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Well, I actually like the MCB better.
It is a bit complicated in its calculations that' s why it gets misunderstood and people don' t take.
SIA CEO doesn' t take because he already has a lot of shares. I would want to diversify if I were him too.
MCB - after backward calculation, is like buying the shares today at $2.68. Even one of the articles below got it wrong. First you have to add 80% to the capital first then convert at the TERP price.
Now after 10 years, what will be SIA price be? then you take the call.
And if they redeem after 5 years, then we get capital back with those 4-6% interest per year.
It is a bit complicated in its calculations that' s why it gets misunderstood and people don' t take.
SIA CEO doesn' t take because he already has a lot of shares. I would want to diversify if I were him too.
MCB - after backward calculation, is like buying the shares today at $2.68. Even one of the articles below got it wrong. First you have to add 80% to the capital first then convert at the TERP price.
Now after 10 years, what will be SIA price be? then you take the call.
And if they redeem after 5 years, then we get capital back with those 4-6% interest per year.
xtraderx ( Date: 08-Jun-2020 09:34) Posted:
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Today? Now is 4.32
Trade with prudence
Trade with prudence
Boatman ( Date: 08-Jun-2020 09:39) Posted:
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lilely will maintain ard 4.5
Now is impossible because market bullish, but a few months down the road if no recovery may be hard to say. As a long term bet its quite risky, in my view its better for trading.
Boatman ( Date: 08-Jun-2020 09:33) Posted:
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today to hit 4.5?
How u trade MCB? Can trade MCB meh?
Goldfinger ( Date: 08-Jun-2020 09:29) Posted:
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no dream of $3...it will be trade within 4$ and above
Boatman ( Date: 08-Jun-2020 09:33) Posted:
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MCBs are a bad deal, 99% will not do well, even SIA CEO also don' t want.
Goldfinger ( Date: 08-Jun-2020 09:29) Posted:
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everyone hope for it to drop $3..... i think is impossible
Safety, reliability, efficiency matter even more now for SIA
Listening to Goh Choon Phong, one can' t help but catch a hint of weariness and wariness in his voice as he describes plans to get his planes back in the skies and claw back the markets that his company has lost amid the Covid-19 coronavirus pandemic.
" We don' t know what is ahead of us in terms of the pandemic, but we do know that we are now going forward from a position of strength," the chief executive of Singapore Airlines (SIA) told The Straits Times.
He was referring to the fact that, after being hammered by the pandemic, which left most of SIA' s fleet grounded and forced it to cut 96 per cent of capacity and burn almost $500 million a month in cash, the airline group is finally starting flights to 33 points - 27 for SIA and subsidiary SilkAir, and six for its low-cost arm Scoot.
This is a far cry from the 136 points that the group used to cover, prior to the Covid-19 crisis.
For an airline that survived the impacts of the 9/11 terrorist attacks, the severe acute respiratory syndrome crisis, and the global financial crisis, this pandemic has threatened to be the straw that breaks its back. As markets across the world shuttered in rapid succession with governments closing their borders to prevent the pandemic from spreading, the airline has been forced to ground planes, furlough staff, cut salaries, freeze recruitment and suspend aircraft acquisitions.
But, as Mr Goh suggested, the company did indeed start the year on a strong footing.
Coming into the third quarter of FY2020, it had posted a profit of $315 million, up 11 per cent from $284 million a year earlier. Revenue for the three months to Dec 31, 2019, was up 3 per cent to a record $4.5 billion.
Much of this was the result of gains achieved during the first phase of its three-year transformation project. That operational and financial restructuring helped it achieve more efficiency, synergy and cost savings. It also managed to strengthen its financial position.
In January, the company had $3 billion in cash and credit, and was already talking to financial institutions to further boost its balance sheet. Then came the full force of the pandemic.
The effects are now well documented.
Faced with an unprecedented crisis, by April, SIA' s cash had been whittled down to $1.5 billion, while borrowings stood at around $6 billion. This included $3.75 billion in bonds, of which $500 million is due for redemption next month and another $200 million in April next year.
Faced with the dire financial and operating outlook, SIA launched its $15 billion fund raising, backed by majority shareholder Temasek. It has now secured the first tranche of $8.8 billion via its rights shares and mandatory convertible bond issues.
" Our balance sheet is now stronger, and this (fund raising) should see us through to the end of the current financial year," Mr Goh said.
SIA girls will be donning masks and gloves and serving meals in bento boxes on fligh
Above: A Singapore Airlines plane at Hong Kong airport last July. Asia-Pacific is likely to lead in the steady opening-up of the region' s economies and skies. ST PHOTO: LIM YAOHUI
Above: SIA girls will be donning masks and gloves and serving meals in bento boxes on flights, to stem the spread of the coronavirus. ST PHOTO: LIM YAOHUI
Still, moves are already under way to secure even more cash.
It can raise another $6.2 billion if needed via more rights issues. It is also in negotiations with various financial institutions and looking to other means such as sale and leaseback to further cash up.
Given how uncertain the current financial year looks, SIA could do with all the cash it can get heading into its second consecutive year of losses.
But the company' s financials were also weighed down by what analysts cite as an " ineffective" fuel hedging strategy.
SIA hedged 51 per cent of jet fuel and 22 per cent of Brent for FY2021 at average hedged prices of US$74 per barrel and US$58 per barrel, respectively. The company unveiled a mark-to-market hedging loss of S$710 million during its final quarter. The hedging losses played a significant part in contributing to its final Q4FY20 quarterly loss of $732 million and full-year loss of $212 million.
Given depressed oil prices and with much of its fleet still grounded, SIA will continue chalking up mark-to-market hedging losses during the current financial year and beyond.
But all that is history. Right now, SIA has to be focused on getting through a challenging FY21.
In launching 78 weekly services to 33 points, the group is moving proactively to recapture some of its markets, as are other carriers around the world. SIA' s capacity utilisation will edge up from 4 per cent to 6 per cent, while load factor will tick up from 9.1 per cent in April to above 10 per cent.
As more points open up in China, New Zealand, Australia and other markets around the region, this could rise to about 30 per cent or more by the year end. This will be driven by both transit traffic via Changi and " travel bubbles" being set up bilaterally.
While no one is expecting SIA to recapture all its 136 destinations any time within the next one year, the current trajectory in pandemic management suggests Asia-Pacific will lead in the steady opening-up of their economies, and skies. With no domestic market to speak of, how SIA' s service expansion pans out will depend on bilateral discussions between various governments.
A lot will depend on the easing of border controls. China has just announced it is opening once-weekly flights to 37 cities and increased frequency in three weeks if there are no inbound Covid-19 cases.
Many of the initial regional passenger services will have to piggyback on cargo routes the airline has already been operating during the crisis.
The airline will initially be using its more fuel-efficient Airbus A-350 and Boeing B-787 planes on most of these routes. Some A-320, B-737NG and B-777 planes will also come back into service. But the bulk of its fleet - including its 19 A-380 jumbos - is likely to remain grounded till some semblance of normality returns in passenger services - possibly later next year.
Meanwhile, the airline must be looking for green shoots in the aviation markets of Europe and beyond.
At this point, no one can say how things will pan out.
Optimists reckon that the discovery of a vaccine by the first half of next year could be a game changer. If that happens, markets could recover very quickly, requiring carriers like SIA to respond on short notice. Maintaining operational readiness and efficiency is the key.
But in the absence of such a positive development, and if the virus continues to linger - albeit at low grade level - SIA will have to work hard to win back customer confidence. While those who need to fly will still fly, they will choose the airline with the best health and safety protocols.
Also, with its legendary SIA girls donning masks and gloves, and serving meals in bento boxes, one wonders if the airline will still have the pricing power to charge premium rates for its tickets! Given its branding and service reputation, it just might.
Still, this is a business where you have to get it right the first time, and every time. Safety, reliability and efficiency will matter even more now than it did in the pre-Covid-19 era. SIA has the wherewithal to achieve this.
Its relatively stronger financial position, diversified strategy and national support have allowed it to ride out the storm, till now.
Going forward, it has to remain agile, flexible and nimble as it nurses itself back to strength.
This is where the next phase of its transformation project becomes critical. It will define how SIA recaptures and reinforces its leadership in the industry in a new post-Covid-19 world.
is moving up...
Kinda regret not subscribing for the MCBs now. Have they started trading yet?
SIA' s rights shares, MCBs to hit market on a tailwind of positive sentiment
Minority shareholders of SIA are about to discover if they were right to shun its rights issue of MCBs
THIS week, shareholders of Singapore Airlines (SIA) will be able to begin trading their rights shares and 10-year mandatory convertible bonds (MCBs). And, by the looks of things, they should enjoy a strong tailwind of positive sentiment.
Markets around the world are in a sweet spot of sorts, buoyed by massive stimulus and news of economic activity re-starting. In particular, the United States Bureau of Labor Statistics said on Friday that the world' s biggest economy regained some 2.5 million jobs in May.
This marked a sharp turnaround from April, when the US lost some 20.5 million jobs, and suggests that economic activity is recovering faster than expected.
The S& P 500 rose nearly 5 per cent last week, and it is now only one per cent below where it was at the beginning of the year. Among the biggest gainers during the week were US airline stocks.
American Airlines rocketed 77 per cent over the course of the week, while United Airlines soared more than 51 per cent.
Closer to home, the Singapore market, which has been something of a laggard in the midst of the global rebound, also showed renewed signs of life. The Straits Times Index climbed 9.6 per cent during the week, and is now about 14.6 per cent below where it started the year.
Among the significant gainers was none other than SIA, which jumped more than 13 per cent during the week to close at S$4.33 on Friday.
Unlike the US carriers, SIA doesn' t have a domestic market to rely upon. It is entirely dependent on major economies along its routes re-opening their borders, and ironing out their quarantine and health check procedures.
On the other hand, SIA has just raised S$8.8 billion through the rights issue of new shares and MCBs, which has removed any doubt that it will be able to survive the Covid-19 crisis. SIA is also prepared to raise a further S$6.2 billion through another rights issue of MCBs, should the need arise.
MCBs shunned
The MCBs were hardly a hit with investors though.
SIA received valid acceptances and excess applications for only S$2.084 billion worth of rights MCBs, representing approximately 59.6 per cent of the S$3.5 billion worth of MCBs it issued.
This included S$1.939 billion worth of MCBs taken up by Temasek Holdings, representing its 55.5 per cent entitlement. The MCBs were issued on the basis of 295 MCBs for every 100 existing shares held, and priced at S$1 each.
Temasek mopped up the unsubscribed 40.4 per cent portion of the MCB rights issue, representing S$1.412 billion worth of MCBs. In total, Temasek took up S$3.351 billion worth of MCBs, or 95.9 per cent of all the rights MCBs issued.
On the other hand, SIA received valid acceptances and excess applications for nearly 2.13 billion rights shares, representing approximately 119.5 per cent of the nearly 1.78 billion new shares it issued under a 3-for-2 rights issue at S$3 per share.
This included Temasek' s 55.5 per cent entitlement of nearly 986 million rights shares.
Among the shareholders of SIA who shunned the rights issue of MCBs were some members of its own board. Notably, SIA CEO Goh Choon Phong allowed his provisional allotment of 3.34 million rights MCBs to lapse, according to filings with the Singapore Exchange.
SIA chairman Peter Seah also allowed his provisional allotment of 73,160 MCBs to lapse.
MCBs versus shares
One reason for the widespread aversion to the MCBs is that their terms aren' t all that attractive.
Two months ago, this column argued against subscribing for the rights MCBs, on the grounds that holders of these instruments will get no cash income, and bear significant downside risk while getting little upside potential.
The MCBs come with a zero coupon, but are redeemable semi-annually at the option of SIA, at prices calculated to deliver a yield-to-call of 4 per cent per annum for the first four years, 5 per cent for the subsequent 3 years, and 6 per cent for the last 3 years.
After 10 years, the accreted value of the MCBs will be converted to new SIA shares, at an initial conversion price of S$4.84 per share.
In the event SIA recovers quickly, the MCBs could be redeemed at prices that would leave investors with returns of as little as 4 per cent.
On the other hand, if SIA doesn' t recover, the accreted MCBs will eventually be converted into new shares, at a conversion price that would probably be higher than the market price of SIA' s shares.
Yet, owning shares in SIA comes with risks too. SIA essentially plans to incinerate most of the S$8.8 billion it has raised through its recent rights issues to preserve its business until the Covid-19 crisis abates.
SIA has stated that S$3.7 billion (or 42 per cent) of the proceeds will go towards funding fixed costs and other operating expenses. A further S$1.8 billion (or some 20 per cent) will be used to service debts and fund other contractual payments.
The remaining S$3.3 billion (or 38 per cent) will be used to purchase aircraft.
Even assuming the S$8.8 billion raised is sufficient to see SIA through the current slump, and that its business then quickly recovers to its FY2019 levels, there would be 2.5 times as many shares outstanding as before.
SIA would also still have to redeem S$3.5 billion worth of MCBs. That is an amount roughly equivalent to SIA' s reported net profit for the five years from FY2015 to FY2019. SIA reported a loss of S$212 million for FY2020.
So, if investors are excited enough about a recovery in SIA' s business to push its shares much higher, they ought to be expecting SIA to quickly redeem the MCBs too. In short, if shares in SIA keep rising, there should also be some investor interest in the MCBs. It would be strange if there wasn' t.
Fed, fiscal risks
The big question is what the US Federal Reserve will make of the apparently quick turnaround in US unemployment when it meets this week.
In March, as markets were melting down in the face of the Covid-19 pandemic, the Fed aggressively slashed rates twice, all the way down to 0-0.25 per cent. It wasn' t clear how lower interest rates would revive economic activity that was being halted by lockdowns to curb the spread of Covid-19. But the market applauded the moves anyway.
With US unemployment data now suggesting that a recovery quickly follows any loosening of Covid-19 restrictions, the Fed and other policymakers might be inclined to take their foot off the pedal. Indeed, given the pace at which the market was been climbing in recent weeks, some policymakers may well fear that they are unnecessarily stoking another asset bubble.
Such a shift, if it happens, could knock the wind out of stocks that have made the biggest advances recently, including the airlines. Shareholders of SIA should stay alert and tread carefully.
Do you mean dump to pump? LOL
SAVIORFOREVER ( Date: 08-Jun-2020 09:19) Posted:
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Same here, sold my rights shares bought at $0.565 last Thur, today dumped all my free money excess at the open, its higher now but no regrets since its free money.
Boatman ( Date: 08-Jun-2020 09:07) Posted:
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Wow! U made a $1+ per share 👍
Goldfinger ( Date: 08-Jun-2020 09:15) Posted:
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Its a gap down as long as the open is lower by more than 1 bid compared to H1 close, 4.28 is a 5 bid gap down, this is basic TA. You are a newb if you don' t know this.
Trader1987 ( Date: 08-Jun-2020 09:15) Posted:
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Shortlist covering up their shorts
Buy some popcorn 🍿 and watch the show
Buy some popcorn 🍿 and watch the show
Bennytan23 ( Date: 08-Jun-2020 09:18) Posted:
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Pump to dump?
Trade with caution no contra no short and DYODD
Trade with caution no contra no short and DYODD
kingofgamblers ( Date: 08-Jun-2020 09:16) Posted:
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Huat arh... now SIA going up..
Now must see 9.30-10am... see if got mass selling..
Now must see 9.30-10am... see if got mass selling..