Are developer debt fears overblown?

Analysts advise investors to keep tabs on debt and project sales. Some developers also leaning on recurring income streams; Aspial and Oxley are already deleveraging

Published Wed, Apr 10, 2019 · 09:50 PM

oxley holdings

Singapore

AS PUNDITS squint at their recession-watch indicators and Hyflux becomes the latest cautionary tale, attention has fallen to Singapore's most leveraged companies and the question is where the next risks lie.

A quick scan shows that property developers are the most highly-leveraged among large- and mid-cap firms, with their average interest cover having trended downwards since the property market peaked in 2013.

Indeed, it is no surprise that developers tend to take on more debt, given the capital-intensive nature of their business. They can also leverage higher because their assets are tangible and can be secured, which may not be the case for companies in other sectors.

But it would be prudent for developers to mind their debt more closely now, OCBC Credit Research analyst Wong Hong Wei told The Business Times. "Refinancing costs for high-yield companies have mostly increased. For example, Chip Eng Seng's latest bond is issued at 6 per cent (interest cost), compared to 4.75 to 4.9 per cen…