Should you subscribe SIA MCB?

RFTrader
2021-05-31

The $SINGAPORE AIRLINES LTD(C6L.SI)$MCB rights will start to trade on 2nd Jun 2021, 9 am and last trading day for the rights is on 10th Jun 2021. During this period, investors who do not want to subscribe for their pro-rata share of MCB are able to sell the rights in the open market. Just to recall, during the last MCB rights issue in 2020, the rights traded as low as 0.001 cents as there were no buyers for the rights.

Those investors who want to subscribe for the rights are able to do so between 2nd June 2021 and 16th June 2021.

Now, here comes the question. Should you subscribe for SIA MCB?

Let me paint 2 scenarios for you, assuming that you have subscribed for the MCB.

In the first scenario, we assume SIA recovers strongly from the Covid-19 impact in the coming years. SIA’s share price may continue to go up and possibly above the conversion price of 4.84. With higher profit and cashflow, SIA will also be looking at capital management initiatives and it is likely to redeem the MCBs as it is cheaper to do so since SIA can issue new equity at higher price. For investors holding the MCB, your returns will only be around 4% to 6% and you don’t get to enjoy the upside from SIA’s recovery.

In the second scenario, we assume that SIA continues to be badly affected by Covid-19. Profitability, cashflow and share price continues to drop. SIA will not be able to redeem the MCBs. The MCBs will eventually be force converted by SIA at 4.84 in 2030. As a holder of MCB, you may be holding to SIA shares “bought” at 4.84, when the share price of SIA at that time could be lower.

Based on the 2 scenarios, it looks like it is going to be a case of “Head – I win, Tail – You lose” situation for the holders of MCBs.

Personally, I would not touch this MCB with a ten-foot pole.

Trade with care and DYODD.

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Comments

  • Tomji
    2021-06-01
    Tomji
    if I buy $1 a bond n SIA convert it to shares, it will be $4.84?? That is a good return, no???
    If they dont recover n pay interest of 6% End of 10 years then it does not sound good? correct??
    • 滚筒ReplyTiTilili: 
      https://www.singaporeair.com/saar5/pdf/Investor-Relations/Rights-Issue/mcb_sgxann.pdf

      So there's a semi-annual redemption rate in the appenndix.
      and at maturity, $1 become $1.69797...

    • 滚筒ReplyTiTilili: 
      如果新航赎回债券，就不是转换股票。
      如上所述，在航空复苏新航股票暴涨的情况，新航是不会执行转换的。
      那债主就只是拿回本金。
    • TiTililiReply滚筒: 
      其实我还是不理解。如果按照官方说法，2024有希望回到Pre-covid的运载量。那就是说2024有可能到达8新币的股价。那SIA很有可能提前收回这个债券。那持有债券的人不是按照4.84新币低于当天价格买入股票，可以及时获利吗？现在是免费发放给股东的。
    • 滚筒: 
      Can SIA redeem the MCB before 10yrs?
      and would that be better scenario for investor?
    • SteuReplyRFTrader: 
      If I alrdy have sia mcb shares about 2000, means I alrdy own 412 sia shares in future? May I know this MCB can hold until when?
  • 滚筒
    2021-06-02
    滚筒
    Maturity price for the MCB is $1.69797
    • RFTrader: 
      Yes, that is if SIA decides to redeem the MCB without converting at the end of the term. Effective returns is 6% pa
  • JACE
    2021-06-02
    JACE
    Anyone knows if i do not sell those MCB and not exercise them and let it lapse, what will happen?
    • JACEReplyRFTrader: 
      Yes that's right, i am not selling and not subscribing. I will let it lapse.
    • JACEReply滚筒: 
      [OK]
    • RFTrader: 
      I assume u mean not selling the MCB Rights. If you don't sell and don't subscribe, Temasek will subscribe your share of the MCB at the end of the day
    • 滚筒: 
      nothing will happen
  • ChiYao
    2021-06-04
    ChiYao
    If I don't sell and don't subscribe the mcb, will I get to keep my current shares and also the mcb at the same time?
    • ChiYaoReplyRFTrader: 
      Okay thank you!!
    • RFTraderReplyChiYao: 
      Yup. 10 Jun will be the last day of trading for the rights. After which, it will disappear from your portfolio. Having said that, u still have up to 16 Jun to decide whether u want to subscribe MCB.
    • ChiYaoReplyRFTrader: 
      Oh I see.. So if I don't do anything now this rights will just disappear and life as per normal with my SIA shares right?
    • RFTrader: 
      Oh... No... This rights is just a temporary instrument that allows u to transfer the 'right' of subscribing the MCB to another party at a price. You will need to top up $1 per MCB in order to own it.
    • RFTraderReplyChiYao: 
      If you choose not to subscribe, you need not do anything. Just let it lapse. Temasek will pick it up. [开心]
  • Fynn_SG
    2021-06-02
    Fynn_SG
    how can I remain current shares and don't want to convert to bond? sell the additional share names in my tigers?
    • Fynn_SGReplyRFTrader: 
      then if I just leave it. and remain my sia shares. what will happen?
    • Fynn_SGReplyFynn_SG: 
      sorry I mean if I sold my sia shares but the rights shares still remain there. will it be gone after sometime?
    • RFTrader: 
      You can sell the rights at 0.001. But it might not make sense after factoring commission.
  • MoMoDaDa
    2021-06-02
    MoMoDaDa
    How to buy MCB using the rights? In tiger brokers?
    • RFTrader: 
      Can check with tiger brokers help desk on the procedure. Some members have also shared this on tiger Facebook page. Good luck!
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