Perennial Real Estate 4.65% bond - Good buy or Goodbye?

Perennial Real Estate Holdings is launching their first retail bond. It's a 3 year bond paying 4.65% pa, payable semi-annually and with a min amount of $2k. Is it good buy or good bye?

Beautiful name, this perennial word. Perennial means lasting or existing for a long or apparently infinite time; enduring or continually recurring. Unfortunately, the word perennial for this company refers to the hope that it'll last forever and not a fact of its actual existence. How so?


I went to SGX website to take a look at the issuing company's financial statements, and realised that there's only 2 yrs worth of it. It's essentially one year if you exclude FY2014, because the figures between the FY2014 and FY2015 doesn't make sense. From their circulars, I read that last year in 2014, they went through sooo many corporate changes that I was not even sure I'm reading it correctly. Perennial Real Estate Holdings originally came from St. James Holdings Limited, and they are going to dispose all their existing business to Citybar Holding Pte Ltd, consolidate their shares to the tune of every 50 to 1, offer of Perennial China Retail Trust by exchanging their shares (don't ask me the details), transfer their catalist listing to main board and many other proposals, and thereafter change their name to the present Perennial Real Estate Holdings Limited.

Yeah, this St. James powerstation

It is this Perennial Real estate holdings that is issuing the 3 yr bond of 4.65% pa. So this company is one of the many shape shifter company that changed name and business until nobody really knows who they came from and where. As such, they really only have 1 year of financial statements to look at. Nothing really to see, so this is going to be short.


A few key points:

1. Their total assets consists mainly of China (70%) and Singapore (27%). Their Singapore assets consists of CHIJMES, TripleOne Sommerset, Capitol Singapore, House of Tan Yeck Nee, AXA Tower, Chinatown point and 112 Katong. I don't know how well their business is in China, but I don't really like their properties in Singapore. They are really no where near the quality of Capitaland and Frasers.

2. How well a bond does depends on how well the issuer company do, especially over the duration of the bond. I have no idea how they are doing, given the short history of their 'new' company and hence have no idea how well the bond will be doing. I don't even know how well their management is going to be like.

3. Sponsors come from Mr Kuok (CEO of Wilmar), Mr Ron Sim (CEO of OSIM), Wilmar International Ltd and Mr Pua (CEO of this group). Not exactly comforting or reassuring to me.


That's it.


The good thing about this bond is that it has a short duration, hence it won't be so affected by the impending interest rate hike. Anyway, if the company lasts that long and you hold the bond for the full duration, it'll be capital guaranteed. The recent Aspial, 5.25% pa, 5 yr bond is trading at $1.017 now, up from $1.000 par value and I'm quite sure this will be something like that too. Frankly, looking for a high yield bond coupled with the inherent risk that comes with it by sacrificing safety seems silly to me. Don't forget, there's always the 'risk-free' SSB with possibly 3% pa (it's now 2.78% pa on average) if you hold for 10 yrs. So is it a good buy or good bye for me?


It's a good bye for me. Thanks but no thanks.