KiasuParents - Parenting in Singapore

Good evening,

Can someone advice me this Hyflux application in today newspaper...
Can invest or not?

The return how to calculate.....
Have risk or not??

Thank you in advance.

You referring to Hyflux Preference Shares?
The coupon payout (6%pa) is so far is the best among the recent such as SIA bonds, F&N etc.
PS: I am not working in financial industries and not related to the above companies.

You need to look at the risk - return. Comparing bonds (debt) with preference shares (quasi-equity, though you can call it quasi-debt as well) is not very meaningful. For debt, you're paid an interest. You get paid whether or not the company is profitable so long as the company is solvent. For preference shares, you're paid a dividend. Dividend can only be paid out of accumulated profits or reserves, and is not guaranteed.

In my opinion, the preference share issues in recent years are really bad deal. In some way, you take equity risk, but with debt-like return. The risk-return ratio don't seem right to me. I doubt they can pull off issues like these if interest rates aren't so low and many investors (esp insurers) are desperate for yield. If the company is not profitable, you don't get your dividend. In Hyflux's case, at least the dividend is cumulative. In the case of the banks, it's non-cumulative ie if the issuer is not profitable and misses dividend payment for a year, you miss it for good even if the company becomes profitable and able to pay high dividend to the ordinary shareholders in subsequent years.

I haven't read Hyflux's prospectus but it looks like the shares are callable after 7 years ie their option, not yours. If it doesn't get called, it could be perpetual but you get 8% dividend. Not sure if this is the case here. And not sure if you get to vote when dividend is not paid. And preference shares redemption can be tricky since the monies have to come from the capital redemption reserve or another pref share issue, compared to bonds where the company can utilise any monies or assets available to do so.

Having said that, it's not easy to find such returns in today's environment. But I'm not betting that interest rate is going to remain this low in the medium term. And bear in mind that the capital value will fall if interest rate moves up.

Good morning everybody,

Thank you Rosemummy,

For such a details explaination...

So this investment also have risk and not guarantee...

But putting money in the bank the interest is so low....

Worry one day the bank will put in a policy -" in order to help you keep the money in the bank" , the bank needs to charge this amount of money....

Now the practise...if account have less than SGD500....Bank will impose service charge....

So which Bonds can I invest?? Any to recommend....
Now must learn how to invest....
Buying shares....very scare leh....

How about insurance...is Income Harvest Plan Good.....

I am those kind of woman , where people will said " Take a small knife want to cut a big Tree"....

Hi dolphinsiah

All investments come with risk. Except for normal bank accounts with balance below $20k (which will be increased to $50k soon). The question is really what's the sort of trade-off between risk and returns, and your risk appetite.

The minimum amount for Hyflux is $10k, so if you have that amount to invest, there should not be any worry about the fall-below fees.

For investments besides bank deposit, bear in mind the tenor risk. For bonds, structured deposits, preference shares and insurance, you need to be able to hold for at least 3 years or more. Make sure you do not need the money in the mean time. Listed securities like bonds or preference shares can be sold, but you won't know the amount you can get back since that will depend on the market conditions at the time of sale. Liquidity for insurance and structured deposits is worse and in almost all cases, you should be expecting a loss if you need to liquidate before maturity. When comparing returns, be careful to consider the tenor. I hate it when banks (mainly DBS) try to sell a 5 year product by comparing the higher interest rate to a 6 month deposit. The yield curve is not flat and such comparison is just nonsense.

Depending on your risk appetite, you may want to look at REITs. Returns are generally better than bonds, though most would be lower than the Hyflux pref shares. But everything come with risks and there's really no guarantee. If you want no risk, the trade-off is much lower returns.

You've to look at what you can afford to risk and the returns you want to achieve in deciding what investment to go for. If you want high returns, the risks are high. But bear in mind that taking higher risk doesn't mean you'll definitely get a higher return. It just means you may get it. But it'll also mean you can make higher losses.

dolphinsiah wrote: So which Bonds can I invest?? Any to recommend....
Now must learn how to invest....
Buying shares....very scare leh....

How about insurance...is Income Harvest Plan Good.....

I am those kind of woman , where people will said " Take a small knife want to cut a big Tree"....

Hi dolphinsiah, let me know if you want to to discuss further. I can walk thru with you what is available in the market and you can decide which one is right for you, given the amt of risk you want to take and investment time horizon.
Thanks.

rosemummy wrote:Hi dolphinsiah

All investments come with risk. Except for normal bank accounts with balance below $20k (which will be increased to $50k soon). The question is really what's the sort of trade-off between risk and returns, and your risk appetite.

The minimum amount for Hyflux is $10k, so if you have that amount to invest, there should not be any worry about the fall-below fees.

For investments besides bank deposit, bear in mind the tenor risk. For bonds, structured deposits, preference shares and insurance, you need to be able to hold for at least 3 years or more. Make sure you do not need the money in the mean time. Listed securities like bonds or preference shares can be sold, but you won't know the amount you can get back since that will depend on the market conditions at the time of sale. Liquidity for insurance and structured deposits is worse and in almost all cases, you should be expecting a loss if you need to liquidate before maturity. When comparing returns, be careful to consider the tenor. I hate it when banks (mainly DBS) try to sell a 5 year product by comparing the higher interest rate to a 6 month deposit. The yield curve is not flat and such comparison is just nonsense.

Depending on your risk appetite, you may want to look at REITs. Returns are generally better than bonds, though most would be lower than the Hyflux pref shares. But everything come with risks and there's really no guarantee. If you want no risk, the trade-off is much lower returns.

You've to look at what you can afford to risk and the returns you want to achieve in deciding what investment to go for. If you want high returns, the risks are high. But bear in mind that taking higher risk doesn't mean you'll definitely get a higher return. It just means you may get it. But it'll also mean you can make higher losses.

Good evening Rosemummy,

Can I know what is REITs?
Yeah...I am not comfortable with Tenors....because Banks always said consisit of this basket and that basket.....very complicate to understand...
and cannot even know and see the actual price on the market....

Like giving money to let these Banks to play...and I have no control....not for weak heart...

But I am interested in investing in Currency.....
Some currency investment interest rate quite high....
Which one is currently the best to park investment???

Do advice....

financial_guru wrote: Hi dolphinsiah, let me know if you want to to discuss further. I can walk thru with you what is available in the market and you can decide which one is right for you, given the amt of risk you want to take and investment time horizon.
Thanks.

Good evening Financial Guru,

Thanks for offering your help....
I guess you must be a Financial Consultant.....

Yes, I need some good advice on where to park investment....

Actually , thought of investing in property....
But the property market is so hot....price is so high...
Everyone wants to be Landlord...got tentants or not???

Scare the market property will crash.....

So better park investment in more secure area....

Will sort out my thoughts before seeking more advice from you.....

Have a great weekend.

It is difficult to balance risk and return. Naturally, everyone wants higher return but lower risk, but there is no free lunch in this world.

I guess you are looking for yield type of investment. Here are my thoughts.

Property - it is a very good tool against inflation. Current price is high. But how high is high depends on your view. There is no credit risk, no sudden drop in dividend rate. The problem is that it is highly leveraged and the investment amount is big. You need to be very careful on your affordability.

REIT - it is actually property. The good thing is that you can invest in small amount, liquid, you outsource the building management to other people. The problem is that the REIT manager can always do some funny things.

Business trust - for example, SP AUSNET, these are business with quite stable long term income. The problem is the same. The manager can always do some funny things and unlike REIT, there is no stringent requirement on distribution for business trust.

If you do not want to commit a big sum to direct property investment, I will suggest you to find a few REIT and trust.

More news (Will Hyflux's 6% dividend on prefs be the new gold?) :
http://www.businesstimes.com.sg/sub/com ... 79,00.html?