Thursday, March 29, 2012

Journey To Retirement Part 10 -- CapMallsAsia Bond

The tenth part of my investment portfolio in which objective is to create wealth to retire.

Stock : CapitaMalls Asia Bond
CapitaMalls Asia Bond, CapMallA3.8%b220112, was listed in SGX in January 2012 with an IPO price of $1.00.  It is a bond or to be specific retail bond issue by the company CapitaMalls Asia ( which also listed in SGX after Capitaland spin it off for listing ).  The business of CapitaMalls Asia is to develop the shopping malls in Asia countries and when the developments bring in good return, sell to its REITs ( CapitaMall Trust, CapitaRChina, etc ) and in return get the capital back to target for next development.  At the moment CapitaMalls Asia has properties in countries like Singapore, China, Malaysia, Japan and India.  Traditionally, bond investment is only for institutions or rich investors due to its high capital requirement ( min $100k ) but with the introducing of retail bond ( targeting retailers with lower investment capital ) in 2011, CapitaMalls Asia decided to tap on retailer to raise funds through this retail bond.  The detail of the bond is :-

1. face value of $1.00/share
2. callable bonds mature in 12th January 2022, 10-year bond
3. interest of 3.8% paid semi-annually from 2012 to 2017
4. from 2017 onwards till mature if the bonds is not redeemed or purchased or cancelled, the interest rate will be 4.5% per annual.
5. upon maturity in 2022, the bonds will be redeemed at 100% of the principle amount

As bonds in general is a lower risk investment as compared to stocks and being a fixed income entity, without any doubt this will classify under "income stock" under my investment portfolio.  The interest yield per annual might not be high as compared to some of the dividend yields from stocks but the lesser risk in bonds ( due to its callable and redemption nature ), more or less compensate for the different in yield.  As this is my first attempt in bond investing and still have more to learn about that, I only have like 4% of my total investment capital allocated to it.  Presently, have no intention to add more as am waiting to see how bond investment could turn out in the long run.

Potential Upside :
The only potential upside I could think of for CapitaMalls Asia bond is without any doubt capital appreciation.

Potential Downside :
Potential downside probably is if the issuer company goes bankrupt and might not get back all the invested capital.  Like the case of the current Greece's debt, when it goes into default, bond holders will just have to write off all the invested capital.

Personal Expectation :
As a fixed-income entity and "income stock", the minimum expectation for CapitaMalls Asia bond without any doubt is its assurance of the annual interest payment of 3.8% ( 1st 5 years ) and 4.5% ( for the next 5 years ).


CapitaMalls Asia

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