FPL green notes 5 years 4.49% pa

[Kayeesha]

A couple more points from me:

1. There doesn’t seem to be any advantage in placing an order this early if you’re ordering this bond. The deadline is next week. Take your time (you have time), and read the documents carefully.

2. Obviously we’ve seen bond/note defaults in Singapore. It can happen. (Noble is another recent one.) This one could default too. *Frasers* tells you there’s substantial default risk (have you read their documents reasonably carefully?), and I suggest you believe the bond issuer on this point. That said, I’m not necessarily opposed to buying individual junk bonds if they’re a small portion of your wealth and if you maintain adequate liquidity otherwise. I just don’t think this bond is offered at the right price. My back-of-the-envelope calculations indicate this should be a ~4.99% offer, not 4.49%. I’m basing this estimate on current secondary market data points and a kind assumption about credit quality.

I liked the Temasek 2.7% retail bond and thought that one was fairly priced. (And Temasek was smart to raise capital at that time. Although they could’ve gone for a longer tenor, or maybe two different tenors.) I didn’t like the SIA 3.03% bond and thought that one was overpriced. Keep in mind the benchmark 5 year SGS was quoted at 2.98% yesterday, so this offer is about 150 basis points higher for a junk bond v. AAA rated sovereign. This risk premium just isn’t high enough IMHO.

Besides Temasek and SIA, these companies are in different industries and have different business activities, can we find more appropriate comparables like CapitaLand, CDL, Far East, MCL Land and Guocoland, so that we can better assess the risk premium?

 

[BBCWatcher]

Besides Temasek and SIA, these companies are in different industries and have different business activities, can we find more appropriate comparables like CapitaLand, CDL, Far East, MCL Land and Guocoland, so that we can better assess the risk premium?

It doesn’t really work that way if I understand you correctly. If a particular industry has an inherently higher propensity for its actors to become insolvent or experience cashflow problems, risking default, then that should properly be reflected in the risk premium. You shouldn’t get a discount at equal risk levels if you’re in the “right” industry.

If you’re asking whether there are investment grade bonds issued by property developers and managers, yes, there are.

 

[Kayeesha]

It doesn’t really work that way if I understand you correctly. If a particular industry has an inherently higher propensity for its actors to become insolvent or experience cashflow problems, risking default, then that should properly be reflected in the risk premium. You shouldn’t get a discount at equal risk levels if you’re in the “right” industry.

If you’re asking whether there are investment grade bonds issued by property developers and managers, yes, there are.

Yes, would you be able to provide references to such bonds, please? Singapore property developers, of course.

 

[Guojing88]

I was happy to buy their 2015 7-year bonds at 3.65%.

SSB just launched during that same year with 2.6-2.8% range for 10 years.

Now they are offering 5-year bonds at 4.49%.

The only reason why people can be more worried now is because of our remembrance of Hyflux.

 

[sohguanh]

I was happy to buy their 2015 7-year bonds at 3.65%.

Now is 2022 should be 7 years matured? Have you got back your principal you invested in 2015?

 

[lzydata]

I was happy to buy their 2015 7-year bonds at 3.65%.

SSB just launched during that same year with 2.6-2.8% range for 10 years.

Now they are offering 5-year bonds at 4.49%.

The only reason why people can be more worried now is because of our remembrance of Hyflux.

You are comparing 7 year bonds to 10 year SSB, and SSB only launched in Oct 2015. Let's refine this a bit.

The FCL 3.65%'s issue date was 22 May 2015. On that day, the SGS benchmark 5 year yield was 1.61% and the 10 year yield was 2.34%. (There was no benchmark for 7 years). The average of the two is 1.975%. Hence premium was 3.65 - 1.975 = 1.675%.

Between May and Sep/Oct 2015 rates had already risen a bit - SBOCT15's average return if held for 7 years was 2.34%.

9 Sep 2022: SGS 5 year yield is 2.98%, 10 year yield is 3.09%, average is 3.035%. Upcoming SBOCT22 7 years return is 2.68%. So the premium is either 4.49 - 3.035 = 1.455% or 4.49 - 2.68 = 1.81%.

Not so far out of line?

Now is 2022 should be 7 years matured? Have you got back your principal you invested in 2015?

The 3.65% bond already matured on 22 May 2022 and was fully redeemed.

 

[Guojing88]

Now is 2022 should be 7 years matured? Have you got back your principal you invested in 2015?

Yes of course. Otherwise Fraser would have collapsed.

 

[churnmaster]

MBH is currently yielding around 3.8-3.9% with net yield around 3.55-3.65% pa, after fees. Thus, the new green bond issue is paying around 0.85-0.95% pa higher than MBH. MBH is well diversified with about 1 yr higher duration.

 

[sohguanh]

Yes of course. Otherwise Fraser would have collapsed.

Thanks for sharing. Just want to know Frasers past record. Understand this does not indicate it's upcoming future but it serve some small assurance.

 

[Kayeesha]

MBH is currently yielding around 3.8-3.9% with net yield around 3.55-3.65% pa, after fees. Thus, the new green bond issue is paying around 0.85-0.95% pa higher than MBH. MBH is well diversified with about 1 yr higher duration.

The way I have worked out the dividend yield for MBH is as follows:

Current price: 0.941
Investment amount: $1,000
No. of units: $1,000/0.941 = 1,062.699
Last dividend payout for half year: $0.0135 per unit
Expected annual dividend: 2 x 1,062.699 x $0.0135 = $28.693
Estimated annual dividend yield = 28.693/1000 = 2.869%

This is a huge difference compared to 3.8-3.9%.

Can you explain where I have gone wrong? Many thanks.

 

[churnmaster]

The way I have worked out the dividend yield for MBH is as follows:

Current price: 0.941
Investment amount: $1,000
No. of units: $1,000/0.941 = 1,062.699
Last dividend payout for half year: $0.0135 per unit
Expected annual dividend: 2 x 1,062.699 x $0.0135 = $28.693
Estimated annual dividend yield = 28.693/1000 = 2.869%

This is a huge difference compared to 3.8-3.9%.

Can you explain where I have gone wrong? Many thanks.

Look at the fund factsheet which shows the wt avg YTM and wt. avg duration. The latest factsheet (Jul 2022) shows the Wt avg YTM as 3.75 and since yields hv moved higher in Aug and Sep so far. I put it around 3.8-3.9% pa, before fees and 3.55-3.65% pa after fees.

 

[sohguanh]

The way I have worked out the dividend yield for MBH is as follows:

Current price: 0.941
Investment amount: $1,000

Frasers bond not yet up for trading so is at $1. A fair comparison would be to treat MBH price at $1 logical? Once Frasers bond is trading then take that day price for both to compare.

 

[BBCWatcher]

Yes, would you be able to provide references to such bonds, please? Singapore property developers, of course.

On Bondsupermart there are rated bonds listed for Ascott REIT MTN Ltd. (Fitch BBB-), First Real Estate Investment Trust (S&P AA), Mapletree Industrial Trust (Fitch BBB- and BBB+), Mapletree Logistics Trust (Fitch BBB-), and Starhill Global REIT (Fitch BBB).

 

[limster]

Yes, would you be able to provide references to such bonds, please? Singapore property developers, of course.

On Bondsupermart there are rated bonds listed for Ascott REIT MTN Ltd. (Fitch BBB-), First Real Estate Investment Trust (S&P AA), Mapletree Industrial Trust (Fitch BBB- and BBB+), Mapletree Logistics Trust (Fitch BBB-), and Starhill Global REIT (Fitch BBB).

I hope investors realise there is a difference between a REIT/business trust and a property developer.

Otherwise it might mislead some to think that since Fraser's CT 3.2% bonds are BBB, it means Frasers Property bonds also BBB

 

[Kayeesha]

I hope investors realise there is a difference between a REIT/business trust and a property developer.

Otherwise it might mislead some to think that since Fraser's CT 3.2% bonds are BBB, it means Frasers Property bonds also BBB

You pre-empted me from clarifying this. Thank you.

 

[hisokaomi]

Asking a basic question... How to apply the FPL green notes on ocbc banking app? I was going through my app but unable to find it.

TIA..

 

[a4973]

Asking a basic question... How to apply the FPL green notes on ocbc banking app? I was going through my app but unable to find it.

TIA..

maybe its just available on website?

 

[sohguanh]

Asking a basic question... How to apply the FPL green notes on ocbc banking app? I was going through my app but unable to find it.

TIA..

I verified mobile app no IPO function. Go to OCBC website login. Same as SSB only can apply at DBS website but not mobile app

 

[lzydata]

Asking a basic question... How to apply the FPL green notes on ocbc banking app? I was going through my app but unable to find it.

TIA..

It's open for application on DBS and UOB apps only, not OCBC.

 

[sohguanh]

It's open for application on DBS and UOB apps only, not OCBC.

For OCBC go website login can apply IPO I verified it