Genting 5.125% 1st trading day

Today is the first trading day for Genting 5.125%. Some quick number for today's trading for this counter:

Open: 1.002
High: 1.013
Low: 1.001
Volume: 14,473 lots
Closed: 1.012

The next coupon payout date is in 6 months time. As the date draws nearer, we would see it rise slowly. But the the next 1-2 months, I think it is likely that this will stay close to par value of $1.

Other thoughts:
The rich gets richer. In my last post, we saw that 22 people who applied more than 1000 lots getting 500 lots each. 2 people who applied more than 1800 lots got 889 lots each.

These people's assets just increased by $6000 or $10668 each. If the 1st group were to keep their 500 lots, they will be getting $25625 per year from this alone. How many people can even save that amount in a year?


Related posts:
Genting 5.125% bond
Genting 5.125% bond [part 2] 
Genting 5.125% Balloting Results

Genting 5.125% Balloting Results

Genting 5.125% perpetual subordinated capital securities balloting results are out. 


The balloting ratio are as follow:

 

Some summary on the results above:

1) Anyone who applied will get something

2)  If you applied for 10 lots or less, you would have been allocated 100% of hat you applied

3) The offer was about 46.8% over subscribed. This is a little lower than what I expected.

Other quick facts (extracted from SGX annoucement):

Source: SGX annoucement:
 http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA402827CA98B115482579E30039A8FA/$file/GENS-Announcement.pdf?openelement

1) As at the close of the Public Offer at 12.00 p.m. on 16 April 2012, valid applications in respect of S$731,339,000 in aggregate principal amount of the Securities at the issue price of 100 per cent. under the Public Offer were received.

As at the close of the Reserve Offer at 5.00 p.m. on 11 April 2012, valid applications in respect of S$3,014,000 in aggregate principal amount of the Securities at the issue price of 100 per cent. under the Reserve Offer were received. The Company did not offer any of the Securities to institutional and other investors under the Placement.

2) A final issue size of $500M was allocated as follows:

(a) S$496,986,000 in aggregate principal amount of the Securities at the issue price of 100 per cent. to the Public Offer; and

(b) S$3,014,000 in aggregate principal amount of the Securities at the issue price of 100 per cent. to the Reserve Offer.

3) Securities will be issued on 18th Apr 2012 and commence trading on 19th Apr 2012


My thoughts:

The offer was about 46.8% over subscribed. This is a little lower than what I expected. The first trading day should see some active trading in this counter. There will be some investors who got more than what they wanted and may sell some or all of their holdings on the first day. There will also be investors who are waiting to buy this counter for a better yield should it drop below par value. On the whole, I think it should stay close to the par value.

Again, we see a couple of multi millionaires applying this counter at large quantities. There are a total of 24 people who applied for more than a million dollars worthed of this offer. I wonder if they will hold it for medium to long term or will they sell on the first trading day.

The next payout will be in half a years time on 18 Oct. This will stay within my portfolio under my fixed income sector for the next few years at least. Until then, I will be keeping a lookout for opportunities to increase my passive income.

Related Posts:
Genting 5.125% bond
Genting 5.125% bond [part 2]

Genting 5.125% bond [part 2]

There has been quite an number of discussions on the Genting 5.125% bond. Quite a number of people pointed out that the bond do not have a fixed end date and were uncomfortable investing in this counter as it will be quite volatile as interest rates changes. As interest rates are at all time low levels, there are fears of this bond dropping below par value if interest rates were to rise suddenly. With an increase in interest rates, investor will find it safer to leave their money in banks as compared to a bond.

So, what are the chances of increase in interest rates? if so, what levels could it possibly increase to?

My analysis:

Even if interest rates were to rise, my guess will be that a 12-month fixed deposit interest will not increase to a value of more than 2.5%. The rationale is simple: CPF

CPF OA interest rates are pegged to 12-month fixed deposits (subjected to a minimum of 2.5%) and

CPF-SA and MA are pegged to 10-year Singapore Government Securities + 1 % (subjected to a minimum of 4%)

Extracted from CPF website:

http://mycpf.cpf.gov.sg/Members/Gen-Info/Int-Rates/Int-Rates.htm

Interest Rate for Ordinary Account Monies
For Ordinary Account (OA), CPF members receive a market-related interest rate based on the 12-month fixed deposit and month-end savings rates of the major local banks.

The computed CPF interest rate, derived from the major local banks’ interest rates for the three-month period, 1st November 2011 to 31st January 2012, worked out to be 0.16% per annum. However, members will receive the higher rate of 2.50% as legislated by the CPF Act.

Interest Rate for Special and Medisave Account Monies
Savings in the Special and Medisave Account (SMA) currently earn either 4% or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is the higher. The interest rate on SMA savings is adjusted quarterly, based on interest rates on 10YSGS over a preceding 12-month period.

The 12-month average yield of the 10YSGS plus 1%, from 1st March 2011 to 29th February 2012, works out to be 2.93%. Accordingly, the SMA interest rate payable to CPF members from 1st April 2012 to 30th June 2012 will be maintained at the current floor of 4%.

_____________________________________________________________

If interest rates of a 12 month fixed deposit hit say 3%, that will mean that CPF board has to pay out interest rates of 3%!  Do you think the government will allow interest rates to increase so significantly?

Not only that, as interest rates drop, consumer spending increase, simulating economic growth. Likewise, if interest rates increases, consumer spending decreases, companies cut their borrowings. Economy growth will slow down or even contract. As Singapore is likely to continue to concentrate on economic growth, I highly doubt that interest rates will increase significantly over the next 5-10 years. 

That being said, I will definitely apply for the Genting 5.125% bond. No doubt we can get a higher yield through other instruments like REITS, but they belong to different asset classes. A yield of 5.125% is attractive compared to other fixed income instruments.


Related Posts:
Genting 5.125% bond [part 1]

Genting 5.125% bond

Genting is issuing a 5.125% perpetual bond. This means that there is no fixed final redemption date. However, Genting may choose to redeem this bond 10 years later (year 2022).

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_6F2A85EA925FE130482579DA008137DC/$file/GENS_announcement.pdf?openelement

Offer information statement:
http://masnet.mas.gov.sg/opera/sdrprosp.nsf/beeb14c28bb1c29b48256b3d002f927b/EFD34C2A527432E8482579DB000D376D/$File/2.2.1%20-%20OIS.pdf

Details of the bond are as follow:


Yield
For the first 10 years, the yield is 5.125% per year.
If it is not redeemed by Genting after 10 years, the yield will increase to 6.125% per year.

Min. amount
Minimum amount to apply is 5k. Subsequent increments are in 1k.
Cash only. No CPF.

Payout
Semi-annual: 18 Apr, 18 Oct

Time table:
I have highlighted the more important dates in red below.

Lodgment of Offer Information Statement
: 9 April 2012

Opening date and time for applications for the Securities
under the Public Offer
: 10 April 2012 at 9.00 a.m.

Opening date and time for applications for the Securities
under the Reserve Offer
: 9 April 2012 at 2.00 p.m.

Last date and time for applications for the Securities
under the Public Offer
: 16 April 2012 at 12.00 noon

Last date and time for applications for the Securities
under the Reserve Offer
: 11 April 2012 at 5.00 p.m.

Balloting of applications under the Public Offer, if
necessary (in the event of an oversubscription of the
Securities under the Public Offer). Commence returning
or refunding application moneys to unsuccessful or
partially successful applicants
: 17 April 2012

Expected Issue Date of the Securities : 18 April 2012
Expected date of commencement of trading of the
Securities on the Main Board of the SGX-ST
: 19 April 2012



My thoughts
Earlier, I posted about the CMA 3.8% bond:
http://madstranger.blogspot.com/2012/01/cma-bond.html
Other CMA bond posts:
http://madstranger.blogspot.com/search/label/CMA%20bond

This bond has a yield of 5.125% which is more attractive than the CMA bond that IPOed earlier in this year. This yield is even higher than the 4.7% yield offered by the DBS preference shares.

The "perpetual bond" has little drawbacks for me. If I own this bond and I need to sell it for cash, I could sell it in the open market. Even though the volume for the bond is likely to be low, any losses incurred will be minimal. Of course, there are risks involved. If Genting is unable to payout the coupons, prices of this bond will drop badly.

I am likely to apply for this bond. Depending on the amount allocated, I might even cash out my CMA bond and use this as a replacement. If you are keen on applying this bond as well, do take note of the dates above.

Good luck to those applying for this.