Wednesday, March 23, 2016

Aspial 5.30% bond (AGAIN) - Good buy or Goodbye?

Aspial is issuing out new bonds again. The last time that did it was back around Aug 2015, giving 5.25% pa with maturity period of 5 yrs, which I've blogged about it here. This time round, they are upping the stake, giving 5.30% pa with a maturity period of 4 yrs.

The expected issue date is 1st April 2016, and since this is a retail bond, you can bid for the allotment of the bonds through ATM as well. DBS is the sole lead manager and bookrunner, which is the same as last year.

I don't think much had changed in the fundamentals of Aspial over the course of less than 1 year. If anything, it should get worse or at best neutral. So fundamentally, Aspial is just about the same company as it was last year. It's a company that I won't invest in, to put it bluntly. But what about the bond? Will you lend money to them? Will they survive for 4 yrs for them to pay out the coupons of the bonds? Nobody knows.

Let's see how their bond 5 yrs, 5.25% bond performed last year. It went to a high of 1.020 to the most recent 0.984 after their most recent coupon payment this year around Feb. The price had went up to today's transacted price of 0.996. There are a total of 10 coupon payments each with $0.02625 (5.25% / 2), of which one is paid out, leaving 9 left. What's the total returns of that bond if you buy at today's transacted price of 0.996?

Total no of payments left: 9
Payout per payment: $0.02625
Total coupon payout: $0.23625 (9 x 0.02625)
Capital gain from buying below par: $0.004 (1-0.996)
Total gain excluding comms: $0.24025 (0.23625 + 0.004)

Total % returns: 24.12% (0.24025/0.996)
No of days till maturity in 28 Aug 2020: 1619 days or 4.436 years
Ave % returns pa : 5.438% (24.12/4.436)

5.438% if you buy their issued bond last year, as opposed to this new bond 5.3% and they roughly matured in the same year as well, just a difference over a few months. Of course you need to include the brokerage commission to buy the traded bonds at SGX, compared to just paying $2 to bid for the bond over at ATM, so it's going to be lower than 5.438% after brokerage. Since the traded 5.25% bond is giving a better return than this upcoming 5.3% one, I think it's not such a good deal. But as mentioned, you have to include brokerage. It might not work out to be of much difference I suspect.

The advantage of bond can be seen easily with the chart below:

Blue line is the Aspial 5.25% bond while the purple line represent the index STI.

The chart is generated using Investingnote. It's free and I can't recommend it enough. It's even better than the (also free) Chartnexus with real time and also more historical price data to choose from. Anyway, you can see that the price of the bond stays relatively the same despite the ups and downs of the market. This means you can 'switch' out of the bonds, as some sort of high yielding cash equivalent, when the market is not doing too well. Rebalance, so to speak.

Still, last August when they issued the bonds, STI was around 3300. Now is about 2880. Back then 5.25% pa might be hard to find everywhere, but I think even with the present market conditions, there are plenty of choices to get 5.30%. Starhub (6%)? STeng (5%)? SPH (4.9%)? I haven't even included reits and business trust.

I won't go for it. I'm gunning for blue chips with reit like yield, haha!


Sillyinvestor said...

Hi LP,

The earlier batch of bond holders so be happy?

At least money in to return ??

Better grab more when market still believe bonds at safe

la papillion said...


Thanks :)

la papillion said...

Hi SI,

Hmm, I would be happy if I'm the earlier batch of bond holders. At least they are borrowing from new people to pay the old, you're right :)

Unknown said...

Good buy or Goodbye?"

Wong said...

It may not have problem paying the coupons next two years but how will they find money redeeming the bonds maturing within a few months? Issuing new bonds of course! That is more worrying

Anonymous said...

There are 5 OCBC perpertual bonds running at the same time, aren't u worried?

Anonymous said...


I know that you're said you wouldn't go for this and instead look for other one's with similar interest. However, would you still recommend a first-timer trying this bond? At a pretty minimum amount of 2-10k ?

Appreciate it.

la papillion said...

Hi Angie,

I wouldn't know if 2 to 10k is how many % of your investible cash haha! But let's just say the amt invested should be as much as you can afford to lose without feeling any pain. I really don't know whether to recommend a first time to try this bond.

passive incomer said...

I think bonds should be treated differently from stocks.

Why are people so fearful of bonds but not about shares that can drop from 1 dollar to 5 cents.?

Bonds should be kept to maturity and not for trading unless it reaches a good price above par. So, depending on your available funds, it would be good to allocate a bigger portion into such fixed income instruments than to dabble it with stocks or reits for that matter which fluctuates a lot in pricing.

la papillion said...

Hi hdtv,

I think the issue here is not which asset class is more volatile. It's how the underlying companies issuing the bond is doing, and hence affecting their solvency affects the bonds indirectly. If the company issuing the bond is not doing well financially, then it'll affect the payment of the bond, hence the strength of the company is a matter of great importance when looking at bonds.

I agree with you that bonds should be kept to maturity, but you can't apply that to just any bonds. We don't often see bonds defaulting here, esp for retail bonds traded over sgx, but that doesn't mean it won't happen.

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