Hyflux Preference

[Chinaman]

Sorry, long pang here temporary dunno where is the relevant thread.
I m thinking of applying this 1 for passive income...locked-in 7 yrs @$100/share yield is 6%.

R they predicting interest rate will be raised soon, so faster borrow while rate is cheap.
Or they foresee exchange rate will fovour them to borrow now?

Can any1 comment on the prefernce share pro & con.

Hyflux Preference Shares

Posted: 13 Apr 2011 07:27 PM PDT

Hyflux preference shares (up to $200 million) will be offered to the public at $100 per share giving 6% pa yield.

The dividends will be payable semi-annually when, as and if declared by the Hyflux Board, in arrears on 25 April and 25 October of each year.

As the Hyflux preference shares are cumulative in nature, any dividends not paid will be accrued and owed to the investor.

The minimum subscription is 100 shares ($10,000) and subsequent multiple of 10 shares ($1000).

The application period is from 14 April 2011 at 9.00 a.m. to 20 April 2011 at 12.00 noon and the preference shares are expected to be listed and traded on the Main Board of the SGX-ST from 26 April 2011.

Application can be made through electronic applications via automated teller machines (ATMs) of the participating banks, namely, DBS Bank (including POSB), Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (together with the United Overseas Bank Limited, the “UOB Group”) or the internet banking websites of DBS Bank as well as the UOB Group.

Investors who are CPF members may use up to 35% of their investible savings (comprising the balance in a CPF Ordinary Account plus the net amounts (if any) withdrawn for education and investment) to apply for the Hyflux preference shares under Public Offer.

If the preference shares are not redeemed by Hyflux on or after 25 April 2018, the dividend rate will step up to 8% per annum.

[kennynah]

Bro C, u might wana be careful abt mixing fx n dividen plays. They are usually inversely related.
In times of uncertainty, that countries currency will usually be negatively get hit and it's government usually raises interests rates as a stop gap measure. Think Vietnam.
What happens next is the onslaught of hyerinflation and businesses will start to be faced with dwindling profit margins. There goes your dividend gameplan

[Chinaman]

Bro k, thanks for your comment

Anyhow, dividend locked-in at 6% for 7 yrs..dat is the plus point...some say this is much safer than reit stock.
Ppty investment yield nowadays hardly can achieve 3.5%, think it will be dropping further soon.

During the Lehman bro crisis i saw those preference share didnt drop much...... anyway, most likely i will apply but onlt at wat quantum.

Pro: interest rate better than bank FD
Con : Listed on stock exchange market, so subjet to px fluctuation.

[iam802]

The dividends will be payable semi-annually when, as and if declared by the Hyflux Board, in arrears on 25 April and 25 October of each year.

I have a question.

Is the dividends guaranteed?

[b0rderc0llie]

From what I understand, the dividends for the hyflux preference shares are not guaranteed. However, any missed dividends will be added to future dividends. Also, dividends for the preference share holders must be paid out first before any dividends can be paid to the equity holders.

I am thinking that holding the equity for 7 years might give a better return than holding the preference shares, if the company does well enough to pay the 6% dividend every year. If they don't do that well, I guess the preference share holders are better off than the equity holders.

[OE2008]

My first impression is that at 6%, the cumulative preferentail shares looks too good. Anything too good carries higher risks IMO. Before putting in serious money, it is prudent to study the balance sheet and review its debt and the company ability to generate sustained cash to fund future dividend.

The private placements, I gather, has been over-subscribed. So looks like the herd has placed big bets and jumped at the attractive dividend yield. The remaining option is to tikam at the ATM.

[ichew]

Anyhow, dividend locked-in at 6% for 7 yrs..dat is the plus point...some say this is much safer than reit stock.
Ppty investment yield nowadays hardly can achieve 3.5%, think it will be dropping further soon.

During the Lehman bro crisis i saw those preference share didnt drop much...... anyway, most likely i will apply but onlt at wat quantum.

Pro: interest rate better than bank FD
Con : Listed on stock exchange market, so subjet to px fluctuation.

bank pref shares also suffered during the lehman bro crisis
i guess in any crisis, those who cannot hold will have to sell, even if at a loss

some other cons:
- though listed, it may not be very liquid. so when need to get out, may drop a few dollars
- no capital appreciation
- if got other better investments that comes along, money stuck
and usually when such better investments appears, it is hard to raise cash

i read tat if int rates gg to rise (some say 2012? ), then best to stay out of bonds & bond-like instruments
but i guess it all boils dwn to how one wants to allocate his scarce resource$
every yr, can we find a good, safe stock with div yield of, say 3%, with potential for its stk px to go up 6% at our entry px?

[kennynah]

i read tat if int rates gg to rise (some say 2012? ), then best to stay out of bonds & bond-like instruments

i'm getting confused by this statement

[winston]

i read tat if int rates gg to rise (some say 2012? ), then best to stay out of bonds & bond-like instruments

i'm getting confused by this statement

When interest rates goes up, bonds drop in price.

[Musicwhiz]

When interest rates go up, even property prices and equities will fall.

This is because property will become more expensive as it is usually fuelled, in large part, by leverage (i.e. loans). When these loans become more expensive, it means less can afford the installments and sentiment is dampened.

For equities, investors demand a decent yield on their investment when interest rates are low. Logically then, when interest rates are higher (say 2-3%), some people will yank money out from equities and into bank deposits which are viewed as "safer". Hence, this creates negative sentiment for equities as well.

So in short, rising interest rates usually pr**k bubbles....