Extracted from DBS (Bond issuer), dated 23rd Oct 2013.
Funding needs
The group is refurbishing its Sun Plaza investment property. The expected capex is S$30mn over the next three years, of which Heeton’s share is S$15mn. Financing for the refurbishment has been secured. Besides looking for landbank in Singapore, Thailand, Malaysia, Australia and UK, the group is looking to expand into other regional markets such as Indonesia and Vietnam.
The primary focus will be on residential and retail property developments. The group will also look to add commercial and industrial properties to its investment portfolio. This will be sourced from Southeast Asia (Singapore and Vietnam). Additionally, Heeton is exploring opportunities to expand its hotel portfolio in Thailand, Australia, IndoChina and the UK from 245 rooms currently to 1,500 rooms by FY2016.
Over the next four years, Heeton expects to recognize around S$98mn in property development sales. These are generated from sold units in existing development projects (excluding those projects from associated companies) such as Lincoln Suites and Earlington in London. Furthermore, the group has saleable resources (excluding developments from associated companies) of around S$380mn.
In addition, Heeton’s property development JV’s have already sold approximately S$300mn worth of units which will contribute to the group’s associate income between FY2013 and FY2016.
Meanwhile, the property investment segment will be impacted by the refurbishment works at its Sun Plaza property over the next two years. Rental income will only take a slight dip in FY2013 as the group’s other properties will enjoy a 5-15% increase in rates, upon renewal of the lease terms.
However, upon completion of the refurbishment in FY2015, the Sun Plaza property should command a 25% increase in rental rates, boosting the group’s rental income in the medium term. On the other hand, the hotel business is expected to record an increase in earnings in FY2013, on the back of continued growth in tourist numbers into Thailand. The group also anticipates an improvement in hotel margins as it renegotiates the management agreement with the Accor Group which expires in 2015.
As at end FY12/2012, the group’s cash balance stood at S$9.6mn of which S$1.3mn was unrestricted. While this is insufficient to cover short term borrowings of S$95mn, as the majority of the group’s debt is secured by its property development projects and investment properties, the group is confident of rolling over or repaying its short term debt.
The group also had about S$20mn of undrawn uncommitted facilities but they are mainly related to construction loans for its developments. Heeton’s liquidity could be enhanced in the medium term from the potential exercise of 44,769,200 bonus warrants which would raise S$31.3mn.
The bonus warrants were issued in September 2013 on a one bonus warrant for every five existing ordinary shares basis, with an exercise price of S$0.70. The warrants can be exercised from March 2014 until expiry in September 2015. Meanwhile the majority of the group’s debt (c. 47%) is due between the one and two year horizon. As at end December 2012, the group’s proportion of total secured debt to total assets stood at 54.5%.
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