CFA Society Singapore
SINGAPORE (Sept 21): There were at least 102 Singapore-listed companies with net gearing ratios of above 100%, with 17 operate in the property management and development industry, according to 12-month trailing data from Bloomberg.
Even so, there are wide differences in the financial strength of individual companies within each sector. Take the two largest developers City Developments (CDL) and CapitaLand, Each has net gearing below 50%, whereas several of the smallest developers, such as Aspial Corp and Chip Eng Seng, have net gearing levels of around two times or higher.
Still, that does not necessarily mean that the smaller developers are at risk. Analysts say loans make up two-thirds of the debt composition of some property developers, while one-third represents bonds. Typically, smaller developers tend to have a high proportion of debt that is secured compared with larger developers.
Among the property developers that are managing seemingly enormous debt loads is World Class Global (WCG). As at June 30, the company had about $644 million worth of borrowings repayable in one year or less. Of this, a collective sum of $394.5 million is owed to parent company Aspial Corp and a sister company. The debt, which is interest-bearing and unsecured under a revolving credit facility, will mature on Feb 28, 2021. The remaining $249.5 million consists of bank borrowings. The company also has long-term borrowings of $159.8 million.
As part of its efforts to reduce property-related debt, WCG is hoping to sell more units from its projects, AVANT and Australia 108. AVANT is a freehold 56-storey residential skyscraper located in the heart of Melbourne’s central business district, while Australia 108 is a freehold 101-storey residential tower that is also in the same area.
A decade of loose monetary policy has left the corporate sector more indebted than ever. Now, liquidity is tightening, global growth is waning and a trade war is breaking out. Which Singapore-listed companies are at risk? Login and read our “Debt risk” cover story in The Edge Singapore (week of Sept 24, Issue 849) which is out today. Alternatively, subscribe here.