Wednesday, August 19, 2015

Aspial 5.25% Retail Bond Thoughts

First off, contrary to what the Straits Times believes, I do not think that the Aspial 5.25% bonds are in competition with the Singapore Savings Bonds.

Such bonds are in no way an alternative to the government-backed SSBs. The main difference is the default risk, which is why corporate debt is always priced to a premium to government debt. The SSB is a risk-free way to squeeze out more yield, whereas corporate bonds are reach out for more yield by taking on more risk. Governments can just print more money to pay back obligations. Companies cannot.

Giraffe Value wrote an extremely comprehensive post that covers basically everything under the sun related to the Singapore Savings Bonds and I strongly recommend it as a read for people who want to gain more knowledge on it.

TradeHaven wrote quite an informative post to give background knowledge on Aspial. If I understand correctly, compared to their previous issues, this current offering that includes retail bonds is going to be their lowest premium that they are offering to investors. Of course, since the public tranche is 67% and most retail investors have absolutely no clue when it comes to bond investing given how little opportunities there are in the market to hone such skills, you can bet your sweet ass that they are going to be oversubscribed. The narrative in today's newspaper also paints it as a very rosy and generous offer.

(Source: TradeHaven)

This graph on TradeHaven shows their EBIT/interest ratio. I don't know about you, but for me that looks very thin.

Aspial is actually one of the counters on my research list. I do like the fact that they are a diversified business and I quite like the idea of synergy between Maxi-Cash and their jewellery business. However, Maxi-Cash does not seem to be doing very well. Over the past 2 years stock price has dropped about 50%. Michelle Chia as their celebrity ambassador is their saving grace though. Australian property seems to be in one of the biggest bubbles they have ever seen.

Perhaps the only thing I like about this issue is the 5 year tenor that they have, which is longer than the usual 3/4 yr that corporates usually go for. If market cycles do hold true, we would be in for an unhappy time in the near future and getting cash would be not be easy. If their true intentions is to brace for shock, then this issue sounds great for them. Of course, this is just pure fantasy speculations in my mind.

I would not be subscribing this retail bond or buying their stock. However, if my time frame was only 5 years and gun to my head, I had to make a choice, I would go with the bonds. But I'm not in that situation.

That said, the real main reason for not being interested in either its bonds or equity is that I foresee that there will be plenty of opportunities to be had in the near future.

Cash is a position, and a very good position in a falling market.

3 comments:

  1. Its interesting blog about got money trading is good way for it Singapore stock recommendations is helpful for doing trade.

    ReplyDelete
  2. the aspial retail bond looks dicey. it probaby needs a 7 or more than 8% handle. MAS probably need to impose a credit rating for all retail bonds...oh well we need a lesson sooner or later

    ReplyDelete
  3. Hey GMGH,

    Thanks for mentioning my post.

    ReplyDelete

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