My take on YFG's issuance of convertible debt - felicity
Author: Tan KW | Publish date: Sun, 10 May 2015, 04:12 PM

Saturday, May 9, 2015


Here are my take on the redeemable convertible debt issued by YFG. One should read in detail the disclosure provided through Bursa. I should say this issuance is highly complex and one of the more complex notes (debts) that I have encountered. It is definitely issued and negotiated by people whom are experienced and knowledgeable on this topic.

As a start, let me go through the need for YFG to raise this. It definitely needs restructuring of its balance sheet as well as taking care of its growing debt. To go to the banks and get new loans, I think is almost very difficult given the scenario of its balance sheet. It will also face a lot of problem if it is going to the debt market - probably rated as junk.

But one of the reason which I took notice of this company is its ambition. YFG has faced countless challenges taking over a very difficult company. One does not discover just a single cockroach. If one cockroach is found, there are usually more.

With that I would say the RM100 million debt deal is a good option, although not fully ideal. This is because it can now fully concentrate on getting its business dealings moving forward rather than worry over the financing portion besides the very friendly interest rate of 2%. There is however no free lunch - do we think there really is one? Why?

The notes holder are given the option of converting the notes at a sweetheart deal i.e. 80% of the average closing price of the YFG share on any 3 consecutive market days during the 45 days prior to the conversion date - see below or a fixed option as below. (now you know why I said it is a mouthful to comprehend given the complexity and thoughts that are put into the deal). The conversion is however subject to approval from the company and/or shareholders depending on various situations.


Conversion terms of the notes To control the conversion so that they are not at too low a price, there is a clause for redemption as below. Well you can do the calculation...



What other things to look at? Well, in the event the notes holders (and assuming that the notes are fully subscribed) are given the option to convert the shares and at 80% of its current market price, they would end up with a very significant stake of more than 70% in YFG.

My thoughts - the RM100 million approval needed for shareholders to make the decisions in a single general meeting is way too high as it does not need the amount now. YFG also need to explain better why it needs shareholders to approve RM100 million. I would recommend to change it to approval for RM50 million with further option for a further RM50 million in another session.

What are the risks and weaknesses in this deal to shareholders?

YFG could have raised additional funds but giving too much to the notes holders with an option of a cheap equity entry into the company;
5% arranging fee is also quite high;
YFG is raising funds that it does not need and again giving away too much, hence too much dilution to YFG.
The benefits?

The 2% coupon rate is low and would not affect its financial cashflow as opposing to being financed through banks;
Deal would strengthen its balance sheet;
Funding is almost assured.

http://www.intellecpoint.com/2015/05/my-take-on-yfgs-issuance-of-convertible.html

Yes, it's about time to buy YFG at this price level....hehe

Looking at the poor US data releases since Q1 2015, Fed will not hike rate in Jun....earliest will be in Sep and the move is very much data dependent

I will buy on weakness and add position in Scicom with near term target price of 2.50 - 3.00

i'm still waiting to buy at 0.075....hehehe

haha...this is all operator's strategy....

i always believe one principle, when all rush to sell, i buy, when all rush to buy, i sell....that simple

near term target is 2.50

Time to sell before it goes back to 0.80

KNM is a stock to buy when it drops so u can sell when it goes up....

yukchian...if that make u feel better, then u can continue to think i'm very new to market....hehehe

paikcheong, only 8 million share mah...no bid deal...Ask Rezal to sell all aja

starts dropping d....good good good

0.075 is next target...sell sell sell

Ya, can't believe them....sell sell sell....it's gonna drop more soon....

Good please drop more

I think the operator strategy is to push down the price to around 0.075-0.08 and see whether the existing holders can tahan or not. Weak holders sure will throw...

Our gang is waiting to buy at lower prices also...drop ah

I think today closing price of 0.105 clearly shows one thing, someone is still collecting at this price level and they haven't collect enough

Just be patient, collect some at current level and collect more if it drops

I was told YFG can go beyond 0.35 in the longer term once the new management and new shareholders come in....

Time to buy back YFG

Second round rally coming, next target 0.18 - 0.20!

I suppose when Bursa UMA comes, price should drop to around 0.08-0.09, where the rally started earlier today....

my advice is to sell first coz Bursa UMA is coming for sure looking at this momentum.... just my 2 cents

I heard the company will secure tons of new projects under new chairman...hoh seh liao!

Scicom next target will be 2.50, I reckon we will reach there by end of Mar 15...

All cabut d? haha

Then it's about time to hantam on Instacom and I suppose the counter gonna have big rally soon!

A clear breakout, 0.30 next target and followed by 0.35!

Insas-PA is a bargain as long as the price is below 0.93!

8% per annum guaranteed for the next 5 years! What a great investment opportunity!!!

Opportunity to make some good profit!

I know most people not so keen to look at longer term (3 to 5 years). Insas Preference shares is out today traded.

It has the following profile:

- Non-Convertible;
- Redeemable at RM1 after 5 years;
- Dividend of 4% payable every half-yearly;

The preference shares is offered at RM1.00 with 2 warrants attached for every preference shares purchased.

During the last 1-1/2 months, I have been asked about what will happen to the price of the preference shares as seemingly its 4% dividend is not attractive. I knew that it would have dropped below RM1.00. In fact, I thought that RM0.90 is a good price to even purchase for those whom would want to hold it longer for the dividends and lower entry price.

Today, upon opening it dropped to RM0.795 and as at this time of writing, it is at RM0.82. Just a note at RM0.82 and with brokerage fees paid, one's return is at 8.652% for 5 years (see below).


Purchased at RM0.82 with brokerage at 0.42%

Obviously, it is not too shabby at all, assuming we are confident that Insas can pay its dividends and repay the RM1 after 5 years. I am confident.

Think of it, if you are paying 5% for your housing loan or your car loan, do not be a smart-Alex to pay them off early.

Note: Anything that you do is at your own risk.

Just a note, at RM0.90, Insas-PA's return is at 6.43%. Well, if you look at it, is below what EPF gave last year!


If purchased at RM0.90


Posted by felicity at 2:04 AM
http://www.intellecpoint.com/2015/03/insas-pa.html

Agree, growth rate matters more

Targeting 2 by end of Jan 2015 and 3 by end of the year!

Happy new year to all Scicom supporters! Let 2015 be another Stellar Year for Scicom, RM3 is the first target!!!

RM 1? Well then I believe that's the time to sell everything to buy Scicom! Haha

Actually oil price drop is good for world economy as consumers pay much lesser for energy and cost of manufacturing will drop
Scicom is key benefiary of strong USD as part of its revenue is in USD
I suppose Scicom will record better profit going forward!

Buy KNM and hold for 1-2 years sure very good return

Cancel right issue even better la

Yes agree the right issue can't be lower than 0.50
So now buy at 0.45 is free money! 10% guaranteed return
Haha

Best price to go in is 0.005
Haha

Low oil price means more consumptions, more inventory hoarding and lesser production!

Oil price has shown sign of stabilization and oil and gas stocks are in oversold position, technical rebound is imminent!!!

Buy buy buy

NYMEX crude up in Asia as API report shows sharp drop in crude stocks

http://touch.investing.com/news/commodities-news/nymex-crude-up-in-asia-as-api-report-shows-sharp-drop-in-crude-stocks-318828

Retailers have to buy when there are so much fear in the market, and start selling when market rebounds

Not suppose to buy when it rallies and sell when it drop haha

Buy a couple of millions shares and hold for 1-2 years sure win

Please don't play contra on KNM
Only real investors are welcomed

Billionaire Shale Pioneer Sees Drilling Slowdown on Oil Price Drop

http://mobile.bloomberg.com/news/2014-12-01/billionaire-shale-pioneer-says-drilling-will-slow.html

Come on! do u guys really think that oil price will stay at this level forever? Haha

It's just a matter of time that oil price rebound to more reasonable level

What trap? Buy at this levels sure win la in 1-2 years time

I think buy at this level and hold for mediums term sure Win!

I'm so happy to have the opportunity to buy oil and gas stocks at distressed level! Got crisis means got chance to make quick money again as long as we buy with cash and have good holding power!

Buy buy buy!!!

KNM will be above 0.50 by end of the week for sure

Another pocket of opportunity to pick up Scicom at discounted price, hurray!!!

Opec confirm cut d
But just symbolic cut

​Market manipulation of oil prices backfires on those that start it - Putin

http://rt.com/business/208243-putin-low-oil-prices/

This all has to come to a pause and it's happening real soon

Prepare for $95 oil in 2015: HSBC

http://www.cnbc.com/id/102204549

Don't worry, we are near the bottom...buy at current levels and keep for 1 year sure better than FD....

China is expected to cut their interest rates further or even reduce the RRR and the demand for commodities are expected to rise with more more economy improvements coming from India, Europe and Japan going forward, commodity counters surely are the best bet at such low prices for 2015 and beyond

Iran May Propose Million-Barrel Daily OPEC Cut in Saudi Talks
OPEC is expected to cut production this Thursday

Strong technical rebound is expected, first target 0.70 follow by 0.815