>90% of SIA retail investors are foolish people.

[bic_cherry]

>90% SIA shareholders who didn't subscribe to MCB have lost a great deal.


Correct price of SIA MCB now should be 10% less than equivalent SIA share price (conversion factor of 2.68 bonds to 1 SIA share) and vice versa.


That is why, based on the 6% compound interest and $4.84 conversion price (may be even lower with anti-dilution clause), the effective price of an SIA share in 10 years time, from the MCB pathway is $2.68 now.


For rights share issue, the rights conversion price is $3.


$2.68 is 89.33% of $3 or for convenience, 10% discount off the SIA share rights conversion price at the start to make it more attractive and compensate for the accumulation of interest/ dividend as the outcome prevails) .


Thus, SIA MCB and SIA shares, in a worst case scenario are essentially the same thing, since both will accrue the SAME dividend, just difference in dividend pay out time and the interest ceiling (limited upside) for the MCB (4-6% compounded annual interest, depending on time of redemption), thus, there is a 10% implicit discount to the price of bond at inception, to compensate for this undertaking. And the worst case scenario always prevails in case the MCB value is below the projected par value at any contamporaneous period (e.g. $1 at inception, $1.1716 at 4 years, $1.6047 at year 8 etc, see redemption value chart for guidance.


Since 2.68 MCB will eventually yield one SIA share (or more) eventually, then by extension, if supposing the MCB market price is 95¢, then the equivalent SIA share market price should be = 95/100 *$2.68/0.9 = $2.828888


If the SIA share price is $4.33, then the MCB price level should be = $4.33*0.9/2.68= $1.4541.


Thus, it is an oxymoron for the MCB price to be 95¢ and the SIA share to be $4.33 for example and the MCB is underpriced by 1.4541-0.95/0.95 = 53% for instance. Or else, it is the market that has over priced the shares, which ought to be priced at = 0.95*2.68*1.12= $2.8515, or that they are 4.33-2.8515/4.33 = 34.15% over priced in this instance.


My personal recommendation is thus for the SIA shares and MCB to equilibrate at maybe $3.40 for each SIA share (80% BVPS) and $1.14 for each MCB (3.40*0.9/2.68), which will still give holders of 2.962B SIA shares, some small reason to subscribe to 2 new series#2MCB ($6.2B or lesser) to raise the next $6.2B in MCB financing if necessary at again, $1/MCB each.


Reference:
Rights issue results (02 June 2020): https://links.sgx.com/1.0.0/corpora...PLH622/Rights Issue Results Announcement .pdf


Of the 44.5% retail SIA share investors only average 4.1% (non Temasek shareholders) accepted with payment for rights MCB (including excess rights MCB applications) . (I.e. less than 10% did so), so 90% of SIA shareholders have overlooked a great deal.

 

[bic_cherry]

With so much cash inflow, not so accurate to value SIA solely on PE ratio alone. At least until the next financial update. A discount to tangible asset may be a better valuation method.

Net asset right now is about $9b, add on $8.8b cash and divide by 3b shares = $5.9 per share

A 70% to 80% discount will give us a range of $4.13 to $4.72.

Errrr.....

Hi aldophia,

Do u work for Hyflux as accountant?

The MCB is equity too leh.

Or if u classify MCB debt, then u cannot count $3.5B of MCB as SIA equity value.

In fact, the default setting is that MCB are all dividend earning, by accumulation, that is.

All SIA share dividend pay outs accruing as accumulated dividend towards off-setting the eventual $4.84 redemption price.

If count as debt, it's ($9B+$5.3B)/3B= $4.7666 BVPS.

If count as equity, it's ($9B+$8.8B)/4.27B=$4.17 BVPS.
(*added 1.305B notional shares to denominator because that is what 3.5B of MCB are by default, scheduled to become SIA shares in 10 years).

Since the default scenario is that the MCB will become equity, at 80% BVPS= $3.33.

U cannot have your cake and eat it as well.

PS: I used your pre rights issue SIA equity value of $9B for convenience (although I think that it is $9.3141B actually).

 

[Valium]

Errrr.....

Hi aldophia,

Do u work for Hyflux as accountant?

The MCB is equity too leh.

Or if u classify MCB debt, then u cannot count $3.5B of MCB as SIA equity value.

In fact, the default setting is that MCB are all dividend earning, by accumulation, that is.

All SIA share dividend pay outs accruing as accumulated dividend towards off-setting the eventual $4.84 redemption price.

If count as debt, it's ($9B+$5.3B)/3B= $4.7666 BVPS.

If count as equity, it's ($9B+$8.8B)/4.27B=$4.17 BVPS.
(*added 1.305B notional shares to denominator because that is what 3.5B of MCB are by default, scheduled to become SIA shares in 10 years).

Since the default scenario is that the MCB will become equity, at 80% BVPS= $3.33.

U cannot have your cake and eat it as well.

PS: I used your pre rights issue SIA equity value of $9B for convenience (although I think that it is $9.3141B actually).

You quote someone from HWZ over here?

Investment this kind of topic you should conslut our @ginfreely buffet gan.

 

[bic_cherry]

You quote someone from HWZ over here?

Investment this kind of topic you should conslut our @ginfreely buffet gan.

Just adding explaination. Cut and paste will do no harm and the quote is important for context. At least I am forthright where the original comment came from.

Can invite him to come here to comment.

 

[knnb40]

have the backing of LHL and Tamasak