DBS Preference Share – Higher than FD dividend yield with Singapore’s largest lender?

DBS Preference Share (SGX Stock code: MU7) is currently trading at SGD 101.48 per share.

Should investors buy at current price and hold it to maturity, where a first and final call for redemption expected to be announced on 23 Nov 2020, investors stand to receive 2 more dividend payments in May and November 2020 as well as redemption at par of SGD100 per share. After accounting for transaction costs, holding period yield of 9 months comes to be about 2.7% with corresponding annualized yield of 3.9%. In view of the market turmoil due to the COVID-19 crisis, investors could count on Singapore’s largest lender DBS to honour its redemption and dividend obligations.

Final thoughts:

Pros: Potential higher than risk free FD dividend yield.

Cons: Lock up on funds till expected maturity in end November 2020.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: Long DBS Preference Share.

Pimpinan Ehsan – Cash arbitrage gains on the cards?

Pimpinan Ehsan Bhd (PEB) (Bursa Stock code: 5622)(formerly known as TriPLC Bhd) was in the news for its corporate deal involving the following in sequence:

(i)                  Transfer of TriPLC under Pimpinan Ehsan Bhd - Completed

(ii)                Sale of 100% stake in TriPLC construction business unit to Puncak Niaga - Completed

(iii)               Declaration of special dividend of RM1.95 per share from sale proceeds of TriPLC - Completed

The stock recently went ex-special dividend on 14 June 2018, and currently trading at ex-dividend price of RM0.64 per share. It is currently trading at a whopping 45% discount to net cash per share of RM0.93 per share, which may potentially be distributed back to shareholders should a core business is not found by PEB within a year.

Final thoughts:

Pros: Potential unlocking of share value via dividend distribution catalyst, acquisition of earning accretive business

Cons: Extension of timeline for new acquisition of business thus delay in full realization of share value/narrowing of discount to NTA/net cash per share, Management hoarding cash (low probability), acquisition of value destroying business.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

Disclosure: None.

Insas – PA – Defensive High Yield Preference Share?

Investors looking for some high yielding instruments may consider Insas-PA listed on Bursa Malaysia (Code 3379PA). It is a preference share issued by mother company Insas Berhad, a mini conglomerate with a collection of stakes in various companies such as the high flying Inari Bhd.

The key investment merit from Insas-PA comes from its expected dividend distribution and mandatory redemption by the company. There are 5 more dividend distribution cycles in which holders of Insas-PA will be getting RM0.02 per share for another 5 rounds all the way till beginning of 2020 which comes to a total of RM0.1 per share. At maturity which is expected to be in end February 2020, the preference shares will be redeemed at RM1 per share.

Should investors able to purchase the preference share at RM0.965 or RM0.97 based on best ask prices, you can expect to gain a little over 13% over the course of 2 years and 7 months, which works out to be a little over 5% per annum of investment yield.

Investors should take comfort on the financial strength of Insas Bhd where last check on its March 2017 quarterly report, it has a healthy net cash balance of over RM240 million, way above the expected dividend and redemption payout of about RM132 million.  

Pros: Healthy above average yield, backed by healthy balance sheet

Cons: Funds lockup, need to hold to maturity to fully realize gains

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 
Disclosure: None.

MAA: Something Brewing? (2)

Recall that yours truly had in an earlier blog posting highlighted the pending sale negotiations for MAA to dispose its 75% stake in MAA Takaful. Fast forward to present day, on 4^th May 2016, MAA officially announced the signing of S&P agreement with Zurich to Bursa Malaysia. All the pros highlighted will be realized should the sale go through namely:

Management aggressive buyback: Management has continued its share buyback spree by buying approximately 2.6 million shares from the open market at an average price of around 0.95 per share. This provided a strong support basis for the share price.

Favourable valuation obtained for sale of MAA Takaful – This is huge positive surprise as the sale price of RM393.75million for its 75% stake values MAA Takaful at Price to Book (P/B) ratio of 4.49 times, well above prevailing valuation of comparable M&A transactions.

Management unlocking share value via distributions – Management has proposed a special dividend amounting to RM0.35 per share should the deal goes through smoothly, which may take about 3 months or more.

Post disposal MAA will be a cash rich company. It intends to maintain its listing status, hence there may be room for management to hoard the cash pile since it is likely to avoid being a cash company. NTA after disposal is estimated to be RM2 per share after declaration of special dividend.

Yours truly once held MAA shares but had since been disposed for other utilization, hence missing the impending big gain when shares begin trading on 5 May 2016. There may be opportunity if the share price is right for some risk arbitrage gains, but subject to final computation of expected remaining cash pile per share held by the company and of course share price levels.

Final thoughts:

Pros: None. Subject to share price which may present some risk arbitrage opportunities.

Cons: Management hoarding cash or deploy in value destroying new core business.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 

Disclosure at time of publication: None.

 

Golden Land Bhd: Special dividend and capital repayment as catalyst for share price uptrend movement?

Golden Land Bhd (Stock Code:7382) listed on Bursa Malaysia announced on 8 June 2015 that it has signed a conditional sale and purchase agreement to sell 4 of its subsidiaries and a piece of plantation land to a ubsidiary of Felda Global Ventures (Stock Code:5222). Fast forward to March 2016, the sale and purchase is almost nearing its completion stage with the latest announcement in its quarterly report ending 31 Dec 2015 indicating completion of disposal in early March 2016 and receipt of the balance of cash receipt amounting to a total of RM655million.

Yours truly had been collecting Golden Land shares in several trades after the announcement of the deal, with the view that the announcement of the cash distribution will provide a short term catalyst for narrowing of discount of its share price to its intrinsic pure cash value, hence providing a short term risk arbitrage gains.

Based on the latest quarterly financials as at 31 December 2015, intrinsic cash value (A) is determined to be as follows (RM1.87 per share):

 

Note: (B) represents expected cash outlay for purchase of palm oil plantation in Indonesia as announced in its quarterly report.

Based on the current share price of RM1.61 as at 4 March 2016, there is still a 15% discount to its intrinsic cash value, excluding all other fixed assets. The actual NTA is deemed to be higher but had been excluded in the computation.

For those holding on to the Golden Land shares, it may be ripe for harvesting and to take the opportunity to dispose your shares for any gains obtained, since bulk of its income generating palm oil assets will have been fully disposed.

For those that are willing to ride on Golden Land’s shift of focus into growing its Indonesian palm oil plantation operations and smallish property development ventures, the net cash value post distribution may serve as a cash buffer for future operations and should you choose to hold on to the shares.

Note: This is not an investment advice. Buy and sell any securities at your own risk.

 
Disclosure as at time of publication: Long Golden Land Berhad.