Wednesday, May 13, 2015

Frasers Centrepoint Limited 3.65% pa, 7 yrs bonds

I was alerted to a facebook feed regarding this year's first retail bond launch. This is more exciting that the savings bonds thingy to me.

Frasers Centrepoint Limited (FCL) is offering a bond, open to both retail and institutional investors. The terms of the bonds are as follows:



Duration: 7 years
Coupon yield: 3.65%
Open for subscription: 13th May 2015, 9am
Closing: 20th May 2015, 12 noon
Minimum amt for retail: $2000, with integral multiples of $1000 thereafter

Retail (public tranche): $150 million
Institutional tranche: $50 million

This is likely the first bond I've seen in which the retail tranche is bigger than the institutional tranche. This will create a lot of good will for FCL. The usual way to apply is like applying for IPO, which is through participating banks like DBS, POSB, OCBC and UOB ATMs. Take note that you need to put in a min of 2k, with subsequent addition of 1k thereafter.

I suspect this will be taken up like hot cakes. I will personally bid a big part into this, if not for myself, it's also that I can 'sell' some to my parent's retirement portfolio that I'm managing for them. This is quite likely going to be traded in the open market like other bonds. There's a lot more details that I wish I can elaborate, but these details are found in the prospectus that is lodged in Opera MAS site. It's down now and I can't access it. I'll do another post on it soon.


Update: Here's the second part of the FCL bonds. There are very important information that I added after reading through the prospectus, including the optional redemption. Please do read it.

22 comments :

Singapore Man of Leisure said...

LP,

It's always good to do price comparison with at least 3 shops before deciding ;)

1st shop: SG Bonds. Wow! So good! Minimum $500.

2nd shop: Bank fixed deposits. Even better with 1.4% for 1 year! Oh! Need minimum $20,000...

3rd shop: Corporate bond with 3.75% for 7 years!!! Minimum $2000.

Hmm. Will I get better rates if I continue shopping and searching for myself? Lot's of leg work...

Or maybe I just ask someone which is better for me? Let others decide for me?

;)

imdna said...

Was looking for payout dates but can't find.

CMT is twice yearly.

Anonymous said...

Interest payment dates are on 22nd May and 22nd Nov each year, from today's Straits Times.

betta man said...

If we wish to sell the bond before the 7th year, how do we do it ?

Anonymous said...

It will be traded in SGX.

Anonymous said...

Sell early likely will lose money as bond price go down when interest rate go up (which is most likely over the next 7 years).
If just want to collect interest until 7th year redemption, then don't have above problem.
Hence, if want to go in, then go in to hold for 7 years. Else by the SG bond instead.

la papillion said...

Hi SMOL,

Haha, indeed! There are already two camps forming, with supporters on each side talking up and talking down the same bonds :)

Doesn't matter, I already know what I need to do :)

Felix Leong said...

why lose $$?
can hold 7 years to maturity what?

LOL

la papillion said...

Hi Felix,

Lose $ in terms of better opportunity out there, or lose money when the interest rates increase and the price of the bond drops and they want to cash out at that precise moment lah.

I guess there are pple out there who don't know how the bond works, or they didn't considerate their investment timeframe.

Anonymous said...

Can use SRS or CPF?

la papillion said...

Sorry for the late reply, I just managed to download a copy of the prospectus earlier today.

In short, you can't buy using CPF or SRS for this bond "IPO". However, for those using SRS, you cannot apply for this initial offer BUT you can use SRS funds to purchase the bonds from the market when it's listed on SGX.

K said...

Hi,

I was looking at the comments about the SG bonds (10 years 2.29%) on different websites. Wouldn't it be better if you placed $50k in promotional FD rates from the banks every 6-12 months (eg 1.5% for 6 months) repeatedly?
I am assuming interest rates will go up and you would redeem the bond after 2 years to place it at a higher interest rate bond. In this case, you will get approx 1% (2 years SGS bonds only give 1% interest).

Am I missing something here?

la papillion said...

Hi K,

It is better if you do it the way you described. But that is provided you don't take out the money from the fixed D, because you will suffer a penalty. There's no such penalty for sg bonds.

Another thing is regarding the promotional fixed D. There might not be such promotions anymore in the future. Who knows?

I don't think sg bonds is such a big deal, seriously. But its presence makes other competing instrument better, so maybe there's the true purpose of the sg bonds.

K said...

Thanks for the reply.
I can always buy the bonds when the promotional FD rates are no longer available.
Since the FD period is 6-12 months, even if I break it, the penalty is not too much.

Siufai Chan said...

Pg 47 of the prospectus stated that the issuer may redeem on 2 dates every year starting from 2019..that means it is a recallable bond, is it? If by than interest rate goes up, bonds come down, wouldn't it be disadvantages to the bond holders?

la papillion said...

Hi Siufai,

Yea, I think you call it a callable bond.

I don't get your second question. What do you mean by the 'it' in 'wouldn't it be disadvantages to the bond holders'? Are you referring to the callable feature? If so, I don't see what's so bad about recalling it earlier, since you'll get a better returns % pa.

See my post here: http://bullythebear.blogspot.sg/2015/05/fraser-centrepoint-limited-365-pa-bond_15.html#.VVXKVPmqpBc

Anonymous said...

I think this question has not been answered. May I know how do I go about selling a bond? Do I sell it through my CDP account or through other platforms. Also, what are the charges like when selling the bond?

la papillion said...

Hi,

Pls leave a nickname so that I can reply properly?

How do u go about selling shares? It's the same process. Go to any brokerage platform linked to your cdp acct and sell it.

What are the charges when seeking shares? It's the same.

Anonymous said...

When comparing , choose apples to apples.

SGS & Deposits are not comparable.
Corporate Bond, yes. but not many around of 7 year tenor and similar "rating" as FCL.

Anonymous said...

if it gets called in May 19 it will be good for us, the YTM will be about 4.08%

K said...

Hi LP,

Why would you not consider the Genting5.125% bond? Based on my calculations at a price of $1.056, you will still get 4.85%. (I am assuming Genting will not go bust).

Thanks.

la papillion said...

Hi K,

That's the assumption I can't afford to rely on. Ultimately the investment in the bond is meant to safeguard capital. It's for my parents retirement funds. If i don't feel safe regarding the solvency of the business and the company, I think I should skip it.

U can look at osim too. It pays even higher if memory serves me well.