A belated update relating to the cash call done by SIA in March 2020. The cash call consisted of 2 parts :-
1. Rights issue with 3 rights share for every 2 ordinary share at an issue price of $3
2. Rights MCB at an issue price of $1 on the basis of 295 Rights MCB for every 100 ordinary share
As existing shareholders after holding it for more than 10 years, I have 2 options either to take up the offering or ignore it. At the end of the day, I decided to take up the offering to subscribe for both the Rights and the Rights MCB. A bold move ? Probably since most of the feedback I have gather was pretty negative about SIA amid the Covid-19. In fact, SIA just registered its first ever FY loss since listed in 1985. On 29th Jul 2020, SIA reported its 1Q FY20/21 earning with a S$1b loss for the quarter. The dark cloud circling around it definitely not over very soon.
So any regrets in taking up the offer in March or even not cutting loss of the existing investment ? Well, frankly speaking, with Covid-19, I do not expect things will resume to norm anytime soon so for SIA to jump back to the old glory days within short period of times is not something I expected. In fact, as a worst case scenario, I'm prepared for another decade for it to fully recover and back to its glory old days.
With a dim expectation and why should I still continue the investment ? Firstly, I am no longer those investor that just put the money in and wait for the profit to fall. This type of investment is my past. Since 2015, I already started to switch to strategic based investment. As such, to continue the investment in SIA I would have all the strategies being mapped out.
My original thought of SIA is too big to fail for Singapore is still correct. If not, Temasek won't be involved helping SIA to raise cash during the Covid-19 crisis. This continues to be one of the many reasons I still stick with SIA.
Now, with the enlarged holding due to the Rights issue, this has given me more strategies to play with. The Rights issue allowed me to increase the holding by 166.67%, reducing the holding price from $12.028/share to $6.3855/share. Soon after the allocation of the Rights issue share, I further reduced the holding price from $6.3855/share to $6.3745/share strategically. This is just one of the many strategy that I will be doing going forward.
The interesting part is the Rights MCB. Firstly, this Rights MCB does not give out coupon and it is converted to ordinary share upon maturity at an initial but adjusted conversion price of $4.84/share. Some shareholders could have ignored this MCB but not me. Nobody could predict or assure what will happen in the future regarding SIA. Upon the Rights MCB maturity, the share price could be higher than the conversion price and subscribing to this MCB allows me the possibility to take advantage of it. Then, there is also possibility that upon maturity, SIA share price is well below the conversion price so any conversion will lead to loss. Taking account into this possibility, I have strategically locked in the invested capital for this MCB to some floating market price. As of 30th Jul 2020, the last done price for SIA MCBz300608 was $0.905 and the locked-in market price for my case was $0.9175. In addition, the locked-in entity allows me to collect dividend, something which plain holding the MCB will not get it.
1. Rights issue with 3 rights share for every 2 ordinary share at an issue price of $3
2. Rights MCB at an issue price of $1 on the basis of 295 Rights MCB for every 100 ordinary share
As existing shareholders after holding it for more than 10 years, I have 2 options either to take up the offering or ignore it. At the end of the day, I decided to take up the offering to subscribe for both the Rights and the Rights MCB. A bold move ? Probably since most of the feedback I have gather was pretty negative about SIA amid the Covid-19. In fact, SIA just registered its first ever FY loss since listed in 1985. On 29th Jul 2020, SIA reported its 1Q FY20/21 earning with a S$1b loss for the quarter. The dark cloud circling around it definitely not over very soon.
So any regrets in taking up the offer in March or even not cutting loss of the existing investment ? Well, frankly speaking, with Covid-19, I do not expect things will resume to norm anytime soon so for SIA to jump back to the old glory days within short period of times is not something I expected. In fact, as a worst case scenario, I'm prepared for another decade for it to fully recover and back to its glory old days.
With a dim expectation and why should I still continue the investment ? Firstly, I am no longer those investor that just put the money in and wait for the profit to fall. This type of investment is my past. Since 2015, I already started to switch to strategic based investment. As such, to continue the investment in SIA I would have all the strategies being mapped out.
My original thought of SIA is too big to fail for Singapore is still correct. If not, Temasek won't be involved helping SIA to raise cash during the Covid-19 crisis. This continues to be one of the many reasons I still stick with SIA.
Now, with the enlarged holding due to the Rights issue, this has given me more strategies to play with. The Rights issue allowed me to increase the holding by 166.67%, reducing the holding price from $12.028/share to $6.3855/share. Soon after the allocation of the Rights issue share, I further reduced the holding price from $6.3855/share to $6.3745/share strategically. This is just one of the many strategy that I will be doing going forward.
The interesting part is the Rights MCB. Firstly, this Rights MCB does not give out coupon and it is converted to ordinary share upon maturity at an initial but adjusted conversion price of $4.84/share. Some shareholders could have ignored this MCB but not me. Nobody could predict or assure what will happen in the future regarding SIA. Upon the Rights MCB maturity, the share price could be higher than the conversion price and subscribing to this MCB allows me the possibility to take advantage of it. Then, there is also possibility that upon maturity, SIA share price is well below the conversion price so any conversion will lead to loss. Taking account into this possibility, I have strategically locked in the invested capital for this MCB to some floating market price. As of 30th Jul 2020, the last done price for SIA MCBz300608 was $0.905 and the locked-in market price for my case was $0.9175. In addition, the locked-in entity allows me to collect dividend, something which plain holding the MCB will not get it.
