Sunday, November 19, 2017

Some Corporate Bonds and their Yield to Maturity

To me, investing in corporate bonds is easier than investing in equities, because all one needs to care about is not whether the company makes more and more money in the future, but whether the company can make enough money to survive the holding period of the bond. 
However, needing to fork out generally $250k a unit ( except retail ones) adds to the risk. Given that there is little capital appreciation, the greediness to leverage looms large. I really need to give myself a slap in the face if i ever think about it and thank God, i have not levered ...yet.
The fall of Swiber, Marco Polo, krisenergy is a lesson for bondholders. Other than just simply looking at pure numbers, it is imperative to know what kind of assets a company holds. A company holding computers as assets does not give one peace of mind. 
Perpertual securities and preference shares are a very tricky lot and they must be adjusted for by deducting them from equity and adding to liability in the balance sheet.
From the table, generally, the higher the liabilities/equity, the greater the yield to maturity (ytm). The further the maturity of the bond, the greater the yield to maturity.
Heeton seems very "value" from the perspective of it having a lower liabilities/equity than Tuan Sing, Oxley and Aspial but commanding a higher ytm.
(ytm taken from bondsupermart. liabilities/equity taken from financial statements.)

Wednesday, October 25, 2017

Committing Financial Harakiri and the ICBC Travel Mastercard

I will be going overseas to splurge on luxury watches (looking for Pateks and Audemars Piguet) hence committing financial harakiri. Sweat.... Actually, its a gift to people special so damn it, better make it bang for the buck. Save on the taxes. I can't possibly be carrying more than ten thousands of cash overseas. Fortunately, a special shoutout to a forumner called BBCwatcher who alerted the public on the ICBC Travel Mastercard. No link nor picture, as i am not advertising for them nor paid by them.

My motive of this post is for constructive feedback in case i did my calculations improperly or for any alerts if there is a better card out there for overseas foreign transaction because every cent counts.

The ICBC Travel Mastercard has a bank fee of 2.5% and an unlimited cashback of 3% on foreign transactions.

I used the following 2 websites.
1) The official Mastercard website that lists the indicative forex rates. We can input the bank fee which i inputted as 2.5%.
2) A money exchange website that lists the exchange rates that one can find in Singapore ( i am not being paid so no link).
Official Mastercard Website
Money exchange website
Nett cashbacks for transactions in stated currencies after bank fees 
(done on 25/10/2018 11.10am)
YEN = 0.41%
USD = 0.53%
AUD = 0.22%
MYR = 0.43%
NZD = 0.74%
EUR = 0.46%
KRW = 1.4%

The KRW and NZD are aberrations. I will need to observe them again as what Mastercard does is to convert foreign currencies to USD before converting to SGD. Since all foreign currencies have to be converted to USD first before being converted to SGD, it is unlikely that the nett cashback on any foreign currency to be higher than the nett cashback on USD. Perhaps the money exchange website isn't showing correctly for these rates. 

Wednesday, October 11, 2017

Unsatisfactory reply from SGX Regarding SIAEC - Part 2

Oh boy, i sound like the mad dog who refuses to let go.

Actually, if they have read my blog, they would have realised i already checked the annual reports and also checked the funds JP Morgan holds.


The annual report reflects many nominee accounts who hold shares for people and one of these nominee accounts could be holding shares for JP Morgan. Most likely DBS Nominees or Citbank Nominees since they are the only ones who hold more than 38.8 million shares. 

I understand the rule that a shareholder, holding less than 5%, do not need to issue notifications as they are not substantial shareholders. 

This reply email from SGX doesn't tell me anything i don't already know. Perhaps, it adds to my curiousity only.

What i am curious is:
1) How come SGX through their stockfacts service is aware that Matthews own 22 million and Seafarer owns 10 million but not aware that JP Morgan owns 38.8 million shares?
2) Is there some form of market manipulation going on where major news are allowed to broadcast news but no one knows what's happening and no one questions? I mean if im a big  boy and just releasing such unverified facts to move a share price without any cost, wow, easy money.
3) Can SGX stockfacts be relied upon and trusted? 

Which points me to another question. Why does SIA not want to privatise SIA engineering since it already owns 77% and save on listing fees?

Lots to learn..lots to learn

Tuesday, October 10, 2017

Unsatisfactory reply from SGX regarding SIAEC

Alamak. What kind of reply is this? Why is SGX asking me to clarify with the source of the information when it is already published publicly in Reuters and SPH Business Times .Unless they are implying the above news is unverified. 


Reply by SGX

Anyway,  for the sake of continous learning and curiousity, i have emailed back.

Saturday, October 7, 2017

SIA Engineering and JP Morgan Asset Management

I understand that SIA Engineering was dropped as a STI Component on 1 Sep 2017 and this remains the most possible explanation for now, though lingering doubts remain.

The Curious Case of SIA Engineering
SIA Engineering and try to make sense of JP Morgan's sale

Based on SGX website, the Edge Singapore mentioned JP Morgan Asset Management Real Assets (Singapore) Pte Ltd, so i went to google and it brought me to a list of funds managed by JP Morgan Asset Management.


The most likely place a stake such as SIA Engineering would be hiding in would be in the following 3 funds.

JP Morgan Funds - Singapore Fund (Total fund size of USD63 Million)
JP Morgan Funds - Singapore Fund


JP Morgan Funds - Asean Equity ( Total fund size of USD433.9 Million)
JP Morgan Funds - ASEAN Equity

JP Morgan Funds - Asia Pacific Equity (Total fund size of USD 919 Million)
JP Morgan Funds - Asia Pacific
Based on the total fund size and top ten holdings, it is impossible for SIA Engineering to be among the list of funds above, unless they bought it after July 2017. The traded volume, however, does not correspond to this hypothesis.
Maybe, it is in the other entities of JP Morgan. Anyhow, let's see what SGX emails back with.


Thursday, October 5, 2017

Sia Engineering - trying to make sense JP Morgan's sale

SIA Engineering's response to SGX queries still sheds no light on why JP Morgan offered to sell 28 million shares. Looking at the volume traded on 4 october, about 5.5 million shares changed hands through SGX. The past 2-3 months total volume also don't add up to 28 million which mean they haven't sold it yet. Could they have done it through a married deal and who is the counterparty? According to SGX rulebook, married deal needs to be reported.

8.7.4

Direct Business must be reported through the married trade reporting system of the Trading System under Rule 8.7.5.
I need to be educated on this.

How did Reuters or Bloomberg know about this? And why would JP Morgan make it a public news? Very curious.

Actually, people tend to focus on the bad news but every sale has a buyer and what if the buyer who is not known is warren buffet? Anyway, just some due diligence  before i decide to plonk in more money if it goes down further.



Comparing the 767 (old model ) vs 787(new model), indeed, SIA engineering, like Comfortdelgro, Singpost, SPH is facing the disruption due to new technologies. Using the above comparision, if every old plane is replaced with a new one and assuming the total number of planes serviced does not increase, SIA engineering will be facing with a 65% reduction in total man-hours.
We are indeed entering a new era of technology disrupting our lifes!

Wednesday, October 4, 2017

Curious case of SIA Engineering

Straits Times reported a massive selling of 38.8 million shares in SIA engineering by JP Morgan. This likely being the reason why it plunged 6% to $3.15.


BUT................A look at the Twenty Shareholders breakdown in their latest Annual Report shows Singapore Airlines Limited holding on to 77.72%

JP Morgan is not in the list. So where did JP Morgan get 38.8 million shares to sell?A look at SGX website Stockfacts on 04/10/2017 also shows JP Morgan not in the list.

The next biggest shareholder is Matthews , holding 22,873,500 shares which is much lesser than JP Morgan's short sale volume of 38.8 million. How do i make sense of this? Are the facts of the reporting wrong? Did JP Morgan borrow shares to short this counter? How did JP Morgan get 38.8 million shares unless Matthews ,Seafarer and some others combined to lend them the shares? Matthews and Seafarers don't seem to be subsidiaries of JP Morgan, based on my brief check on the internet .Will see the short sale report tmr. 

I just stopped eating my prawn mee soup and added some shares to my existing collection. Given its recurring free cashflow, no debt, 4 plus% dividend yield, again, its a sin not to buy since stocks are like rubber band.

Haven't been following this counter for years but a brief search on the internet word says about new aircrafts needing less maintenance, hurting SIA engineering. DBS research in July 2017 noted in their report about a potential catalyst regarding a merger with ST Aerospace or privatization with SIA. ( huh where did this thinking come from?? I can't find any supporting evidence.) . Anyhow, let's hope for the best!

Analysts: Suvro Sarker and Glenn Ng
Source:dbsvickers.com

Sunday, September 3, 2017

Considerations about Hyflux


"Should i sell my perpetuals (BTWZ) or preference shares(N2H) of Hyflux?" asked a concerned HNW individual.
" I don't know..it is complicated."I said. "Don't ask a church mouse".
But that got me thinking.

There is no denying that Hyflux is super leveraged and it is issuing debt to repay old ones. 

In May 2016,the issuance of $500 million perpetual securities (BTWZ) was done at a good time for the company because the closest comparison , Hyflux Preference shares (N2H) has been trading consistently above par of $100 since its issue, even reaching $105 at one point ( current yield of 5.7+pa).This gave the company an opportunity to issue a 6% coupon for BTWZ. 

Coupled with the very low interest environment then, there were many investors willing to take the risk.


Most people  speculate that the company will redeem N2H on 25 April 2018 to avoid the step-up coupon of 8% pa. But, i am wondering, how is Hyflux going to pay back?

1) Divest projects

They have stated they intent to divest partially Tuaspring and fully divest Tianjin Dagang. 

Assets held for sale = SGD 1711 million
Liabilities held for sale SGD 664 million
Net = SGD 1047 million ( more than enough to pay back upcoming N2H)
(Based on Unaudited Financial Statements For The Second Quarter and Half Year Ended 30 June 2017)

But, who are going to buy them as these are customised projects and  transactions are subject to regulatory approvals? Besides, Tuaspring has been making losses so the eventual sale price might be lower. 

2) Reissue another preference share or perpetual securities.

Currently, investor sentiment is different. Investors are going to again look at the closest comparison BTWZ on 25 April 2018 . Sadly, it has been trading consistently below Par since late July 2016. Therefore, i think Hyflux will have to issue another perp with a coupon greater than 6%pa to pay back N2H ( or sweetening things up with a shorter maturity ) especially since the yield for BTWZ has been hovering above 6%, having even reached to a high of about 6.8+% in dec 2016.  
No thanks to the O&G related bond defaults and the higher likelihood of interest rate rises. 
N2H Price Chart ( Bondsupermart)
3) Don't redeem the N2H

This is a likely possibility too. Not having to reissue a new tranche could save Hyflux the issuance expenses. The issuance expenses was SGD 5.2 million ( 1.04% of $500 million for BTWZ) and given the likelihood that the coupon for the new issuance will be higher than 6% pa, there is not much advantages to redeeming N2H.
However, i think this will shed a negative light on Hyflux as there are expectations that they will redeem. 

Hopefully they are able to divest their assets for sale. Not redeeming N2H is the worst outcome among the 3. Their ability to easily sell their debt to the retail market is due to their brand and their history of repaying in full their debts. Without this ability, their leveraged business model is dead.

As with Keppel, Sembcorp, Swiber whose fortunes are so intertwined with the oil price, who is to know that Hyflux ( a water company) is also a victim as their supposedly big customers in MENA are cutting back on their infrastructure budgets.

A saving grace is that their customers are 98% municipals (63% Singapore government related entities) so the risk of them reneging on contracts is low. Hyflux has also been giving out dividends to her common shareholders albeit decreasing in amount. I guess its not a simple thing as to suddenly stop completely  the payouts as this will surely have ramifications on their share price and indirectly, their ability to find sources of funds. Selling equity seems like a remote possibility given the state of the share price.

The issue is rather on cash flow liquidity, regulatory risk( divesting) and project execution.
Hope Hyflux can think of something BIG out of the box. ( ELO seems insignificant, at most a distraction)