Wednesday, October 28, 2015

Another pref shares bites the dust..

Just received word that the OCBC Bk 4.2% NCPS preference share is going to be fully redeemed. That is very bad news. As it is now, there's not a lot of preference shares by the banks listed in at SGX, and yet one by one those good ones are redeemed. There used to be UOB's preference shares too, but that is gone by the wind too. Now, there's just the preference shares by CityDev, Hyflux, another OCBC 5.1%, DBS 4.7%, Fibrechem and lastly United engineers.

OCBC is going to pay the last preferential dividend of $1.00 x 4.2% x 183/365 = $0.02106 per share and redeem back the preference shares at $1 par value. The trading price now is 1.020/1.025, so it's about right. If ever the price drops below 1.020, you should just buy it because you get net returns after getting paid your last dividends and losing out due to the capital loss from buying above par (excluding commission).

The redemption date is on 2nd Dec 2015 and the counter will go XD after 27 Nov, and will cease trading on 30th Nov and will be delisted on 22nd Dec 2015. Proceeds from the redemption of the preference shares at par value will be paid on 21st Dec 2015.

Personally I don't have any of this, but my parent's portfolio which I managed had a substantial chunk of this. Need to find a place to park their money after I get the proceeds from the redemption. So many low yield but high quality retail bonds out there, so I'm not afraid, haha


starlight said...

I am puzzled by "low yield high quality" retail bonds.
I am thinking the recent ones are "rather high yield but low quality".
Thank you.

la papillion said...

Hi starlight,

Haha, I'm not referring to the recent bond offerings. I'm talking about those frasers and cap type. Safety is paramount for my parents retirement funds, so no nonsense haha

Anonymous said...

Hi Lp,
I need your advice on bonds. I have about 20K which I want to park into something which give me some income but no need to monitor like FD but their rates are very low. I read your post on bonds - which one would you recommend. Thanks

la papillion said...

Hi anon,

If I have 20k, and after setting aside emergency cash and other what nots, then I'll think about investing. There's a few bonds which are higher quality (not the Oxley, perennial type). I would not put all into one bond, preferring to split in 4 parts of 5k each. This will allow me to enter and exit easily as the bonds are not very liquid. Also, it reduces the risk of default/premature redemption etc.

I'll probably put into capmallA3.8% which will mature in about 6 yrs. Then another one for capmalltrb3.08% which will mature in about 7 yrs also, another 5k in FCL trea 3.65% which will mature in 7 yrs, and keep the rest in saving savings bond. Should there be a good high quality bond, i'll encash the ssb and buy it. This portfolio should last me about 7 yrs with a portfolio yield of about 3 to 3.5% pa. That's what I'll do for my 20k. Not perps for me.

Now what will you do?