(08-01-2012, 03:27 PM)bluechipstamp Wrote: [ -> ] (06-01-2012, 09:41 AM)yeokiwi Wrote: [ -> ]I think I have to upgrade it to Ang Bao money now looking at the placement response.
[wrap]
[table=Mkt Price]
-1.04
-1.03
-1.02
-1.01[/table]
[table=Div Y1]
0.038
0.038
0.038
0.038[/table]
[table=Div Y2]
0.038
0.038
0.038
0.038[/table]
[table=Div Y3]
0.038
0.038
0.038
0.038[/table]
[table=Div Y4]
0.038
0.038
0.038
0.038[/table]
[table=Div+Principal Y5]
1.038
1.038
1.038
1.038[/table]
[table=IRR]
2.928%
3.142%
3.359%
3.578%[/table][/wrap]
What yield do u think the market will tolerate? Assuming mkt demands a minimum of 3% IRR, you're looking at a spread of at most 3% for this stag, before transaction fees. Still worthwhile?
Hey! This is a Value forum, so let's not use the word 'stag' but more suitable terms to evaluate this investment opportunity.
Let's assume we are looking at short term investments to maximise our free cash. Some of the choices are FD (1-3mths), T-Bills (3-mths) and perhaps maturing SGS Bonds. These are relatively risk-free and offers less than 1% returns. We also have higher risk - higher returns options like Money Market funds.
Now, we compare it with this CMA Bond. Although it's meant for longer term investors with a tenure of 5-10 years, let's be flexible enough to evaluate the short term opportunity. The risk is of course higher, especially more so for those who don't know what they are doing if they just blindly follow some faceless forummers!
As pointed out by 'yeokiwi', a fair comparison would be against other Corporate Bonds, ideally with similar tenure. At $1 par and 3.8% Coupon and 5 years tenure, the probability of it dropping below $1 during list date is very low. Further, the good demand from the Placement tranche also indicates a high probability of it staying above $1 once it list. In total, the probability of losing money is slim.
The next Q is what is the probability of making good returns? The stronger than expected demand for the Placement tranche had caused 'yeokiwi' to upgrade the potential short term returns from 'kopi-$$' to 'ang-pow $$'. IMO, that's a bit debatable (on strong demand) as the issuer had only increased the tranche from $100M to $180M, which is lower than my expected max. of $200M. But, let's leave that aside and look at the possibilities.
Assuming we can make 0.5ct (Net of all transaction costs) within 1 week (some call it stag, but I prefer to call it short term investment). That's 0.5% but if we annualised it over 52 weeks, it becomes a whopping 26%!!
In my case, my most recent experience was with Hyflux Pref. Ya, I also don't like Hyflux as it's too highly geared but it's always a case of looking at probabilities (I may be repeatedly infringing on someone's copyright here) of what's the best/worst case and making a decision on whether it's worth it. Back to Hyflux Pref., my worst case target was to hold it for as long as the mother company don't start showing poor EPS (that means they may not be able to pay my 6%). To cut a long story short, the share price crept up very slowly (retreats occasionally) and after a month, when it hit above $1.05, I decided to sell it as I saw something else I liked more. So, a slightly below 5% return in 1 mth, which annualised to 50%+. Not something to laugh at, eh? My main problem is I'm not able to repeat such annualised returns on a bigger scale and over longer time frames.
Warning : I'm not advocating that all of you should rush to apply for this. Just make sure you know what you are doing, the risks involved, work out your own probabilities and judge whether it's going to be worthwhile for yourself.
