]

Jan 7, 2011
CapitaMalls to sell retail bonds
Investors can subscribe to a minimum $2,000 for one- and three-year bonds
By Cheryl Lim

RETAIL investors will have a chance to get a slice of the action when CapitaMalls Asia (CMA) launches a bond issue to raise up to $200 million for new projects.

The one- and three-year bonds from the property firm will have a minimum subscription of only $2,000, far lower than most bond issues, and pay more than bank deposits.

The one-year bonds will pay out 1 per cent a year while the three-year ones have an interest rate of 2.15 per cent per annum.

Banks do not pay anything like that for amounts of about $2,000. A check shows that a one-year term deposit earns about 0.35 per cent while the two-year rate is 0.6 per cent or so.

The bonds might also attract investors who shop in CMA malls like Ion Orchard, Plaza Singapura and Raffles City and are familiar with the firm's retail business.

CMA chief executive Lim Beng Chee said the bond proceeds will be used to invest in new developments and other general corporate purposes.

The real estate investment trust (Reit) has $1.4 billion of cash on its books and zero net gearing.

Earlier this week, it revealed plans to double its portfolio of malls in China to 100 over the next three to five years. In total, CMA expects to invest $2 billion in malls in China, Malaysia and Singapore.

Corporate bonds have attracted a keen following among retail investors.

Last October, Singapore Airlines had to raise its offering to $150 million from the original allocation of $50 million after a strong response.

SIA's bonds pay an interest rate of 2.15 per cent a year.

A month later, DBS Group Holdings offered $800 million in new preference shares to retail investors with an annual dividend rate of 4.7 per cent. The offering was more than 3.5 times oversubscribed.

Similarly, analysts expect the CMA offering to attract a good investor demand given the high levels of cash flowing around the market.

Investor Jackson Teo, 59, usually invests in the stock market and said bonds with a longer tenure are not options he would explore.

'Three years is still a bit long because interest rates might go up. But since the minimum is quite low, I might consider putting a small amount like $10,000,' said Mr Teo.

CMA has the option to allocate up to half of its bond offerings to institutional investors.

But one analyst said such investors might shy away because sophisticated investors are typically more aggressive in seeking returns.

CMA will offer the bonds through its unit CapitaMalls Asia Treasury. DBS bank is the sole underwriter and lead manager.

Investors have until Jan 17 to apply for the bonds, which are expected to be issued on Jan 21 with trading on the Singapore Exchange to start on Jan 24.

CMA shares remained unchanged at $1.90 yesterday.

They are down about 10 per cent from their listing price of $2.12 and around 20 per cent lower than their high in January last year.

cherlim@sph.com.sg

Since when is CMA a REIT LOL

[bluechipstamp]

If u know anyone interested in the bonds, do advise them to check out ICICI fixed deposit rates (1st $50k guaranteed). If they're still not convinced, ask them to take a look at SIA bond price - it's now under PAR.

[brattzz]

why does CMA want to sell to retails investors? at $2000 per lot also? this is very strange! :O

[wj888]

why does CMA want to sell to retails investors? at $2000 per lot also? this is very strange! :O

Doing a little bit of National Service.
Let the retail get some fixed income that is deemed "won't die govt company" so they can at least keep up with inflation.

Though... there's a lot more corporate bonds going for 4% and upwards with around 3-4yrs duration going on for the $250k per block lot.

[dydx]

Even though the default risk is assessed to be low in this case, I think it is rather silly and ridiculous for retail investors to just accept a very low 1% p.a. yield/return for a 1-year credit exposure to a property developer risk like CMA. I think even a 2.15% p.a. yield/return for a 3-year exposure to a property developer risk like CMA is not good enough!

In this seemingly wrongly priced bond deal - from the risk-reward perspective - DBS as the Lead Manager/arranger is quite clearly off-the-mark, and perhaps is siding too much towards CMA's interest in wanting to achieve a lower cost of borrowing (vs. what the company has to pay on bank loans of similar tenures).

There is a fair chance that both the 1-year and 3-year bonds may trade below par, simply because the professional market players would not just accept such low interest coupons on a property developer risk. If SGD interest rates were to rise, the market price of the 3-year bond would suffer even more.

I will not buy into such a deal, even if I have the money!

[Zelphon]

Even though the default risk is assessed to be low in this case, I think it is rather silly and ridiculous for retail investors to just accept a very low 1% p.a. yield/return for a 1-year credit exposure to a property developer risk like CMA. I think even a 2.15% p.a. yield/return for a 3-year exposure to a property developer risk like CMA is not good enough!

In this seemingly wrongly priced bond deal - from the risk-reward perspective - DBS as the Lead Manager/arranger is quite clearly off-the-mark, and perhaps is siding too much towards CMA's interest in wanting to achieve a lower cost of borrowing (vs. what the company has to pay on bank loans of similar tenures).

There is a fair chance that both the 1-year and 3-year bonds may trade below par, simply because the professional market players would not just accept such low interest coupons on a property developer risk. If SGD interest rates were to rise, the market price of the 3-year bond would suffer even more.

I will not buy into such a deal, even if I have the money!

Buy the stock then...
There has to be one winner here...
So it must be CMA...

[pianist]

i am getting 0.9% per annum from my CIMB starsaver deposit current account with no lock-in nonsense or anything..comes with a free cheque book..

i also cant understand why retail investors will be attracted by an extra 0.1% to lock himself for a 1 year coupon issued by a property developer..

[intellect]

Neither do I.
When I saw the advertisement, I was asking my colleague will he subscribe to such low rate?

[Musicwhiz]

i am getting 0.9% per annum from my CIMB starsaver deposit current account with no lock-in nonsense or anything..comes with a free cheque book..

i also cant understand why retail investors will be attracted by an extra 0.1% to lock himself for a 1 year coupon issued by a property developer..

Erm, I thought CIMB is giving 0.8%, not 0.9%?

Nevertheless, I do agree the bonds are not worth buying. A very low yield with your money locked in for a year.....

[pianist]

I was an earlier customer with CIMB then the rate was 0.9%