And now we have a new kid on the block, and that's Oxley holdings.
There's scant details of the bond, where news of it is just fresh out of the oven here. $100 million will be issued to the general public and $25 million will be for institutional investors, with DBS as the book runner for the bond. I'll blog more about it when details of the bond comes out. As it is, Oxley holdings holds several residential/industrial/commercial properties in Singapore (about 80% of which are freehold) and some in London, Cambodia and China.
Didn't look through the annual report much, but at the very least they are making money in 2013 and 2014. And they had been giving dividends since 2011 without fail - so that's always a good sign. Will have to do a more thorough check up later when they have more details of the bond.
This looks good for me because it fulfills the requirement of being at least 5% in order for my 1k per month passive income (again based on 240k capital) to work. It's good to have an instrument that you don't have to care about prices for the next 4 yrs. A small holding in this shouldn't go wrong.
Update as of 27th-Oct-2015: The new post on Oxley bond is here.
14 comments :
Why retail bonds are such hot now? Will these events lead to something unpleasant?
LP,
Nothing is "free".
More yield means someone is demanding more for the risks they are taking before they'll bite.
http://www.straitstimes.com/business/economy/singapore-set-to-suffer-indonesias-debt-defaults-as-well-as-its-haze
Another unrated retail bond?
Does rating matter in the probability of default?
Hi anon,
Suspected it has to do with the impending rate hike. As cost of money goes up, liquidity dries up and that's why they might want to raise the cash first before it all happens. The big companies will always have a cash line to draw from several banks because of their size and risk profile, so we see a lot of these smaller companies raising cash through debt or equity. Wise move, I must say. When you do have a pressing need to borrow, nobody will lend you lol
Hi SMOL,
Agree. I read that article too. It's better to know the risk before entering any bond. Basically the promise is as good as the solvency of the company!
Hi starlight,
Ya loh, another unrated bond. It does matter. But look again at the bond saga not too long ago. The credit agency are in cahoots with the issuer, and in the end, the ratings don't mean anything. If a particular rating agency don't issue the desired ratings (and they are paid for doing so), the issuer will simply bring the business to another credit agency who can do so. A good credit rating will enable the issuer, which is the borrower, to get a betting deal. If not the cost of the debt will be higher.
So back to the question, does it mean that unrated means higher probability of default? It's related, but it's also hard to tell. The best is to ask yourself do you foresee the company issuing the debt to continue paying the coupon for the duration of the bond. If yes, go ahead. If you are in doubt, then invest lesser or none at all.
Thanks LP for your comments.
As said, raising cash can be via debts or equity. In recent cases, why smaller companies choose to issue bonds than shares?
Nevertheless, the temptation of 5%pa for 4 years is quite difficult to resist.
Hi starlight,
I'm no expert, so I'm just voicing out my opinions. If they go by equity, it'll be shares placement to institutional investors. Perhaps there are no takers for their shares? If you look at this particular company's tranche, the public tranche is 4 times more than the institutional ones. It could mean something or nothing at all. Perhaps everyone is hungry for more yield? I've no idea, really.
There's another reason for Oxley, particularly. Someone told me that their corporate bond is maturing soon, so this is possibly a replacement for it. I didn't verify it though. So maybe we shouldn't pay too much attention to the whys but more attention to how safe the bond issuer is, haha!
Hi LP,
The 5% is definitely more appealing than the owner's face.
Sometimes, I make decision of buy or not, by seeing the person's face and judging the overall feel that the seller gives.
hehe.... at least it gives me lots of comfort of buying from a person, who appear appealing to me. Appealing not good looking. You know what I mean..... haha
Hi Rolf,
I remembered you saying that before. Haha, so you are saying the face of this boss is not appealing? haha! You must be quite astute in looking at people. I don't think I'm a good judge of person...last time I always kena cheated :(
HI LP,
Indeed the details are not out, but I consider this a "high risk" investment.
Debt to equity is a whopping 400%！
I remembered Oxley expanding very aggressively when I looked at it 3-4 years ago and was turned off by the almost reckless (Personal opinion only) way of acquisitions for expansion
I took a look at Q1 report and 2015 announcements, did not seem anything has changed.
I did not track the "cash harvest" period of the projects, but I would not touch this.
Sometimes only common sense is needed. Imagine you are property owner who leveraged all your properties and you face an uncertain rate hike, would you try to sell your income stream for an upfront lump sum to finance your loans or buffer in case of rate hike?
If you do it, would you want to take a loss?
Recall here that a small percentage translates to a big amount.
Now you are a people with cash flow. Will you be looking to buy this property owner's income stream? Or would you be looking at how to get your own perpetual income stream for lesser?
If the property demand is lower, would a rate hike raise the existing properties value or decrease it? If so, in what kind of environment?
Hi SI,
I haven't looked at the finances yet, but I saw that the prospectus is out already, so will take a look. Thanks, didn't know their debt to equity is 400% lol
Technically, between this and Perennial, this is more risky, looking at both the yield and the duration.
HI SMK,
Good questions! Don't know how to ans though, haha! So may all investors answer their own!
Thanks for the comment ;)
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