Singapore Bonds

[Runifyouhaveto]

Hi ah run, it's good to see you back.

Thank you good brother. It has been a struggle to stop myself from posting. hahahahaa

Definitely missed the brotherhood here.

 

[Runifyouhaveto]

men on the street thinking is that 6% coupon literally means that hyflux is hardup and wants more funding. doesn't match market sentiment when it is over subscribed.

is hyflux considered a junk bond?at 6 percent interest rate,its within the range of junk bond status.

If plain-vanilla bond gives 6%pa, it is probably BBB-rated or poorer, which is broadly defined as Junk Bond. However, for preference shares, perpetual bonds, Bank AT1 Bonds, it is very common to see 6% yield because they are subordinate (ranked lower) than plain vanilla bonds because they do not legally guarantee bond redemption and coupon payment but can only hint their intention to do so, by including harsh self-imposed penalties.

Examples of good companies' with 6% coupon in secondary market:
Julius Bear Perpetual SGD 5.9% (Top-notch Swiss Bank)
Hotel Properties SGD 6.125% (Locally listed hospitality company)
Maybank SGD 6%
DBS SGD 5.75%
Ausnet 5.5% (Owned by Singapore Power and China Government)
Global Logistic Properties 5.5%
Mapletree 5.375%

 

[Runifyouhaveto]

if its oversubscribed,couldnt hyflux issue bonds at a lower rate?like singapore government bond at 2.3 percent.

Hyflux's placement share was already 400% oversubscribed last week. 6% is 'normal' for corporate perpetual bond issue unlike those from high-risk country/companies or complex bank USD perpetual bonds

USD Bank Perpetuals either with no cumulative coupon feature or loss-absorption*:
Deutsche Bank 7.500%
Standard Chartered 7.014%
UBS 6.875%

Loss Absorption means that if the bank sinks into heavy losses, your bonds will also convert to ordinary shares at probably higher prices. I think if you buy bonds, you don't even want the possibility of having your bonds converted to ordinary shares at higher exercise price against your will.

i heard singapore government bond was undersubscribed even though its redeemable anytime at no penalty.even better than cpf.sinkies just love to chase high dividend yields and interest rates thats all.

At current June rates, Singapore Savings Bonds give you appx AVERAGE 2%pa if you hold ten years and AVERAGE 1.14% if you hold more than 3 years. So it is more meaningful for investors to park their money in 3YR Bank Fixed Deposits for getting 2%pa.

 

[Runifyouhaveto]

SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds

FAQs
7. Can I buy with my CPF money?

No because it does not guarantee redemption or coupon payment although there are penalty for failure to do so.

Personal Note: if yes, i think it will cause a stampede. :p

 

[Runifyouhaveto]

SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds

FAQs
8. Is it very safe? Why was there a mad rush for private placements last week?

Caveat Emptor. Nothing is 100% safe, including Apple Bonds that I kept using as example.

I suspect macro-factors were in play last week to explain for the oversubscription in private placement:

- Recent big drops in SIBOR and SOR = cheaper bond financing for rich private banking clients

- The investor community likes bonds in smaller denominations. Given the same yield, similar maturity from the same company, bond prices are better for those in smaller denominations, eg.
Large Denomination selling at $99 without accrued interests: https://www.bondsupermart.com/main/bond-info/bond-factsheet/SG6T47979602
Small Denomination selling at $100.5 without accrued interests: https://www.bondsupermart.com/main/bond-info/bond-factsheet/SG3257980320

- Availability of bond financing for retail investors this year

- Large Hyflux shareholders might do complex structuring, eg. pledge their Hyflux shares at current low valuations to banks (means lower risk of margin calls), and use the leverage to buy the 6% issue. Purely illustrative example: A investor pledges $1million worth of hyflux shares to bank and obtain leverage to own another $3 million of new Hyflux 6% bonds.
Total returns = 6% x $3million + potential ordinary shares dividend + potential capital gain of ordinary shares
Total costs = cost of financing for $3million + risk of further capital loss of ordinary shares.

 

[lifeafter41]

The orderbook is about S$3.5bn, almost 95% of the revenue are municipal (government projects), that why investors and banks are willing to finance their projects. 60% are from Singapore and China govt and a good portion of the remaining 40% revenue are from rich gulf states like Saudi Arabia and Oman. Lastly, many listed company has huge debt programs, sometimes that are larger than their market capitalization, please google: Medium Term Note Programme Singapore, many are in the range of $500m to $1.5bn.

I refer to my answer in reply #682 in this thread:
Unhealthy companies become heavily indebted because of losses. Hyflux is also heavily in debt, because of 2 primary reasons. Firstly, they have an asset-light business model to take advantage of the low-interest rates environment and embarked on share buy-back programs in recent years. Hyflux a lot have low-risk water projects which generates a safe and regular income stream from Singapore and rich gulf countries eg. Oman & Saudi. Their bigger risk are from riskier middle east countries such as Egypt, Algeria, etc. These projects appears to be funded by Hyflux's debts (the more fundings they secure, the more the more projects they can embark on). Secondly, they delisted the Hyflux Water Trust in early 2010s to take advantage of its cheap valuation (8 to 11% annual yield before delisting) after Lehmen Crisis and in return, issued the old Hyflux 6% preference shares and plain-vanilla bonds at 3.9% to 4.6%.







I refer to my answer in reply #692 in this thread:
Generally speaking, not likely. The company still brings in a respectable profit margin after servicing their debts. Debt's interest servicing is not an issue because some projects are in low-risk rich countries with a regular stream of income, (riskier in African states). The cashflow is negative because of the wild-swings caused by project-disposals (there might be more project disposals in the pipeline according the company disclosures, assets-held-for-sale is about $211 million).

According to the latest Q1 results, cashflow is negative but much better than the year before and there are $211 million worth of assets identified for near-time disposal + $181million cash-in-hand.








I believe the share drop due to general market weakness, eg. DBS crashed from $20 to $14+ within a year. Of course, the earnings is weaker despite being profitable. Lastly, I refer to my earlier reply above, to explain about their continued ability to obtain support for their debts:
The orderbook is about S$3.5bn, almost 95% of the revenue are municipal (government projects), that why investors and banks are willing to finance their projects. 60% are from Singapore and China govt and a good portion of the remaining 40% revenue are from rich gulf states like Saudi Arabia and Oman. Lastly, many listed company has huge debt programs, sometimes that are larger than their market capitalization, please google: Medium Term Note Programme Singapore, many are in the range of $500m to $1.5bn.




Disclaimer: As of today, I do not own any Hyflux shares or bonds but I will be apply for this new issue. I am just sharing my take and I am not financially trained and there are risks involved in all investments, including bonds. Please find out more from your RM or stockbroker.

Was just asking for some advice/opinion on this hyflux thingy just a few days back......
Glad that run came in. Timely indeed.....

Plan to apply for 10k, what about you run?

 

[lifeafter41]

SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds

FAQs
8. Is it very safe? Why was there a mad rush for private placements last week?

Caveat Emptor. Nothing is 100% safe, including Apple Bonds that I kept using as example.

I suspect macro-factors were in play last week to explain for the oversubscription in private placement:

- Recent big drops in SIBOR and SOR = cheaper bond financing for rich private banking clients

- The investor community likes bonds in smaller denominations. Given the same yield, similar maturity from the same company, bond prices are better for those in smaller denominations, eg.
Large Denomination selling at $99 without accrued interests: https://www.bondsupermart.com/main/bond-info/bond-factsheet/SG6T47979602
Small Denomination selling at $100.5 without accrued interests: https://www.bondsupermart.com/main/bond-info/bond-factsheet/SG3257980320

- Availability of bond financing for retail investors this year

- Large Hyflux shareholders might do complex structuring, eg. pledge their Hyflux shares at current low valuations to banks (means lower risk of margin calls), and use the leverage to buy the 6% issue. Purely illustrative example: A investor pledges $1million worth of hyflux shares to bank and obtain leverage to own another $3 million of new Hyflux 6% bonds.
Total returns = 6% x $3million + potential ordinary shares dividend + potential capital gain of ordinary shares
Total costs = cost of financing for $3million + risk of further capital loss of ordinary shares.

I guess liquidity is the main question here. To buy and sell 1k to 10k is definitely easier than selling 250k, hence the price differential. Even though the coupon rate is the same....

 

[Runifyouhaveto]

Was just asking for some advice/opinion on this hyflux thingy just a few days back......
Glad that run came in. Timely indeed.....

Plan to apply for 10k, what about you run?

probably more, cos I think I will not get full allocation and it will not sink to 99 on first day of trading so I can offload it without much losses, if I ended up being allocated more.

 

[Runifyouhaveto]

I guess liquidity is the main question here. To buy and sell 1k to 10k is definitely easier than selling 250k, hence the price differential. Even though the coupon rate is the same....

Yes sir, the genting example clearly explains this phenomenon:
same coupon, similar maturity, same company
yet different price because of denomination

 

[Runifyouhaveto]

Hyflux's upcoming 6% might have soaked some fair bit of liquidity from bond market.

After 25th May, we should see some a few other other SGD bonds from locally-listed companies, offering 4-6%pa (my speculation) in the month ahead, eg. Valuemax, GSH or United Engineers, depending on their bond duration.

 

[krafty]

Hyflux's upcoming 6% might have soaked some fair bit of liquidity from bond market.

After 25th May, we should see some a few other other SGD bonds from locally-listed companies, offering 4-6%pa (my speculation) in the month ahead, eg. Valuemax, GSH or United Engineers, depending on their bond duration.

i am expecting GDP to be on par with 1.8% year on year, on the 25th, good day to all!

 

[mmngck]

who wants to buy the bonds issued by this lousy cashflow company?

debt covers debt.

 

[bart12]

Welcome back bro!

SPECIAL COVERAGE: Hyflux 6% Perpetual Bonds

 

[Runifyouhaveto]

Welcome back bro!

Thank you bart. I hope you have been well.

When I missed myself in SBF, I do look back to this thread and know that you are the one who last posted here during my short departure.
Thank you for your support

 

[Runifyouhaveto]

i am expecting GDP to be on par with 1.8% year on year, on the 25th, good day to all!

feel that my brain juices are overflooding this morning, i wish to paste something related to this thread, i contributed in another thread:

It's time to face the real world and loss of economic confidence is mounting. We are a highly illiquid marketplace, how often can big boys offload a 1% stake in our blue chips listed companies or that small office building in CBD efficiently. With an illiquid economy and our hands are also tied if we increases rate to normalize our economy; we risk rocketing the strength of SGD and destroy our exports and local-jobs.

If you agree with my generalized illustration that Singapore cannot play too much with interest rates, MAS must intervene into the local SGD govt and corp bond market like Eurozone. (ECB actively trades bonds issued by European Govt and Companies). By manipulating bond prices, bond yields can be swayed at will to tide things over, without directly manipulation of SIBOR and SOR.

Today, we are looking at countries fighting asymmetrical FX warfare between rich small states, rich big states and poor big states. Big or rich does not equate to victory as keynesian economics might not work anymore. Thinking out of the box is insufficient for Singapore, we should throw away the box.

 

[krafty]

feel that my brain juices are overflooding this morning, i wish to paste something related to this thread, i contributed in another thread:

It's time to face the real world and loss of economic confidence is mounting. We are a highly illiquid marketplace, how often can big boys offload a 1% stake in our blue chips listed companies or that small office building in CBD efficiently. With an illiquid economy and our hands are also tied if we increases rate to normalize our economy; we risk rocketing the strength of SGD and destroy our exports and local-jobs.

If you agree with my generalized illustration that Singapore cannot play too much with interest rates, MAS must intervene into the local SGD govt and corp bond market like Eurozone. (ECB actively trades bonds issued by European Govt and Companies). By manipulating bond prices, bond yields can be swayed at will to tide things over, without directly manipulation of SIBOR and SOR.

Today, we are looking at countries fighting asymmetrical FX warfare between rich small states, rich big states and poor big states. Big or rich does not equate to victory as keynesian economics might not work anymore. Thinking out of the box is insufficient for Singapore, we should throw away the box.

dear bro, you have once enlightened me again in my quest for knowledge, cheers! i want to buy you beer but you prefer to stay anonymous.:p

 

[Runifyouhaveto]

dear bro, you have once enlightened me again in my quest for knowledge, cheers! i want to buy you beer but you prefer to stay anonymous.:p

According to boss Sam's signature, tomorrow's his birthday.

Wanted : Sam Leong
DOB: 25 May 66

hahaha, paiseh ah RUN is just spouting nonsense here. He is low-life being in real life, so he opts for anonymity so that he can speak his mind here. Thank for your kindness and you may consider donating US$4.95 from our drinking funds to boss SAM
http://www.sammyboy.com/verotelsubscribe.php

 

[Runifyouhaveto]

Aussie Bonds Set to Lose Highest-Yielding AAA Spot to Singapore
http://www.bloomberg.com/news/artic...o-lose-highest-yielding-aaa-spot-to-singapore

Among the AAA countries, Singapore, Australia, Canada, Denmark, Germany, Luxembourg, the Netherlands, Norway, Sweden and Switzerland, most of them are cutting rates.

We are less dependent on oil than Aust, Canada and Norway, so it is likely that SG rates will be trending lower in short term and limited upside in long term.

 

[krafty]

According to boss Sam's signature, tomorrow's his birthday.

Wanted : Sam Leong
DOB: 25 May 66

hahaha, paiseh ah RUN is just spouting nonsense here. He is low-life being in real life, so he opts for anonymity so that he can speak his mind here. Thank for your kindness and you may consider donating US$4.95 from our drinking funds to boss SAM
http://www.sammyboy.com/verotelsubscribe.php

i doing my best to contribute as much as possible, but not in dlrs & cents.:o

 

[bart12]

The bonds market was really active in Singapore while you were away.. Glad you are back, this thread is dead without you.

Thank you bart. I hope you have been well.

When I missed myself in SBF, I do look back to this thread and know that you are the one who last posted here during my short departure.
Thank you for your support